EU - Inflation Sutge: ECB's Rehn warns of risk if inflation surge lasts much longer

The surge in inflation in the euro zone is still mostly temporary but households and firms will start to lift their price expectations if it lasts much longer, European Central Bank policymaker Olli Rehn said on Tuesday.

Inflation in the euro zone hit 3.4% last month according to flash estimates amid higher energy prices and supply constraints pushing up the price of a range of goods.

Read more at: ECB's Rehn warns of risk if inflation surge lasts much longer - Metro US

Italy: Draghi: Call of duty for Italy's 'Super Mario' - by Mark Lowen

"The thing about Mario Draghi is that when he ran up the pitch, he would always pass the ball - he was generous like that," reflects Staffan de Mistura, a UN diplomat and school friend of Italy's likely next prime minister.

"Mario was a team player. Not the best footballer we had but a good one - and he always had a strategy, he knew which way to turn."

Read more at: Draghi: Call of duty for Italy's 'Super Mario' - BBC News

EU: ECB plots Amazon-style market to prevent Wall Street COVID debt swoop

Europe is working on an Amazon-style website to sell hundreds of billions of euros of bank loans which have been soured by the coronavirus crisis, in a bid to shore up the economy and challenge the dominance of big Wall Street debt investors.

The blueprint, devised by top European Central Bank (ECB) officials, is part of efforts by the 19-state euro zone to tackle a growing pile of unpaid loans and aims to prevent “distressed debt” funds from buying them at rock bottom prices.

“The idea is to open up the market to buyers of smaller portfolios, with an Amazon or eBay-style marketplace, where you can browse … That can get the market moving,” Edward O’Brien, a senior ECB official involved in the plan, told Reuters.

Read more at:
ECB plots Amazon-style market to prevent Wall Street COVID debt swoop | Hellenic Shipping News Worldwide

EU Economy: As eurozone records 3.8% slump ECB chief warns of worse to come

Former ECB president Mario Draghi claimed last year that the majority in favour of further loosening was so large that it was unnecessary even to count the votes. Never mind that the countries opposing the decision hold 56% of the ECB’s paid-in equity capital and account for 60% of eurozone output. Counting their compatriots on the ECB governing council, however, they have only seven out of 25 potential votes (subject to a rotating limitation). Draghi did have a majority, then, but it represented a very clear minority of the ECB’s liable capital. This raises considerable concerns about the governing council’s decision-making process.

Todays head of the ECB Christine Lagarde has warned that the eurozone could be on course for a 15% collapse in output in the second quarter as evidence of the economic toll caused by Covid-19 pandemic started to emerge, with France and Italy falling into recession.

After news that the 19-nation monetary union area had contracted a record 3.8% in the first three months of 2020, Christine Lagarde said much worse was possible in the April to June period, when the impact of lockdown restrictions would be most severe.

 Read more at:

As eurozone records 3.8% slump ECB chief warns of worse to come

EU - Coronavirus Bailout Fund: Spanish vs Dutch views on the EU Recovery Fund - by Monika Sie Dhian Ho and Charles Powell

Dutch PM Mark Rutte being stingy

The Netherlands and Spain are at opposite ends of the debate about the EU's recovery package. But they must realise they are in the same boat.

The Covid-19 pandemic has triggered an unprecedented recession in Europe which has hit the EU at a delicate moment. It could be the toughest test for European integration yet. A strong, fast and coordinated, response is essential.

The European Central Bank has deployed an unprecedented asset-purchase programme, the European Commission has for the first time ever lifted restrictions on fiscal expansion and state aid, and the Eurogroup agreed new European Stability Mechanism credit lines, emergency measures to support those unemployed, and new funds for the European Investment Bank. Now it is time for the heads of state and government to rise to the challenge

The internal market, the monetary union and the Schengen travel zone are at risk, and populist anti-EU voices stand ready to exploit disagreements that have emerged among member-states.

A piece of unfinished business is the so-called EU Recovery Fund.

It is based on a Commission proposal, and is integrated into the EU's draft seven-year budget. It would allow for investment in the EU of almost two trillion euros, some of it in the form of debt issued by the Commission.

The sooner a deal is reached, the quicker the money can be The sooner a deal is reached, the quicker the money can be released and the faster the recovery will be.

Read more: 
Spanish vs Dutch views on the EU Recovery Fund

EU: ECB increases pandemic stimulus to €1.35 trillion

The European Central Bank (ECB) said on Thursday it would increase the size of its Pandemic Emergency Purchase Programme by €600bn to €1.35 trillion, the BBC reported.

