Submitted by Tyler Durden on 08/12/2012 – 10:05Bond Creditors European Central Bank Eurozone Germany Greece Gross Domestic Product International Monetary Fund Italy RecessionWhile Frau Merkel remains beach-bound somewhere, hence the lack of ‘Neins’ recently, her deputy chancellor Michael Fuchs made it unequivocally clear this morning in a Handelsblatt interview thatGermany had “reached the limit of its capacity” over additional EFSF payments to Greece and reiterated the double-whammy that the ESM should NOT receive a banking license and that the ECB should NOT act as “money printing press in disguise” by extending emergency loans and bypassing EFSF/ESM. A decision about whether Greece should be given the second tranche of its loan will not be made until October, after the Troika finalizes its first review of the second rescue program in September. However, BNP Paribas notes that there have been a couple of developments worth noting over the past week and more are likely in the coming weeks.
Submitted by Tyler Durden
on 08/11/2012 – 21:12Belgium Bond Borrowing Costs Central Banks European Central BankGoldman Sachs goldman sachs Italy Newspaper Reality Sovereigns
A week ago we explained quite clearly why instead of encouraging self-defeating, short-termist behavior by promising to save Europe’s insolvent countries if and when needed, which does nothing to resolves Europe’s problems and make it worse in exchange for a brief respite from bond selling, the ECB should be doing precisely the opposite: encouraging local governments to understand that there is no magic bazooka from the central banks. Specifically we said that
“this Catch 22 of confounding cause and event can continue seemingly indefinitely, although in reality it can’t
. Because fundamentally what the bond market does is keep sovereigns “honest”
– just as Schauble said a week ago, Spanish yields at 7% are not the end of the world – instead what they are is a signal to the country to get its spending in control in order to reduce its deficit, and fundamentally get its house in order – yes, that means getting government spending to a sustainable level and firing hundreds of thousands of workers, as well as probably raising taxes even more. It also means pain all around, but the pain is inevitable and will only be worse the longer reality is denied.” This logic is so clear that only a lifelong economist, PhD or Goldman apparatchik can not grasp it: sadly that accounts for most of the people “in charge.” Which is why we were delighted to read that at least one person “gets it” – Belgian national bank governor Luc Coene
, the same Belgium that is also the heart of the bureaucratic labyrinth known as the EU, who told Belgium’s two largest newspaper that “buying the bonds of these countries would only serve to weaken the ECB and do nothing to resolve underlying issues of competitiveness
. “It makes no sense for the ECB to start financing those countries,” said Mr Coene, “It would only lead to the ECB taking on the whole public debt of Spain and Italy onto its balance sheet.
” Bingo. And not a moment too soon – we really were starting to pull a Mogatu here