Posts Tagged: german public

 

The US Federal Reserve has launched a blistering attack on the European Central Bank, calling for quantitative easing across the board to lift the eurozone fully out of its slump.

In a rare breach of central bank etiquette, a paper by the Richmond Fed said the ECB is hamstrung by institutional problems and acts on the mistaken premise that excess debt is the cause of the eurozone crisis when the real cause is the collapse of growth, which has, in turn, spawned a debt crisis that could have been avoided.

“The ECB lacks a coherent strategy for creating the monetary base required to sustain the money creation necessary for a growing economy,” said the paper, written in July by Robert Hetzel, the bank’s senior economist.

It called for direct action to buy “bundles” of small business loans, as well as “packages of government debt” across EMU states, including German Bunds. “The ECB will have to be clear that surplus countries will experience inflation above 2pc for extended periods of time,” and must be prepared to “explain to the German public” that this is desirable.

“Most important, the ECB needs to start by recognising that Europe’s problems are more than structural. It needs to stop using monetary policy as a lever for achieving structural changes and to end its contractionary policy.”

While the paper reflects the views of the author, there is no doubt that many Fed officials feel the same way. >> Read More

Showdown Looms for ECB, Germans

01 August 2012 - 13:51 pm
 

The European Central Bank is primed for a debate this week over whether to use its printing press to save the euro, with Germany’s conservative central bank positioned to determine the course of Europe’s escalating debt crisis.

The showdown pits ECB President Mario Draghi, a veteran Italian central banker who has headed the ECB since November, against Jens Weidmann, the 44-year-old Bundesbank president. Last week, Mr. Draghi said the ECB would “do whatever it takes to preserve the euro.” The comments were viewed by investors as a signal that the central bank was poised to prop up government debt markets by buying vulnerable countries’ bonds en masse.

Such a move would be anathema to the Bundesbank, which argues that the purchases would risk violating the ECB charter’s ban on central-bank funding of government debt. Two senior German officials—the ECB’s former chief economist, and Mr. Weidmann’s predecessor as Bundesbank president—resigned last year in protest over the ECB’s previous interventions in government debt markets.

On paper, Mr. Draghi could overrule his German colleague because Mr. Weidmann has just one vote on the ECB’s 23-member council. But boxing the Bundesbank into a corner could undermine Mr. Draghi’s credibility in Europe’s largest country and main financial backer. Of particular concern to the ECB president, such a move could undermine support for the euro among a key constituency, the German public. >> Read More

 

 Germany and its central bank are unlikely to lead the way out of the euro zone debt crisis within three months time, after which it will be too late, U.S. billionaire George Soros said on Saturday.

Speaking at an economic conference in Trento, Italy, Soros said that the euro crisis – which he defined as a sovereign debt crisis and a banking crisis closely interlinked – threatened to destroy the European Union and plunge it into a lost decade like Latin America in the 1980s.

“A similar fate now awaits Europe. That is the responsibility that Germany and other creditor countries need to acknowledge. But there is no sign of this happening,” Soros said.

Soros said he expected Greek elections in June to produce a government willing to stick by the current bailout agreements, but which would find it impossible to do so.

“The Greek crisis is liable to come to a climax in the fall. By that time the German economy will also be weakening so that Chancellor (Angela) Merkel will find it even more difficult than today to persuade the German public to accept any additional European responsibilities. That is what creates a three-month window,” he said.

The Hungarian-born U.S. financier said that all the “blame and burden” of adjusting the euro area’s imbalances was falling on weaker peripheral countries, but the bloc’s core bore an ever greater responsibility for the crisis. >> Read More

 