The ECB also extended bond-purchasing until the end of June 2021 and pledged to reinvest proceeds until at least the end of 2022. The ECB committed earlier this year to buy up to €1.1 trillion worth of bonds this year.

Read more At: ECB increases pandemic stimulus to €1.35 trillion

Netherlands Headed For Unprecedented Crisis?: Millions Of Retirees Face Pensions Cuts Thanks To The ECB - ""This Report is Questionable say Dutch Government insiders"" - by Tyler Durden

When one thinks of pensions crisis, the state of Illinois - with its woefully underfunded retirement system which issues bonds just to fund its existing pension benefits - usually comes to mind. Which is why it is surprising that the first state that may suffer substantial pension cuts is one that actually has one of the world's best-funded, and most generous, pension systems.

According to the FT, millions of Dutch pensioners are facing material cuts to their retirement income for the first time next year as the Dutch government scrambles to avert a crisis to the country's €1.6 trillion pension system. And while a last minute intervention by the government may avoid significant cuts to pensions next year - and a revolt by trade unions -  if only temporarily, the world finds itself transfixed by the problems facing the Dutch retirement system as it provides an early indication of a wider global pensions funding shortfall, not to mention potential mass unrest once retirees across some of the world's wealthiest nations suddenly finds themselves with facing haircuts to what they previously believed were unalterable retirement incomes.

At the core of the Dutch cash crunch is the ECB's negative interest rate policy, which has sent bond yields to record negative territory across the eurozone, and crippled returns analysis while pushing up the funding requirements of Dutch pension funds.

Ahead of a parliamentary debate on Thursday on this hot topic issue, the Dutch minister for social affairs and employment, Wouter Koolmees, will write to lawmakers to outline his response to the pension industry’s problems, the FT reported.

 Read more: Netherlands Headed For Unprecedented Crisis: Millions Of Retirees Face Pensions Cuts Thanks To The ECB | Zero Hedge

ECB: Christine Lagarde′s first speech as ECB chief: The Main Points

The European Central Bank's new president has urged European countries to invest and innovate as concerns of an economic slowdown intensify. She warned that export growth could no longer be relied upon to boost growth.

Read more at:

• https://www.dw.com/en/christine-lagardes-first-speech-as-ecb-cPolicyu Speechhief-the-main-points/a-51370974

EU-Brexit chaos is lesson to other EU states, ECB governor says

British chaos over Brexit has dampened other member states' potential appetite for leaving Europe, Villeroy de Galhau, a French governor of the European Central Bank (ECB), said Tuesday. "It is a gratitude we have to the British today," he said at an event in the London School of Economics, Reuters reported, in comments which risked giving ammunition to British claims the EU was trying to punish the UK for leaving.

 

Read more: Brexit chaos is lesson to other EU states, ECB governor say

 

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Euro expanding its global Reach: Possible Draghi successor wants to increase the euro’s global use

The Governor of the Banque de France, François Villeroy de Galhau, told a conference in Paris on 4 June that increasing the global use of the euro would bolster “European financial sovereignty”.

Villeroy de Galhau, who is a frontrunner to succeed Mario Draghi as the head of the European Central Bank in October. argued that since the2008 financial crisis and the 2012 Eurozone crisis. the international use of the euro as a major reserve currency has sharply declined.

More than 60% of global official reserves are held in US dollars. A key for the euro to emerge as a global currency that is on par with thepower of the greenback hinges on the creation of a safe asset similar to US Treasuries, an objective that provides a new impetus to the discussion for Eurobonds.

European Commission President Jean-Claude Juncker has repeatedly vowed to turn the euro into a global reserve currency by replacing the dollar with the single currency when concluding deals tiedmto energy imports.

Read more at: Possible Draghi successor wants to increase the euro’s global use

ECB - European Economy: ECB braces for more money printing

The European Central Bank is prepared to resume its money-printing programme, according to its vice-president Luis de Guindos.

Meanwhile, the euro tumbled to 22-month lows against the dollar late last week, as US growth data remains robust both in terms of capital goods investment and real wage growth.

With decelerating growth and inflation in the Eurozone, de Guindos reignited speculation about the continuation of a €2.6 trillion bond-buying programme that officially ended in December 2018. Meanwhile, the forthcoming European elections in May are weighing negatively on the Eurozone’s economy, as markets expect a surge in euro-critical movements.

“Quantitative easing is something that we can use again if needed,” de Guindos told an audience in New York, although he made clear that the resumption of bond-purchases beyond the current levels has not yet been discussed. Officially, the ECB projects a rebound in Eurozone growth during the second half of 2019, but De Guindos’ announcement consolidates the overall impression that a prolonged period of subdued growth may be ahead.

