Yesterday Mario Draghi gave his
quarterly report to the European Parliament’s Economic and Monetary Affairs
Committee. His remarks on current economic and monetary conditions contained no
surprises, and he said nothing that would change the perception of his earlier
comments to the effect that QE will continue, despite an awareness of possible
side effects, which would have to be carefully monitored.
It was his comments on Greece that
were of the most interest. He is adamant that the role of the ECB is confined
to interpreting the rules and applying them as far as the Greek position is
concerned. Any concessions in the terms of the current bailout program are
purely for the consideration of the Eurogroup, so ultimately with euro area
Member States. “Hence”, he said, “this is a political decision that will have
to be taken by elected policymakers, not by central bankers”.
This is interesting because, as late
as last week at the G7 summit in Bavaria, both Francois Hollande and Angela
Merkel were saying that Greece needed to finalise technical talks in order to
make progress, but that time was running out. Is there an element of buck
passing here? The answer is: not really. The various comments of the ECB
president and the leaders of Germany and France are a response to the strategy
being adopted by the Greek government under Mr. Tsipras, which is centred on
attempting to side-line the ECB, the Commission and the IMF, and to appeal
directly to the governments of the other member states, in particular those of
Germany and France.
European
Court of Justice Outright Monetary Transactions (OMT) bond buying ruling is due
this a.m.
A ruling from the European Court of
Justice on a case referred to it by the German Constitutional Court is due out
this morning. A determination that the purchase by the ECB of sovereign bonds
of a member state that is locked out of the normal bond market constitutes
direct monetary aid to that country, and so is contrary to EU treaties, would
have serious implications for the operation of the ECB. It has argued that this
ability is akin to adjusting interest rates, which it is manifestly allowed to
do, and that the function of buying sovereign bonds on the secondary market in
emergency situations is so important that not being able to do so could place even
the continuation of the Single Currency in question.
As if the Greek situation was not bad
enough.
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