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FRANKFURT—European Central Bank officials signaled they are prepared to dramatically ramp up the ECB’s crisis response by renewing the central bank’s dormant government bond-purchase program. “Within our mandate, the ECB is willing to do whatever it takes to preserve the euro and, believe me, it will be enough,” ECB President Mario Draghi said in [...] February 20, 2012 [European Monetary Union countries'] GDP dropped by 0.3% QoQ (Q3 +0.1%), confirming our view that we are in a mild recession. The Franco/German axis held up relatively well although slightly out of balance (France +0.2%, Germany -0.2%). But the risks that the wheels are coming off and derailing current rescue efforts have risen. This [...] The IMF is reported to be putting together a loan package of from €400-600 billion, according to La Stampa via Bloomberg. Apparently IMF director Christine Lagarde wants to give the Mario Monti government enough time to launch reforms and then back them up with this huge loan. Loan interest rates mentioned were from 3% to 5%. Right [...] TOP DEVELOPMENTS SO FAR (as of 16:45 p.m. EDT): European Union leaders arrived in Brussels for a EU Summit Germany’s parliament approves Chancellor Angela Merkel’s resolution to boost the firepower of the euro zone’s bailout fund EU leaders remain split on the size of a haircut on Greek bonds held by private investors, a sticking point [...] Keep this tidbit of data in the back of your mind, or perhaps somewhere in the middle: Italy is under pressure and their latest treasury bill sale reflects investor concern: today yields soared on one-year bills to 4.153% from 2.959%, or up 119 bps. Note the low bid-to-cover ratio of 1.86. The Rome-based Treasury sold 7.5 billion euros of [...] The bond vigilantes are going after Italy and Spain right now. Instead of accepting the blame for poor fiscal and monetary management, their politicians act right out of the standard playbook and blame “speculators” for their problems. I don’t think I’ve ever not heard a politician say this in such circumstances. Does anyone believe them [...] Italy is the world’s eighth largest economy and it has one of the highest levels of public debt-to-GDP in Europe: Greece is ranked the 28th largest economy in the world. By comparison Ireland is ranked 36th. Needless to say, Italy represents a flash point in the euro zone as bond vigilantes have gone after it for [...] |
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