Read more: ECB braces for more money printing

EUROPEAN Central Bank: Rates to remain unchanged despite weakening economy

ECB to keep rates unchanged amid weakening economy European Central Bank policymakers on Thursday responded boldly to fears of a eurozone slowdown by announcing that interest rates would stay unchanged for the rest of the year and launching a fresh round of super-cheap loans to banks.

 

Read more at: 

http://www.france24.com/en/20190307-european-central-bank-ecb-interest-rates-growth

ECB: Draghi signals unwinding of fiscal stimulus but warns Trump of a confidence crisis

The European Central Bank took a step back from its fiscal stimulus policy, expressing confidence on the robustness of the euro zone’s economic recovery; at the same time, Mario Draghi warned US President Donald Trump that his trade war policies could trigger a crisis of confidence in the US.

On Thursday, the ECB dropped a pledge to increase its bond buying if needed. Frankfurt will continue buying bonds at a rate of €30bn a month, completing its €2.55 trillion bond-buying programme. The programme is expected to continue until September 2018 and, if needed, it will be extended. However, the ECB dropped a reference to extending the sum, as noted both by Reuters and the German public broadcaster DW.

Mario Draghi said on Thursday that it is possible that the euro zone will grow faster than currently projected. The ECB has already raised its 2018 growth projections for the euro zone to 2,4%, but inflation is not expected to reach the 2% target. Inflation will remain subdued to 1,5% in 2018, according to ECB projections.

However, Mario Draghi did warn of the dangers of “protectionism,” that is, hours before US President Trump was expected to make specific statements regarding his steel and aluminum tariffs. “If you put tariffs against (those) who are your allies, one wonders who the enemies are,” Draghi said.

Read more: Draghi signals unwinding of fiscal stimulus but warns Trump of a confidence crisis

ECB concerned stronger euro could derail economic recovery

European Central Bank (ECB) governors are concerned that a further hike in the value of the euro, making exports less attractive and imports cheaper, could derail the economic region’s recovery. In minutes from their meeting on 19-20 July 2017, released on Thursday, they said there is a "risk of the exchange rate overshooting in the future". Some concerns were also voiced about "policy uncertainty in the United States".

Read more: ECB concerned stronger euro could derail economic recovery

EU: ECB caught in monetary policy maelstrom

The European Central Bank (ECB) has done everything in its power to fuel inflation and boost economic growth, but has had limited success. Now, risks and side effects are becoming more evident.

During the height of the euro crisis in the summer of 2012, European Central Bank chief Mario Draghi pledged he would save the euro "whatever it takes." His rhetoric abruptly quieted down financial speculation against several eurozone member states.

Thereafter, the ECB cut interest rates until its key refinancing rate hit zero percent this spring. In addition, commercial banks holding money with the ECB are being punished with a negative deposit rate. Moreover, the central bank supports struggling banks with emergency loans and free credit. After all, the ECB has launched a massive asset-buying program, also known as Quantitative Easing (QE) in the spring of 2015, meaning the bank acquires government and company debts at large scale, thus effectively printing and circulating more and more money.

Not surprisingly, Draghi appears happy with his extremely accomodative monetary policy. After all, inflation, credit volume and economic growth have all been on the rise in the eurozone, if only modestly. But take a closer look and it's hard to share Draghi's optimism. The return of inflation at very low levels - the last number was 0.5 percent - can be primarily traced back to rebounding price of crude oil and groceries.

By contrast, eurozone members fiscal policies have had precious little little effect on those mark-ups. The gush of newly-minted euros, instead, is keeping "zombie banks" and "zombi companies" artificially alive, as it fails to kickstart anemic growth in the euro currency area..

It isn't entirely speculative, therefore, that the ECB's monetary policy is part of the problem, not the solution. Deutsche Bank economist Stefan Schneider told DW that the willingness of eurozone governments to reform their economies has "markedly dropped after Draghi's whatever-it-takes announcement, especially in countries at the bloc's southern periphery" - a fact that has also been substantiated by OECD analyses, he adds.

The Organisation for Economic Cooperation and Development has found that higher interest rates before the 2012 debt crisis, had forced governments of crisis states to implement more than half of OECD's recommended growth initiatives. Last year, however, this share dropped to below 20 percent. This shouldn't come as a surprise: Draghi's promise, in conjunction with the bond purchase program, has minimized the difference in interest rates between German sovereign debt and those of crisis-hit states in the south of Europe. Without psychological strains, it is doubtful that politicians will go through with unpopular reforms when there is no fiscal pressure.

