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Guillaume Duval, chief ed of Alternatives Economiques, says :

...la Banque centrale européenne (BCE) (...) n'a pas le droit d'acheter des titres de la dette publique d'un Etat membre.

(The ECB does not have the right to buy public debt issues of a member state).

What's the legal basis for what the ECB can or can't do?

by afew (afew(a in a circle)eurotrib_dot_com) on Fri Feb 12th, 2010 at 10:02:47 AM EST
[ Parent ]
and presumably absorbed into the Lisbon Treaty now. I think the relevant articles are in the 100-125 range IIRC.

In the long run, we're all dead. John Maynard Keynes
by Jerome a Paris (etg@eurotrib.com) on Fri Feb 12th, 2010 at 10:18:03 AM EST
[ Parent ]
Nothing precise in those articles of Lisbon (different numbering, but Maastricht numbers are cited too) about ECB intervention on the open market, or the right to purchase member state debt.
by afew (afew(a in a circle)eurotrib_dot_com) on Fri Feb 12th, 2010 at 10:41:52 AM EST
[ Parent ]
See my parallel comment.

En un viejo país ineficiente, algo así como España entre dos guerras civiles, poseer una casa y poca hacienda y memoria ninguna. -- Gil de Biedma
by Migeru (migeru at eurotrib dot com) on Fri Feb 12th, 2010 at 10:44:43 AM EST
[ Parent ]
Gah. That's idiotic.

En un viejo país ineficiente, algo así como España entre dos guerras civiles, poseer una casa y poca hacienda y memoria ninguna. -- Gil de Biedma
by Migeru (migeru at eurotrib dot com) on Fri Feb 12th, 2010 at 10:29:34 AM EST
[ Parent ]
Is that at the time of issue or in the secondary market?

En un viejo país ineficiente, algo así como España entre dos guerras civiles, poseer una casa y poca hacienda y memoria ninguna. -- Gil de Biedma
by Migeru (migeru at eurotrib dot com) on Fri Feb 12th, 2010 at 10:33:33 AM EST
[ Parent ]
He doesn't say, just says the ECB can't help Greece by this means.

I'm looking at the General Documentation on Eurosystem Monetary Policy, Instruments and Procedures, The Implementation of Monetary Policy in the Euro Area (pdf), which has a chapter on Open Market Operations, summarised in this table:

The detailed description of the operations says they are carried out by national central banks, with the exception of "fine tuning operations", where it is also possible "the Governing Council of the ECB can decide" to authorize the ECB to carry them out.

by afew (afew(a in a circle)eurotrib_dot_com) on Fri Feb 12th, 2010 at 10:50:27 AM EST
[ Parent ]
Open market operations on public Euro debt are allowed.

Now, when he says "the ECB cannot help Greece" he's assuming that Greece is bankrupt and needs an ECB loan and there's nothing else that can be done to help Greece.

In fact, Greek traded debt instruments are being subject to speculative attack in the markets and the as part of a "pump-and-dump" operation in which market price volatility is talked up as a sign of insolvency. The ECB could kill the volatility stone dead and enforce a floor on the price, and possibly bankrupt the speculators, through open market operations. That would help the whole Eurozone.

And trading in sovereign debt is a part of monetary policy. Sovereign debt is a key component of the money supply, right after cash.

En un viejo país ineficiente, algo así como España entre dos guerras civiles, poseer una casa y poca hacienda y memoria ninguna. -- Gil de Biedma

by Migeru (migeru at eurotrib dot com) on Fri Feb 12th, 2010 at 10:56:48 AM EST
[ Parent ]
So how can we imagine this possibility doesn't occur to Trichet and others?
by afew (afew(a in a circle)eurotrib_dot_com) on Fri Feb 12th, 2010 at 11:02:50 AM EST
[ Parent ]
Ideological blinders.

En un viejo país ineficiente, algo así como España entre dos guerras civiles, poseer una casa y poca hacienda y memoria ninguna. -- Gil de Biedma
by Migeru (migeru at eurotrib dot com) on Fri Feb 12th, 2010 at 11:07:29 AM EST
[ Parent ]
Jean-Claude Juncker has a frank interview with Quatremer. I should do it as a diary.
by afew (afew(a in a circle)eurotrib_dot_com) on Fri Feb 12th, 2010 at 12:18:17 PM EST
[ Parent ]
[ET Moderation Technology™]

link

En un viejo país ineficiente, algo así como España entre dos guerras civiles, poseer una casa y poca hacienda y memoria ninguna. -- Gil de Biedma

by Migeru (migeru at eurotrib dot com) on Fri Feb 12th, 2010 at 02:23:13 PM EST
[ Parent ]
let's see:

  1. "keeping their powder dry"?
  2. not going to war against their friends, partners and neihbors the Serious People?
  3. not going to war against the financiers who are absolutely needed to save us from a bigger crisis?
  4. it's probably socialisticky?


