Mr.Flavor Flav in all his glorious badness. Who would you rather watch tomorrow, him or the European Council leaders in conclave? He may also have more ideas about how to fix the Eurozone…….image as usual has been liberated from Wikipedia for emancipatory purposes….
Increasingly, the European Council summit of December 9th risks becoming a muddled side show.
As Prof. Flavor Flav reminded us all a long time ago: don’t believe the hype! http://www.youtube.com/watch?v=1INb5FM_1lE
In fact the real event today has been the decision by the ECB to cut interest rates again, but above all they have begun providing longer term loans to banks-2-3 years loans which give them a chance to restructure and a breather. Various European banks have already borrowed 50bn in US dollars from the ECB, and that figure is likely to go up.
The next step is to buy state bonds with longer maturities as well. More and more this is what is crucial now: what and how the ECB acts rather than what Sarkozy and Merkel or the rest say and do.
Yes of course Article 125 says the ECB should not finance governments…but in fact they have made interventions before…buying state bonds……and they will eventually have to do so again….if needed… they will channel it through an IMF programme ……..the problem is the ECB are gambling that they have time to refuse to make big buys of state paper soon…..they probably think they can let things slide some more……but what if they’re wrong?
More and more the semi-theological discussion about ‘golden rules’ and reform of protocol 12, which is seemingly the substance of this summit, is beginning to look very beside the point.
It is also revealing how markets are responding to rumors that German diplomats have ruled out increasing the size of EU bailout funds by keeping the EFSF and ESM operating together as a crude expedient of doubling the size of funds available to states who could be locked out of the markets and yet need cash…Italy alone will need a shed load of case soon in the new year…….. and the same ‘un-named’ senior German sources’ are also shrill in their demand for a proper full Treaty reform tomorrow which will of course take ages and undoubtedly referenda-which could well be lost. Oh and we probably don’t need-most of the important changes can be swung through expediencies and quick limited treaty tweaks. My guess these are German negotiating positions and spin-actually we all better hope they are just that!
Dave Shellock in the FT points that market disappointment as such German inflexibility was instantly reflected in a rise in Italian and Spanish bond prices, which had previously fallen somewhat.
Meanwhile a fully fledged bank run appears to have taken off in Greece…http://www.spiegel.de/international/europe/0,1518,802051,00.html
“At the start of 2010, savings and time deposits held by private households in Greece totalled €237.7 billion — by the end of 2011, they had fallen by €49 billion. Since then, the decline has been gaining momentum. Savings fell by a further €5.4 billion in September and by an estimated €8.5 billion in October — the biggest monthly outflow of funds since the start of the debt crisis in late 2009.”
With depositors convinced that Greece will sooner be leaving the Eurozone…either by its own will or by events….one can see why….but…….these things can spread ….and this may be how it starts….
And our leaders want a debate tomorrow about Gold Rules/Balanced budgets and a new Lisbon Treaty that could take three to four years to agree?