Was that careless phrasing or a change of policy from the European Central Bank (ECB)? Ewald Nowotny, head of the Austrian central bank and a member of the governing council of the ECB, on Tuesday appeared to admit to CNBC that it would be possible to accept Greek bonds as collateral even after a default. If he meant it, it would be a significant change of policy by the ECB. The bank's president, Jean-Claude Trichet, has been fundamentalist on the point: accepting duff assets as collateral would damage the ECB's status as the anchor of stability in the eurozone, he thinks. That is why Trichet is so opposed to a Greek default. And his hard line is one reason why eurozone leaders have tied themselves in knots trying to find a way to keep an insolvent Greece inside the single currency. Nowotny later "clarified" his remarks to say he was in complete agreement with Trichet – but without explaining the point he was trying to make. Confusion reigned. In one sense, though, Nowotny's remark may be thought encouraging. It might suggest the ECB is ready to slaughter a few sacred cows to give the politicians greater room for manoeuvre in their hour of need. Don't hold your breath, though. Amazingly, there are still few signs that German chancellor Angela Merkel recognises how high the stakes have become for the single currency. She suggested Wednesday's summit of eurozone leaders will not deliver a spectacular solution. Oh dear. A spectacular – or, at least, comprehensive – solution is exactly what is needed for the eurozone's sovereign debt crisis. The International Monetary Fund was delivering stale news when it said on Tuesday that the risk of contagion in the eurozone is high, that the effect could be global, and that immediate action is required. Stale – but wholly accurate.
Access Investments-Building Awareness - European Union-ROMANIA
Wednesday, July 20, 2011
Was that careless phrasing or a change of policy from the European Central Bank (ECB)? Ewald Nowotny, head of the Austrian central bank and a member of the governing council of the ECB, on Tuesday appeared to admit to CNBC that it would be possible to accept Greek bonds as collateral even after a default. If he meant it, it would be a significant change of policy by the ECB. The bank's president, Jean-Claude Trichet, has been fundamentalist on the point: accepting duff assets as collateral would damage the ECB's status as the anchor of stability in the eurozone, he thinks. That is why Trichet is so opposed to a Greek default. And his hard line is one reason why eurozone leaders have tied themselves in knots trying to find a way to keep an insolvent Greece inside the single currency. Nowotny later "clarified" his remarks to say he was in complete agreement with Trichet – but without explaining the point he was trying to make. Confusion reigned. In one sense, though, Nowotny's remark may be thought encouraging. It might suggest the ECB is ready to slaughter a few sacred cows to give the politicians greater room for manoeuvre in their hour of need. Don't hold your breath, though. Amazingly, there are still few signs that German chancellor Angela Merkel recognises how high the stakes have become for the single currency. She suggested Wednesday's summit of eurozone leaders will not deliver a spectacular solution. Oh dear. A spectacular – or, at least, comprehensive – solution is exactly what is needed for the eurozone's sovereign debt crisis. The International Monetary Fund was delivering stale news when it said on Tuesday that the risk of contagion in the eurozone is high, that the effect could be global, and that immediate action is required. Stale – but wholly accurate.
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Only Germany can save EMU as contagion turns systemic
Europe's leaders have finally run out of time. If they fail to agree on some form of debt pooling and shared fiscal destiny at Thursday's emergency summit, they risk a full-fledged run on South Europe's bond markets and a disorderly collapse of monetary union.
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