Today we finally got some hard details on the much-anticipated
ECB sovereign bond-buying plan. And US markets reveled in the
certainty of a currency more important than dollars or euros:
ECB President Mario Draghi spoke clearly and forcefully at
today's press conference...
This plan "will enable us to address severe distortions in
government bond markets which originate from, in particular,
unfounded fears on the part of investors of the reversibility of
the euro. Under appropriate conditions, we will have a fully
effective backstop to avoid destructive scenarios with potentially
severe challenges for price stability in the euro area."
And while the ECB is not truly printing new money ala
Fed-style QE (since the transactions on the ECB balance sheet will
be "sterilized," there will be no increase in the money supply),
they also are not handing over money to Spain and Italy and whoever
"Governments must stand ready to activate the EFSF/ESM in the
bond market when exceptional financial-market circumstances and
risks to financial stability exist -- with strict and effective
conditionality," Mr. Draghi said.
In other words, they still have to ask for help and agree to
conditions for that assistance. Plus, the ECB can terminate
bond purchases if governments don't fulfill
But despite lots of unity among ECB members and decision-makers,
there is also some dissent from the old guard in Germany. As
Matthew Brockett and Jeff Black reported for Bloomberg this
Germany's Bundesbank was the sole objector to Draghi's plan
on the ECB's 23-member Governing Council. Bundesbank President
Jens Weidmann issued a statement after Draghi's press conference
saying the bond program is "tantamount to financing governments
by printing banknotes" and may encourage them to postpone
So, Super Mario has lived up to his words of "whatever it takes"
and "believe me... it will be enough."
But will it? The ECB's program, called Outright Monetary
Transactions, will target government bonds with
maturities of one to three years, including longer-dated debt that
has a residual maturity of that length. Does this quell the bond
vigilantes attacking 5, 7, and 10-year paper?
So I ask you...
Is this plan a crisis game-changer for Europe?
Is our market that has been "waiting to go higher," confirmation
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