With nothing but mute silence out of Germany in the aftermath of last night’s “historic” Greek vote, the EURUSD is getting nervous trading down to just above 1.3200 minutes ago, well below the level reached last night following the passage in the Greek parliament of the vote with 199 out of 300 votes. As such, everyone is starved for some clues of what Merkel and Germany thinks at this point – will they simply leave Greece to flounder by demanding even more “reality” and implementation of measures from the first bailout - something Greece obviously can not do? Or will Germany relent for at least one more payment (of €210 billion). We don’t know, at least not yet. But the following Spiegel interview with German Foreign Minister Guido Westerwelle may provide some insight. The key part: “Q. The second aid package will presumably be more expensive than anticipated, partly because the Greeks haven’t kept their promises. How much longer will the German public put up with this?…Westerwelle: It’s undoubtedly a moment of truth for Greece. If a sustainable and correct course is set in Athens now, Greece can expect our support — but only then. There will be no more advance payments. Only actions count now.” Like we said, hardly the ringing endorsement people expect. Then there’s this: ” I am more than dissatisfied with the political impasse in Greece in recent weeks. I’m also addressing the German opposition when I say this: You can’t solve a debt crisis by constantly incurring new debts.” And yet that is precisely what Bailout 2 is doing as we have patiently explained over and over.

Yet Guido said something else which may be of interest to everyone else in Europe: “I don’t want a German Europe. Q. What do you want? A. A European Germany.” Aaaand, enter lost in translation interpretations.

What, however, certainly can not be misinterpreted is the following: “There is a tendency toward re-nationalization throughout Europe, which I oppose. Germany occasionally shows a tendency to boast, which concerns me. I don’t think it’s smart for us to shift the differences among German parties to the French election campaign.” Did Guido just slap down Angela Merkel for her decision to be Sarkozy’s running mate in the French presidential elections in April? Because, as we asked before, what happens to Die Frau’s credibility if the current polls leader – Hollande – who has promised to undo all European contracts and agreements, ends up winning?

Key selection from Spiegel interview (in English, so Google Translate can not be blamed for translation losses)

Westerwelle: You know, I wonder why my predecessor Joschka Fischer, who doesn’t exactly have a small ego, agreed to that curtailment of his authority at the time. I’ll ask him about it the next time I see him. >> Read More

 

With nothing but mute silence out of Germany in the aftermath of last night’s “historic” Greek vote, the EURUSD is getting nervous trading down to just above 1.3200 minutes ago, well below the level reached last night following the passage in the Greek parliament of the vote with 199 out of 300 votes. As such, everyone is starved for some clues of what Merkel and Germany thinks at this point – will they simply leave Greece to flounder by demanding even more “reality” and implementation of measures from the first bailout - something Greece obviously can not do? Or will Germany relent for at least one more payment (of €210 billion). We don’t know, at least not yet. But the following Spiegel interview with German Foreign Minister Guido Westerwelle may provide some insight. The key part: “Q. The second aid package will presumably be more expensive than anticipated, partly because the Greeks haven’t kept their promises. How much longer will the German public put up with this?…Westerwelle: It’s undoubtedly a moment of truth for Greece. If a sustainable and correct course is set in Athens now, Greece can expect our support — but only then. There will be no more advance payments. Only actions count now.” Like we said, hardly the ringing endorsement people expect. Then there’s this: ” I am more than dissatisfied with the political impasse in Greece in recent weeks. I’m also addressing the German opposition when I say this: You can’t solve a debt crisis by constantly incurring new debts.” And yet that is precisely what Bailout 2 is doing as we have patiently explained over and over.

Yet Guido said something else which may be of interest to everyone else in Europe: “I don’t want a German Europe. Q. What do you want? A. A European Germany.” Aaaand, enter lost in translation interpretations.

What, however, certainly can not be misinterpreted is the following: “There is a tendency toward re-nationalization throughout Europe, which I oppose. Germany occasionally shows a tendency to boast, which concerns me. I don’t think it’s smart for us to shift the differences among German parties to the French election campaign.” Did Guido just slap down Angela Merkel for her decision to be Sarkozy’s running mate in the French presidential elections in April? Because, as we asked before, what happens to Die Frau’s credibility if the current polls leader – Hollande – who has promised to undo all European contracts and agreements, ends up winning?

Key selection from Spiegel interview (in English, so Google Translate can not be blamed for translation losses)

Westerwelle: You know, I wonder why my predecessor Joschka Fischer, who doesn’t exactly have a small ego, agreed to that curtailment of his authority at the time. I’ll ask him about it the next time I see him. >> Read More

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Baroda, India.