Skip to comments.European Central Bank pledges action as southern Europe buckles
Posted on 07/09/2012 8:55:08 PM PDT by bruinbirdman
The European Central Bank has vowed to do whatever it takes to hold the euro together after the North-South gap in borrowing costs reached fresh extremes, pushing the two halves of monetary union closer to breaking point.
Yields on Spanish 10-year bonds punched through the danger line of 7pc yesterday, obliterating the short-lived gains from the European Union summit last month. Italian yields rose above 6.08pc. With a cruel twist, German rates for six-month money fell to a record low of minus 0.03pc on safe-haven flows, while Frances borrowing costs turned negative for the first time in French history.
Spanish and Italian leaders pleaded for ECB intervention to stop yields spiralling out of control. At this moment the only institution that has enough money to act is the ECB. The ECB should start massive purchases of public debt, said Spains foreign minister, Jose Manuel Garcia-Margallo. Italys premier, Mario Monti, said market mayhem was obstructing the the transmission of monetary policy, the code term used by the ECB to justify intervention.
Mario Draghi, the banks president, said his staff were scrambling to come up with new policy tools to attenuate the crisis, within the limits of the banks mandate.
The euro is here to stay and the euro area will take the necessary steps to ensure that, he said, but gave no hint that the ECB is ready to cap Italian and Spanish bond yields.
Markets are not happy with the lack of action from the ECB. There has been no game-changer, said David Owen from Jefferies Fixed Income.
Both investors and southern European governments had expected the ECB to come to the rescue once EU leaders had agreed in June to a road-map towards a banking and fiscal union.
But Germany has effectively vetoed ECB action
(Excerpt) Read more at telegraph.co.uk ...
At the European Summit...
Herman Van Rompuy, European Council President.
"Just like normal.
"Those who are asking for money, make a line on the left.
"Those who are fed up of giving it, on the right.
"Anyone who has a solution, raise their hand.
"And everyone will have a coffee at 5pm."
Like France told Hank Paulson letting Lehman go bankrupt will effect Europe and I am sure now it will expose American Banks
Why? To save the Euro? To save Europe? To what end?
All governments should be racing to balance their budgets immediately. The era of cheap deficit financing is over.