Yes, a banking license means unlimited ECB support.
The ‘talk’ continues to move in the right direction.
*HOLLANDE SAYS BANKING LICENSE WOULD GIVE ESM `GREATER POWER’
*HOLLANDE SAYS MANY IDEAS ON TABLE TO COMBAT CRISIS
*HOLLANDE SAYS EUROPE CAN IMPROVE ITS CRISIS RESPONSE
*HOLLANDE SAYS EUROPE HAS THE MEANS TO CONTROL ITS FUTURE
*HOLLANDE SAYS EUROPE MUST SO ITS DUTY ON GROWTH FOR GREECE
*HOLLANDE SAYS GREECE HAS MADE ENORMOUS EFFORTS
*HOLLANDE SAYS ITALY UNJUSTLY ATTACKED BY FINANCIAL MARKETS
*HOLLANDE SAYS HE’S IN AGREEMENT WITH MONTI ON GROWTH MEASURES
*HOLLANDE SAYS EUROPE NEEDS MECHANISMS AGAINST SPECULATION
*HOLLANDE SAYS GROWTH IS NECESSARY FOR DEBT REDUCTION
*HOLLANDE SAYS HAS `GREAT CONSIDERATION’ FOR MONTI’S LEADERSHIPHollande Says Europe Needs Mechanisms Against Speculation
By Gregory Viscusi
June 14 (Bloomberg) — French President Francois Hollande said that Italy has been unjustly attacked by financial markets and that Europe needs mechanisms to counter speculation.
Speaking in Rome today at a joint press conference with Italian Prime Minister Mario Monti, Hollande said that both leadders agreed on measures to spur economic growth. Growth is necessary for debt reduction, he said.
Europe must do its duty in helping to deliver growth for Greece, which has made enormous efforts during its bailout program, Hollande said.
Europe can improve its crisis response, and has the means to control its fuuture, he said. Many ideas are on the table to combat the crisis, he said, citing a banking license for the permanent rescue fund, which would give it “greater power.”
right direction, and this at least could bring in interest rates in the periphery, which would be a massive relief.
but still nothing here along the lines of ditching austerity, is there?
and of course this is Hollande talking. i wonder what the reception of these comments was in Berlin…
@gaius marius,
Germany doesn’t have any high cards left anymore I think.
@Kristjan,
Germany has all the strictly economic high cards. Granted it’s becoming a bit politically isolated. But if I were German, that wouldn’t worry me. I’d be tempted to stick two fingers up at the whole world and revert to the Deutschmark.
@Ralph Musgrave,
you mean one finger don’t you…but they would mostly be screwing themselves given the anount of ecb claims the budesbank holds and the disruction of there export model they would experience…
@Ralph Musgrave,
Do German exporters really feel they can ditch euro markets for Russian & Chinese ones?
@Ralph Musgrave,
Exactly – almost half of Germany’s exports are to the rest of the Euro Zone … forcing those countries to suddenly and massively devalue their currencies might prove rather a large mistake. Unfortunately, the only thing less popular than a Greek kebab in Berlin – is a pragmatist in Berlin!
@Ralph Musgrave,
Reply to Fin, Roger Erickson and Cesar . . . it’s true that if Germany reverted to the Deutschmark, they’d export less to the rest of the Eurozone. But what have they got in exchange for the Mercs etc they exported in recent years: to significant extent they (or their banks) have got worthless bits of paper, like Greek and Spanish debt. If Germany reverted to the Deutschmark, that would reduce the balance of payments deficits of periphery countries: just what those countries need.
today the public sector in Germany isn’t directly involved with the funding of exports. German exporters do their thing and get paid in euro.
It’s the importers and/or their clients/consumers/etc. who borrow to pay their bills.
Yes, German banks have excess balances at the Bundesbank, a ‘branch’ of the ECB, but those deposits aren’t at risk.
Hollande seems to be just another well intentioned fellow who doesn’t have a clue on how the markets work.
