Article 123 (ex Article 101 TEC) Overdraft facilities or any other type of credit facility with the European Central Bank or with the central banks of the Member States (hereinafter referred to as "national central banks") in favour of Union institutions, bodies, offices or agencies, central governments, regional, local or other public authorities, other bodies governed by public law, or public undertakings of Member States shall be prohibited, as shall the purchase directly from them by the European Central Bank or national central banks of debt instruments. Paragraph 1 shall not apply to publicly owned credit institutions which, in the context of the supply of reserves by central banks, shall be given the same treatment by national central banks and the European Central Bank as private credit institutions.Okay, so the ECB can intervene in the secondary market to prevent price speculation on Euro sovereign debt. What the ECB cannot do is fund a public debt issue, and that makes some sense from certain ideological perspectives.
Article 123 (ex Article 101 TEC) Overdraft facilities or any other type of credit facility with the European Central Bank or with the central banks of the Member States (hereinafter referred to as "national central banks") in favour of Union institutions, bodies, offices or agencies, central governments, regional, local or other public authorities, other bodies governed by public law, or public undertakings of Member States shall be prohibited, as shall the purchase directly from them by the European Central Bank or national central banks of debt instruments. Paragraph 1 shall not apply to publicly owned credit institutions which, in the context of the supply of reserves by central banks, shall be given the same treatment by national central banks and the European Central Bank as private credit institutions.
What the ECB cannot do is fund a public debt issue, and that makes some sense from certain ideological perspectives.
Because by having passed through the bid-ask spread of a major investment bank, it is suddenly converted from a loan into a monetary instrument?
1) the EU can do no wrong; 2) Trichet is French; is neither here nor there.
I'll accept the first criticism (I think a bit more euro-enthusiasm is the only way to fight the perpetual [Europe.Is.Doomed™ Alert] atmosphere) but not the second one. That Trichet is French has nothing to do with it - I'm generally sympathetic to the "Berlin Consensus" (excessive debt and deficits are bad), but you have to acknowledge the criticism I've made of German positions recently as well. Wind power
The real problem is that Trichet will/can do nothing the Germans don't want. And the German attitude to this whole crisis has been a far greater cause of turbulence than the fact of Greek debt.
does not reference secondary market operations
that is, carried out by the ECB as opposed to national central banks.
Open Market Operations > Structural Operations > Outright Purchases/Sales
which are "non-regular" and "bilateral procedures". The brainless should not be in banking -- Willem Buiter
they are normally executed in a decentralised manner by the national central banks; (p 17)
OPERATIONS EXECUTED THROUGH STOCK EXCHANGES AND MARKET AGENTS The national central banks can execute outright transactions through stock exchanges and market agents. For these operations, the range of counterparties is not restricted a priori and the procedures are adapted to the market conventions for the debt instruments transacted.
The national central banks can execute outright transactions through stock exchanges and market agents. For these operations, the range of counterparties is not restricted a priori and the procedures are adapted to the market conventions for the debt instruments transacted.
The latter from the section on Bilateral procedures, p 31. It's again assumed NCBs will carry out these operations.
Not that the ECB is forbidden to change this. I'm just pointing out that centralised purchases don't feature in the standard procedure.
