Arab Today, arab today draghi can\t offer a quick solution
Last Updated : GMT 12:35:42
Arab Today, arab today
Arab Today, arab today

Draghi can\'t offer a quick solution

Arab Today, arab today

Arab Today, arab today Draghi can\'t offer a quick solution

Berlin - DW

The expectations were enormous ahead of the European Central Bank\'s monthly meeting. People were talking about \"unlimited firepower\" and \"whatever it takes.\" But the announcements at the end were disappointing. Not many people were very interested in the fact that the European Central Bank (ECB) left its interest rates unchanged at its meeting on Thursday. Much more important was the question of what the bank was going to do about the high interest rates which some eurozone countries are currently having to pay to borrow money. The ECB president, Mario Draghi, had raised expectations last week when he said that the ECB would do \"whatever it takes\" to save the euro, \"and believe me, it will be enough.\" Those were clear words which indicated decisiveness - very different from the usual careful phrases for which central bank presidents are better known. But they left plenty of room for speculation, and so the markets and the media could let their imaginations rip. Dreams of salvation One view was that the ECB would start buying bonds itself. But since its statutes don\'t allow it to lend money directly to states, the idea emerged that the future ESM rescue fund would take over that role. It would get a license to operate as a bank and would have endless credit rights with the ECB, so that it could buy bonds from troubled states. That way it would be possible to reduce the high interest on Spanish or Italian bonds to a bearable level. That\'s what the heated imagination of the markets and the media was saying, and it could be that Draghi\'s imagination was running on the same lines. But on Thursday, reality struck and he had to talk like a normal central banker again. He delivered a sober statement, in coded language, that was disappointingly vague: \"The Governing Council, within its mandate to maintain price stability over the medium term and in observance of its independence in determining monetary policy, may undertake outright open market operations of a size adequate to reach its objective.\" In other words, the ECB could possibly buy bonds which were on the market. Whether it will do so, Draghi didn\'t say. The policy is highly controversial. But the ECB has already bought bonds in the past in a program which saw purchases worth some 200 billion euros. That program was suspended in spring. German resistance The German representative on the Governing Council of the ECB, Bundesbank president Jens Weidmann, is strictly opposed to such purchases. He argues that the EU treaties do not allow the ECB to finance states through the back door in this way. In addition he fears that pouring so much money into the market would run the risk of boosting inflation. And the prevention of inflation is the ECB\'s primary task. Draghi didn\'t hide the fact that the Germans don\'t like the idea of buying bonds, but he emphasized several times that he couldn\'t see any risk of inflation in the foreseeable future. His vague announcement that the bank \"may\" become active, looks like the compromise on which the bank\'s council was able to agree. Draghi has no power to deliver on the other elements in the dream: the bank license for the ESM or its right to buy bonds. So he was only able to appeal to the politicians. \"Governments must stand ready to activate the ESM/EFSF in the bond market when exceptional financial market circumstances and risks to financial stability exist,\" he said, adding that this should only be under strict conditions. It\'s up to the governments One could interpret his words to mean that he too favors a dual strategy from the ECB and the rescue funds. But that won\'t be decided by the ECB, it will be up to the governments. The German Constitutional Court will also have a say in the matter. On September 12, it\'s due to announce its decision as to whether the ESM is in accordance with the German constitution. Until then, the fund can\'t start its operations. Even if the German government and the German court both agree and give a green light for the ESM, there will still be plenty to do before the fantasies of an ESM with limitless firepower come true. In theory, the ESM, equipped with a bank license, would buy bonds from troubled states, sell them to the ECB and get money with which it could then intervene further. The idea behind the scheme is: if nobody is prepared to lend money to Italy and Spain at sensible rates, then we\'ll do it ourselves. And we\'ll do it in such a big way that speculators won\'t find it worth their while to try to bet against it. Draghi seems to think that\'s fine. But here too there is a big gap between fantasy and reality. It\'s not the ECB but the national governments which have to award the license. The ECB will then have to decide if it wants to accept the rescue fund as a partner and give it credits. Draghi admitted that the ECB has already commissioned a legal report which says that the current structure of the ESM would make it impossible for the ECB to lend it money. So the big dream of a quick solution to the debt crisis has been followed by the shock of waking up - the dream was never realistic. But the idea of a strategy involving bond purchases by the ESM and the ECB working together is likely to be a topic of discussion and dispute for some time to come.

arabstoday
arabstoday

Name *

E-mail *

Comment Title*

Comment *

: Characters Left

Mandatory *

Terms of use

Publishing Terms: Not to offend the author, or to persons or sanctities or attacking religions or divine self. And stay away from sectarian and racial incitement and insults.