There is no “unjustified attack”. The markets are totally justified in requiring higher rates for Italy and especially Spain, considering the lack of monetary sovereignty of both countries, their low growth prospects, the absence (as of today) of support guarantees from the ECB and the fact that the loan now being promised to Spain means buyers of Spanish public debt are destined to become creditors subordinated to the European “mechanism” providing the money.
It’s frightening to watch a spectacle where the main actors – the leaders of France and Germany – are both, in their own particular way, truly “alienated” (as Hegel or Marx might put it), unable to understand the workings of the monetary system and the currency that they themselves created barely a decade and a half ago.
@Jose,
Hard to see how this cannot all end in tears.
Warren says muddle through regarding financial matters, can anyone tell me how medical care has changed in Greece? In the USA, I feel it has gotten worse for me personally. Too much demand for service, not nearly enough supply.
http://www.zerohedge.com/news/matter-life-and-death-collapsing-greek-health-care-system-critical-condition
As the following Reuters report shows, regardless of the outcome on Sunday, it just may be too late to preserve the future of Greek sickcare, and with that, of the entire population: “The country’s state hospitals are cutting off vital drugs, limiting non-urgent operations and rationing even basic medical materials for exhausted doctors as a combination of economic crisis and political stalemate strangle health funding. “It’s a matter of life and death for us,” said Persefoni Mitta, head of the cancer patients’ association, recounting the dozens of calls she gets a day from patients needing pricey, hard-to-find cancer drugs. “Why are they depriving us of life?””
@Captain Kirk,
“Why are they depriving us of life?”
The morons in charge believe they are “out of money”….. rsp
@Matt Franko,
Why do you call them “morons”?…
“Prof Niall Ferguson is an economic historian. He is Laurence A. Tisch Professor of History at Harvard University and senior fellow at Jesus College, Oxford.”
http://www.bbc.co.uk/news/world-18456131
“The heart of the matter is the way public debt allows the current generation of voters to live at the expense of those as yet too young to vote or as yet unborn. ”
…
“These mind-boggling numbers represent nothing less than a vast claim by the generation currently retired or about to retire on their children and grandchildren, who are obligated by current law to find the money in the future, by submitting either to substantial increases in taxation or to drastic cuts in other forms of public expenditure. ”
—
That guy has clearly invented a way to travel in time, he not only deserves a Nobel price in economics but one in physics, too …
Not cleart what Hollande means.The ESM already has a licence to recapitalise euro banks in art. 15.1. Sure this means unlimited ECB support? Paolo
@Paolo Barnard,
correct me where i’m wrong, but ESM — not being a bank — is more of a passthrough fund at the moment. that is, Germany gives it 100bn, it can lend 100bn.
give it a banking license, however, and the capital contributed becomes the capital/loss buffer and ESM can loan out vastly more — eg, with a 10% capital constraint, 1000bn — with the ECB acting as the interbank market to provide the necessary funding.
@gaius marius, You’re probably right.Problem is that things like the ESM are EU Treaties and Mr Hollande’s idea would require a huge overhaul of the already existing Treaties on the EU System of Central Banks and institutional lenders. Also, the Germans will not be easily convinced. P.
which would require an overhaul of their thought process
right, with a bank license they could lend to a nation, and then use that loan (which could be a security) as collateral at the ECB to ‘replace’ the funds they lent.
@WARREN MOSLER,
Not unlimited, only for as long as these securities pass eligibility criteria.
http://www.ecb.int/pub/pdf/other/gendoc2011en.pdf
Warren but what this would fix except the short term (again)? Ok so they have a license to extend more credit. Credit which will add (even if at lower rated than the market) to the accumulated debt, and if the ECB continues to NOT support directly as ‘buyer of last resort’ of stressed bonds pressures will continue.
Meanwhile Europe (or a part of it) is getting uncapitalised (all great for some vulture hacks).
@Leverage,
In Spain politicians are openly saying the ECB should do more (aka act as buyer of last resort), that it’s Europe turn to move and as fast as possible.
I think Hollande is more or less going along that path. But Germany paternalistic behaviour won’t allow it (“profligates have to pay their past abuses”).
the long term is a series of short terms.
and with at least indirect ecb support, operationally it can muddle through.
socially is another story…