The ECB’s own policies appear to be in contradiction. Its latest Financial Stability Review warned that bond tapering by the US Federal Reserve could lead to an interest rate shock, with a sharp rise in bond yields. Yet it has been slow to mitigate the dangers with pre-emptive stimulus.
Mario Draghi, the ECB’s president, told an audience in Berlin last week that bank needs a “safety margin against deflationary risks” after eurozone inflation fell to 0.7pc.
He warned that low inflation makes it harder for crisis states in Southern Europe to control their debt trajectories while at the same time carrying out internal devaluations within EMU to regain competitiveness, though he denied that the two goals are inherently contradictory.
“If average inflation is allowed to drift too low, adjustment runs into major head winds as demand suffers and real debt burdens rise,” he said.
Mr Draghi has to walk through a political minefield. The German constitutional court has not yet ruled on the legality of his back-stop plan for Italian and Spanish debt (OMT), making it very risky for him to push his case too hard. While Germany does not have a legal veto on ECB decisions, it has a de facto political veto.
Veteran EU watchers say the sacred contract of monetary union is that Germany will never be overruled on crucial matters. Mr Draghi has to work in tandem with Germany’s ECB board member Jörg Asmussen. The bank is in reality a twin-headed institution.
2 comments:
VOINEA SI CHITOIU TREBUIE DEMISI IMEDIAT - Voinea este incapabil, iar Chitoiu, analfebet - altfel se duce tara de ripa - DEMISIA CU IMPUTAREA PAGUBELOR CREATE ECONOMIEI NATIONALE !!! Sunt pagube de peste un miliard de Euro plus dezastrul din economia privata care a adus prejudicii serioase atit bugetului de stat cit si Romaniei . Au adus prejudicii de peste 1 miliard si bugetului UE ...asta se va vedea peste vre-o citeva luni, cind din nou, Comisia Europeana va cere despagubiri !!! AFARA CU NEAVENITII INCOMPETENTI !
The storm, called Xaver, blew a tree on to a car in Poraj, northern Poland, killing three people inside.
The storm also caused two deaths in the UK, one in Sweden and one in Denmark.
Dozens of flights have been cancelled, hitting travellers at Berlin Tegel, Copenhagen and smaller airports.
Many rail and ferry services were also cut in Germany and Scandinavia.
There is severe disruption in southern Sweden, with all rail services cancelled in the Skane region. Planes have been grounded at Sturup airport and Gothenburg's Landvetter airport, Radio Sweden reports.
Fallen trees have blocked many roads in southern Sweden and heavy snow is adding to the chaos.
More than 1,000 people spent the night at Copenhagen airport.
In eastern England about 10,000 homes were evacuated in Norfolk and Suffolk. Several homes collapsed into the sea at Hemsby when the storm battered the clifftop.
The Thames Barrier was closed for a second day to protect London from the surge.
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