ECB Death Wish, Continued
At the end of last week, Spanish 10-year bond yields were close to 7 percent — actually higher than they were last fall, when the ECB stepped in with its big LTRO lending program, a program that bought time that European leaders proceeded to waste:
Spanish Prime Minister Mariano Rajoy said euro-zone countries must urgently implement decisions including government bond purchases agreed to in June as the country can’t finance its deficit under current conditions.
And the European Central Bank, which is the only entity really in a position to do what’s necessary, is, well:
http://krugman.blogs.nytimes.com/2012/07/07/ecb-death-wish-continued/?smid=tw-NytimesKrugman&seid=autoThe ECB lowered its benchmark rate to a record low 0.75 percent on July 5, disappointing investors who had predicted it might restart its government-bond buying program to ease stress on Spain and Italy. The central bank will only buy government debt if it considers it necessary to keep inflation on track, Benoit Coeure, an executive board member, said yesterday.“If the governments decide to do it they should go ahead,” Coeure told a meeting of the Circle of Economists. “That doesn’t mean the ECB can’t buy Italian and Spanish debt on the market, but they’ll do it if it needs to for reasons of monetary policy and not otherwise.”
- dwb
- md
- Verified
Germany is pot committed. they will go along with the minimum necessary to keep the euro together each and every time. Merkels real challenge is.how to pivot. ah, politics, the art of the pivot.
- Joe Smith
- Vancouver
- Verified
The Europeans are now saying that Spain will have to guarantee recapitalization of Spanish banks through the ESM. That defeats the purpose. It turns bad decisions by German investors into a Spanish sovereign liability. Spain should let its banks go broke so the loss falls on German investors where it belongs.
- Jerry Fincher Hough
- Durham, NC
- Verified
Krugman has been very convincing to me at least that the Euro needs to go, at least in the periphery. Maybe ECB has read him and believed him as he has lost faith in his own analysis. Or maybe they have reread Milton Friedman.
The only way that we are going to think seriously about solving the world demand problem is face up to the sheer artificiality of the private-debt demand solution.
The right timing is near the time of a change in Administration so both sides can have an honest debate about alternatives, a new President with a desire for re-election has a mandate for drastic action, and plenty of time to organize a center-left party for the 2014 Congressional election without worrying about offending the blacks..
- John S.
- Arizona
- Verified
Professor Krugman:
If the European Union -- the European countries on the euro -- should collapse, then should the United States declare an economic and fiscal emergency and take any and all actions to protect the economy of the United States?
Your thoughts as to what actions should be taken would be appreciated.
- Ann
- Berkeley
- Verified
Not on topic, but, do you have anything to say about LIBOR, or are you going to just leave it to Joe? Thank you.- Joe Smith
- Vancouver
- Verified
Joe Nocera's piecehttp://www.nytimes.com/2012/07/07/opinion/libors-dirty-laundry.html on the Libor scandal is good but ultimately it just re-enforces what some of us already believe - that the major banks are fundamentally corrupt, that nothing they say can be trusted and their dishonesty is a major cause of the financial crisis and the failure to recover from the crisis. Freshwater and salt water schools do not seem to assign any role to widespread fraud at the heart of the banking system.- Ann
- Berkeley
- Verified
Thank you Joe. I liked the simple statement, "leave it to Joe," knowing full well that readers of Krugman's blog would know it was not Joe the Plumber or Joe Stiglitz.
Seeing as how our current economic problems were caused by political decisions ,Krugman could easily weigh in.
But as he told me when he signed my copy of his book, End the Depression NOW, he said he did not read the comments, I doubt he will get my somewhat vague message.
- Charley James
- Minneapolis MN
- Verified
For the third time in less than a century, Europe is going to stumble and bumble its way into a catastrophe with global consequences, largely by pretending the problem will go away all by itself. I seem to recall it doing the same thing in 1914 and then again in the mid-1930s. The continent's problems back then hardly affected anyone.
Are Europe's political, financial and policy leaders truly this blase' about how the rapidly deteriorating situation in the GIPSI nations - and, I suspect, soon France but I'm not sure how to make a cute acronym by adding an "F" - will shred not just the health of the Eurozone countries but also Britain, America and then the rest of the world.
Maybe I should make a sandwich board and join the folks proclaiming "The End Is Near!"
- martin weiss
- mexico, mo
- Verified
This is not stumbling or bumbling, this is premeditated. Just ask yourself "Who wins?"
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