Read more: ECB caught in monetary policy maelstrom | NRS-Import | DW.COM | 02.12.2016

Finacial Industry: Easy Money is Dangerous Without Activist Fiscal Policy - by Teresa Ghilarducci

Weak fiscal policy and a political commitment to permanent austerity in many advanced economies has left monetary policy do a job for which it was never designed, and at which it is failing.[1] The supply of easy money amid conditions of austerity is increasingly dangerous, not only because it weakens the economy but also because it threatens to destroy the advance-funded pension model. These policies, and a cynical reliance on private debt to fuel consumption by  households in the bottom 90 percent of the income distribution — and especially the bottom 50 percent[2] — will doom all forms of private pensions that rely on advance funding with financial assets.

Given the limited tools available to them, the world’s central banks are unable, acting alone, to stimulate the world economy. That much is plain in the impotence of the European Central Bank without a robust fiscal union,[3] and even in the U.S. experience.

In 2008, Fed chief Ben Bernanke rapidly extended the Fed’s activity to provide liquidity through “quantitative easing,” including providing loans to all financial institutions, not just commercial banks; loaned money to businesses through the “commercial paper” market; and loaned money to AIG, an insurance company. As a scholar of the Great Depression of the 1930s[4], he was mindful of the scale of the danger posed by the financial meltdown, and acted quickly and appropriately to implement a monetary ease, buying bonds from untraditional sources[5] and lowering interest rates.

Short-term low interest rates have their place as a temporary measure; without those, the recession would have been longer and deeper. But the low interest rate policy was complemented by quick action by Congress and the President to decreases taxes and boost spending, but only for a limited period. When these fiscal measures expired, so did the recovery.

Low interest rates plainly can’t stimulate the economy – and can actually be dangerous — without activist fiscal policy, for seven main reasons:  eak fiscal policy and a political commitment to permanent austerity in many advanced economies has left monetary policy do a job for which it was never designed, and at which it is failing.[1] The supply of easy money amid conditions of austerity is increasingly dangerous, not only because it weakens the economy but also because it threatens to destroy the advance-funded pension model. These policies, and a cynical reliance on private debt to fuel consumption by  households in the bottom 90 percent of the income distribution — and especially the bottom 50 percent[2] — will doom all forms of private pensions that rely on advance funding with financial assets.

Given the limited tools available to them, the world’s cencentral banks are unable, acting alone, to stimulate the world economy. That much is plain in the impotence of the European Central Bank without a robust fiscal union,[3] and even in the U.S. experience.

In 2008, Fed chief Ben Bernanke rapidly extended the Fed’s activity to provide liquidity through “quantitative easing,” including providing loans to all financial institutions, not just commercial banks; loaned money to businesses through the “commercial paper” market; and loaned money to AIG, an insurance company. As a scholar of the Great Depression of the 1930s[4], he was mindful of the scale of the danger posed by the financial meltdown, and acted quickly and appropriately to implement a monetary ease, buying bonds from untraditional sources[5] and lowering interest rates.

Short-term low interest rates have their place as a temporary measure; without those, the recession would have been longer and deeper. But the low interest rate policy was complemented by quick action by Congress and the President to decreases taxes and boost spending, but only for a limited period. When these fiscal measures expired, so did the recovery.

Low interest rates plainly can’t stimulate the economy – and can actually be dangerous — without activist fiscal policy, for seven main reasons: Click on link below for full report.

Read more: Easy Money is Dangerous Without Activist Fiscal Policy

EU Economy: Deluded EU boss blames European nations for economic MELTDOWN NOT Euro in shock outburst - Zoie O'Brien

Nobel Prize winner Professor Joseph Stiglitz has insisted the EU will collapse if the Union makes no significant changes to the common currency policy.

According to the economist, the euro has “failed to bring prosperity, led to economic stagnation and to the erosion of solidarity between member states”.

Professor Stiglitz has been touring the EU with his new book which explains his belief the only way to save the Union would be dropping out of the single currency.

The book caught the world’s attention and red-faced Union bosses have spent months in silence.

Now, they have decided to retaliate - in the form of a letter by Eurogroup President Jeroen Dijsselbloem.

The EU chief insisted Brussels cannot possibly be to blame, despite admitting there are issues to be addressed.

He said: “I would certainly not claim that everything is going smoothly in Europe, but the solution is not to abolish the euro to preserve the EU.

“Rather, the solution is to deal with Europe’s economic problems so our countries continue their recovery.”

Jeroen Dijsselbloem argued the loss of an exchange rate mechanism is not the main risk for the euro - because studies have shown “economic cycles of the eurozone countries are broadly aligned”.