In the long run, we're all dead. John Maynard Keynes
by Jerome a Paris (etg@eurotrib.com) on Fri Feb 12th, 2010 at 12:40:18 PM EST
[ Parent ]
I think they don't see a problem so they don't look for a solution.

If there is a problem, they think it's entirely Greece's fiscal position, and the solution is neoliberal reform.

The thought that the bond market might be the problem hasn't crossed their minds.

En un viejo país ineficiente, algo así como España entre dos guerras civiles, poseer una casa y poca hacienda y memoria ninguna. -- Gil de Biedma

by Migeru (migeru at eurotrib dot com) on Fri Feb 12th, 2010 at 02:21:27 PM EST
[ Parent ]
There is something called the European Investment Bank Group, made up of the EIB (aimed at integration and cohesion) and EIF, the European Investment Fund, which focuses on a creating a homogenous venture capital market in Europe. The European Investment Bank is a majority shareholder to endorse the role of the EIF as the exclusive vehicle for venture capital of the European Investment Bank (EIB). Other shareholders are the European Union, represented by the European Commission, and a number of European banks and financial institutions from the public and private sector.

EIF carries out its venture capital and guarantee activities using either its own funds or funds entrusted by mandates. The principal sources of mandated funds are the main shareholders, the EIB (EUR 4bn) and the European Union (EUR 1.1bn), whilst up to EUR 1bn is derived from EIF's partnerships with public and private bodies.

The ECB is the central bank for Europe's single currency, the euro. The ECB's main task is to maintain the euro's purchasing power and thus price stability in the Eurozone, made up of the 16 EU countries that have introduced the euro since 1999.

(my text for a website on the EP)

You can't be me, I'm taken

by Sven Triloqvist on Fri Feb 12th, 2010 at 11:04:58 AM EST
[ Parent ]
Article 123
(ex Article 101 TEC)
  1. 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.

  2. 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.

En un viejo país ineficiente, algo así como España entre dos guerras civiles, poseer una casa y poca hacienda y memoria ninguna. -- Gil de Biedma

by Migeru (migeru at eurotrib dot com) on Fri Feb 12th, 2010 at 10:42:42 AM EST
[ Parent ]
(source: consolidated EU treaties, PDF)

En un viejo país ineficiente, algo así como España entre dos guerras civiles, poseer una casa y poca hacienda y memoria ninguna. -- Gil de Biedma
by Migeru (migeru at eurotrib dot com) on Fri Feb 12th, 2010 at 10:43:37 AM EST
[ Parent ]
I scanned that too quickly, just read "overdraft".
by afew (afew(a in a circle)eurotrib_dot_com) on Fri Feb 12th, 2010 at 10:55:51 AM EST
[ Parent ]
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?

- Jake

Friends come and go. Enemies accumulate.

by JakeS (JangoSierra 'at' gmail 'dot' com) on Fri Feb 12th, 2010 at 11:15:56 AM EST
[ Parent ]
Ideological blinders...

En un viejo país ineficiente, algo así como España entre dos guerras civiles, poseer una casa y poca hacienda y memoria ninguna. -- Gil de Biedma
by Migeru (migeru at eurotrib dot com) on Fri Feb 12th, 2010 at 11:22:10 AM EST
[ Parent ]
LTE to alternatives économiques?

En un viejo país ineficiente, algo así como España entre dos guerras civiles, poseer una casa y poca hacienda y memoria ninguna. -- Gil de Biedma
by Migeru (migeru at eurotrib dot com) on Fri Feb 12th, 2010 at 10:57:49 AM EST
[ Parent ]
I tried to leave a comment but it doesn't seem to have worked - their site is a mess.
by afew (afew(a in a circle)eurotrib_dot_com) on Fri Feb 12th, 2010 at 11:03:39 AM EST
[ Parent ]
We should send them an op-ed :P

En un viejo país ineficiente, algo así como España entre dos guerras civiles, poseer una casa y poca hacienda y memoria ninguna. -- Gil de Biedma
by Migeru (migeru at eurotrib dot com) on Fri Feb 12th, 2010 at 11:05:50 AM EST
[ Parent ]

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