by Bill McBride on 4/15/2012 06:35:00 PM
Sunday, April 15, 2012
From the Financial Times: Sarkozy breaks silence over ECB role
“Europe must purge its debts, it has no choice. But between deflation and growth, it has no more choice. If Europe chooses deflation it will die. We, the French, will open the debate on the role of the central bank in the support of growth.” [Sarkozy said]Of course, while most of Europe is worried about deflation, Germany is worried about inflation.
excerpt with permission
And from the NY Times: In Spain and Italy, Signs of a Lingering Crisis for Europe
Neither Spain nor Italy seems a good candidate for meeting the deficit-reduction targets they have agreed to with the European Union, especially if the downturn deepens.And on Greece: the election is scheduled for May 6th, and the smaller parties will probably do very well.
While the austerity debate simmers, a more pressing concern is efforts by Italy and Spain to raise financing for government debt they will need to roll over this year. Italy has so far raised only a little more than one-third of the estimated 215 billion euros ($283 billion) it will need this year, according to Reuters calculations. Spain is about half of the way to its goal, the economy minister, Luis de Guindos, said last Tuesday. According to the 2012 budget, the Spanish treasury plans gross issuance of 186 billion euros of debt this year.
The European Central Bank relieved a great deal of pressure with two rounds of cheap, three-year loans to banks in December and February that pumped 1 trillion euros ($1.3 trillion) into the region’s banking system. Many banks, especially in the southern countries like Spain and Italy, turned around and used that money to buy their government’s debt.
That debt-buying is now tapering off, said Guntram Wolff, deputy director at Bruegel, a research organization in Brussels. That raises the question of who might step in to finance these governments. “Investors are starting to express big doubts,” Mr. Wolff said.
• Summary for Week Ending April 13th
• Schedule for Week of April 15th
Posted by Bill McBride on 4/15/2012 06:35:00 PM