I agree with the Terms of Use

Security Code*

Arab Today, arab today draghi can\t offer a quick solution Arab Today, arab today draghi can\t offer a quick solution

 



Name *

E-mail *

Comment Title*

Comment *

: Characters Left

Mandatory *

Terms of use

Publishing Terms: Not to offend the author, or to persons or sanctities or attacking religions or divine self. And stay away from sectarian and racial incitement and insults.

I agree with the Terms of Use

Security Code*

Arab Today, arab today draghi can\t offer a quick solution Arab Today, arab today draghi can\t offer a quick solution

 



Arab Today, arab today
Arab Today, arab today Designer Aql Faqih aspires to innovation

GMT 18:41 2017 Friday ,20 October

Designer Aql Faqih aspires to innovation
Arab Today, arab today What's the reason and what you can do

GMT 05:44 2017 Sunday ,22 October

What's the reason and what you can do
Arab Today, arab today Etiquette expert underlines importance of gifts

GMT 17:52 2017 Sunday ,03 September

Etiquette expert underlines importance of gifts
Arab Today, arab today Prayers turn to nightmare

GMT 06:14 2017 Sunday ,22 October

Prayers turn to nightmare
Arab Today, arab today Hiring not part of Alibaba pledge

GMT 11:26 2017 Wednesday ,18 October

Hiring not part of Alibaba pledge
Arab Today, arab today
Arab Today, arab today
Arab Today, arab today World's deepest lake in peril

GMT 15:54 2017 Friday ,20 October

World's deepest lake in peril
Arab Today, arab today Ex-French minister Dati wants tough action

GMT 10:54 2017 Thursday ,19 October

Ex-French minister Dati wants tough action
Arab Today, arab today Delhi braces for pollution 'airpocalypse'

GMT 16:07 2017 Friday ,20 October

Delhi braces for pollution 'airpocalypse'
Arab Today, arab today The history of solar eclipses

GMT 05:16 2017 Sunday ,20 August

The history of solar eclipses
Arab Today, arab today EU raids automaker BMW

GMT 11:06 2017 Saturday ,21 October

EU raids automaker BMW
Arab Today, arab today Sweden to get biggest car factory

GMT 14:10 2017 Friday ,20 October

Sweden to get biggest car factory
Arab Today, arab today Actress Mona Zaki praises husband’s role

GMT 08:15 2017 Thursday ,19 October

Actress Mona Zaki praises husband’s role
Arab Today, arab today Massacre fears spark race

GMT 19:09 2017 Thursday ,19 October

Massacre fears spark race

GMT 08:57 2017 Wednesday ,18 October

Actress Shery Adel happy for Egypt’s qualification

GMT 18:15 2017 Monday ,16 October

British actress becomes fifth woman

GMT 16:53 2017 Tuesday ,05 September

Youssra depended on colored foam

GMT 16:00 2017 Wednesday ,18 October

Climate-disrupting volcanoes helped topple

GMT 10:46 2017 Saturday ,05 August

Nanis reveals simple ideas for home renovation

GMT 10:18 2017 Saturday ,21 October

How to do open-heart surgery

GMT 13:44 2017 Friday ,20 October

Barcelona through George Orwell’s eyes

GMT 17:12 2017 Monday ,07 August

Al-Shawaifi reveals secrets of total solar eclipse

GMT 20:46 2017 Thursday ,19 October

Qualcomm files lawsuits in China to ban iPhones

GMT 16:53 2017 Saturday ,02 September

Mai importance of gifts during Eid Al-Adha
Arab Today, arab today
Arab Today, arab today
 
 Arab Today Facebook,arab today facebook  Arab Today Twitter,arab today twitter Arab Today Rss,arab today rss  Arab Today Youtube,arab today youtube  Arab Today Youtube,arab today youtube
arabstoday arabstoday arabstoday arabstoday
arabstoday arabstoday arabstoday
arabstoday
بناية النخيل - رأس النبع _ خلف السفارة الفرنسية _بيروت - لبنان
arabstoday, Arabstoday, Arabstoday