The fiscal consolidation

If the leaders of the EU meet in early February for their summit, it will be again to talk about the debt crisis in the euro countries. It is clear that over-indebtedness of states and banks is far from overcome. The markets are unsettled. This situation in turn leads to other consequences and they are quite consequential.

I guess everyone here agree with this statement. When uncertainty prevails, transparency is important. Just this is it, which lacking, especially on the part of the European Central Bank (ECB).The successful placement of bonds of Portugal a week ago in the order of 1.25 billion euros was publicly hailed as a great success.

A day later told the news agency Bloomberg, the ECB had bought the day before bonds in the order of 1 to 1.5 billion euros. What a coincidence! Sure, the ECB has bought no German government bonds, probably not Dutch or Finnish. Perhaps she bought Greek or Irish, but maybe Portuguese papers. The ECB is cloaked in silence and thus contributes to the uncertainty in the markets.One thing is clear. The ECB is moving on very thin ice. You must under Article 123 of the Treaty on the Functioning of the European Union to not be allowed directly buying government securities.

In the same time, in regards to the marketability of Greek and Portuguese bonds can certainly have doubts.A manipulation of the market price is the intervention that now includes nearly 140 billion euros, anyway. Because in addition to the purchases of nearly 80 billion euros in government bonds, the ECB has purchased € 60 billion covered bonds.In this situation, the ECB has taken through the monetization of government debt itself. The ECB has become by their own “unprincipled” blackmail.

Therefore urges the ECB President Trichet leaders to an increase in the “euro rescue fund.”The ECB does not operate in a legal vacuum. After the European treaties, it is not the financing of insolvent states and banks committed, but the “price stability”. That is their job. Whether to accept this statutory mandate, they must demonstrate: “Mr Trichet, tear down this wall!”

Comments are closed.