In fact, he sees the issue as belonging entirely to separate member states.

He said: “If we return to the introduction of the euro, we can see that the problem did not stem from the loss of exchange rate levers.

“The problem was that financial markets made no distinction between the member states with regard to risk, even though there were enormous differences in growth potential from country to country.”

Mr Dijsselbloem used examples in Ireland, Spain, Greece and Portugal where he claims “wages rose faster than productivity”.

Read moreL Deluded EU boss blames European nations for economic MELTDOWN NOT Euro in shock outburst | World | News | Daily Express

ECB: Draghi asks for faster response of Eurozone governments to reforms

Mario Draghi, President of the European Central Bank (ECB) warns on lack of actions of Eurozone leaders at the Brussels Economic Forum.

Draghi asked the governments to act in all policy areas in order for stabilisation of the economy to occur. “In the euro area, many structural reforms have been implemented in recent years, and especially in those countries worst-hit by the crisis. The benefits can now be seen. But there are many more benefits still to aim for, and so much more needs to be done,” stressed Draghi.

As consolidation after 2010 in the area was implemented in some countries mainly through tax rises rather than current spending cuts, the full burden of macroeconomic stabilisation was placed on monetary policy, as Draghi suggests. “This has led to a slower return of output to potential than if fiscal policy had been more supportive. This is why the ECB has said many times that fiscal policy should work with not against monetary policy,” underlined the man responsible for the Euro area’s monetary policy.

“Supporting demand is not just a question of the budget balance, but also of its composition, especially the tax burden and the share of public investment,” he adds. “We should not see fiscal policy as solely a macroeconomic tool, which is only available to countries with strong public finances. We should also see it as a microeconomic policy tool that can enhance growth even when public finances need to be consolidated.”

Read more: Draghi asks for faster response of Eurozone governments to reforms

Greece Wins Pledge for Debt Relief as IMF Bows to Euro Plan - by Ian Wishart, Corina Ruhe, Nikos Chrysoloras

Greece’s creditors reached a preliminary accord to ease the country’s debt burden but left the important details to be hammered out after Germany’s federal election next year.

At a meeting of euro-area finance ministers in Brussels that ended early Wednesday, and paved the way for a 10.3 billion-euro ($11.5 billion) aid payout, the International Monetary Fund retreated from its hard-line stance for concrete and generous measures on Greece’s debt, allowing creditors to announce a “breakthrough” despite giving no figures or real commitments.

"It seems very much like an agreement of convenience more than anything else,” Peter Rosenstreich, head of market strategy at Swissquote Bank told Bloomberg TV. “Greece needed the money now -- they were already behind on payments. Europe really needed to show a stable hand” before the June 23 referendum on whether the U.K. should stay in the European Union, he said.

Read more: Greece Wins Pledge for Debt Relief as IMF Bows to Euro Plan - Bloomberg

The ECB Grants Debt Relief To All Except Greece "for the time being" - by Paul De Grauwe

It looks like Greece may get some debt relief. There is as yet no certainty about this because some German politicians continue to conduct rear-guard battles to prevent it. What is certain, however, is that all Eurozone countries, with the exception of Greece, have been enjoying debt relief since early 2015. That may seem surprising to the outsider. Some explanation is necessary here.

As part of its new policy of ‘quantitative easing’ (QE), the ECB has been buying government bonds of the Eurozone countries since March 2015. Since the start of this new policy, the ECB has bought about €645 billion in government bonds. And it has announced that it will continue to do so, at an accelerated monthly rate, until at least March 2017 (Draghi and Constâncio 2015).

By then, it will have bought an estimated €1,500 billion of government bonds. The ECB’s intention is to pump money in the economy. In so doing, it hopes to lift the Eurozone economy out of stagnation.

I have no problems with this. On the contrary, I have been an advocate of such a policy (De Grauwe and Ji 2015). What I do have problems with is the fact that Greece is excluded from this QE programme. The ECB does not buy Greek government bonds. As a result, the ECB excludes Greece from the debt relief that it grants to the other countries of the Eurozone.

How is this possible? When the ECB buys government bonds from a Eurozone country, it is as if these bonds cease to exist. Although the bonds remain on the balance sheet of the ECB (in fact, most of these are recorded on the balance sheets of the national central banks), they have no economic significance anymore.

Each national treasury will pay interest on these bonds, but the central banks will refund these interest payments at the end of the year to the same national treasuries. This means that as long as the government bonds remain on the balance sheets of the national central banks, the national governments do not pay interest anymore on the part of its debt held on the books of the central bank

Read more: he ECB Grants Debt Relief To All Except Greece