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The reaction from Germany was one of outrage.

At the press conference, Draghi said that one member vote No - no prizes for guessing who. Draghi said different central banks expressed different views, but all converged to this policy. As reported by Frankfurter Allgemeine and others, a Bundesbank spokesman quoted him as saying that he rejected the OMT on the grounds that it was too close to monetary financing, and that they would risks for taxpayers.

The FT's editorial headline says: Mr Draghi's audacious gamble. The comment said that the SMP fell short for technical reasons, which the OMT has fixed. But it warned that the heavy lifting has yet to be done. Italy and Spain still have to apply for a programme. And the process of closer integration remains subject to political risks.

While the non-German press seemed mostly impressed, the Germans went on a verbal rampage.

Holger Stelzner writes in Frankfurter Allgemeine that the decision means a formal end of the separation between monetary and fiscal policy in Europe. The southern countries can now continue to amass at low interest rate, without having to worry about financial markets. The northern countries are also happy, not having to keep asking their parliaments for more money. He says the conditionality can never be applied in practice. Will the ECB stop buying bonds because Italy refuses to reforms its dismissal laws? He concludes with a reference to the German constitutional court, and wonders what the courts view on this policy will be?

Marc Beise, writing in Suddeutsche Zeitung, defends the Bundesbank. He said the truly bad aspects of Draghi's decision was that the ECB left no doubt that it wants the euro to survive (Yes, we, too, had to read that sentence twice.) He writes this is not a statement a central banker should make. This is for politicians. He says the ECB has crossed an important line with its decision, but it is not irreversible. They will not be able to save the euro against Germany.

Note that these are Germany's two most important newspapers, straddling a wide ranging of public opinion from the right (FAZ) to the centre-left (SZ).

Interestingly, Bild Zeitung was relatively more moderate than the "serious" newspapers. Nicolas Blome dressed up his commentary in a pseudo-factual Q&A, in which he says that inflation will come, of course, but not immediately.



If you are not convinced, try it on someone who has not been entirely debauched by economics. — Piero Sraffa
by Migeru (migeru at eurotrib dot com) on Fri Sep 7th, 2012 at 05:08:28 AM EST
[ Parent ]
Holger Stelzner writes in Frankfurter Allgemeine that the decision means a formal end of the separation between monetary and fiscal policy in Europe.

This is a bizarre statement, since the much vaunted conditionality was a linking of monetary action to fiscal (and indeed other) policy.

by Metatone (metatone [a|t] gmail (dot) com) on Fri Sep 7th, 2012 at 07:16:16 AM EST
[ Parent ]
Independence and not speaking outside your brief only goes one way.

On the other hand, yesterday there was a very good question to Draghi at the press conference: a journalist pointed out that the conditionality meant that the ECB would interrupt bond purchases if the Eurogroup declares a country is not keeping to its memorandum, and that's not "independence".

The issue really is that separating fiscal and monetary policy is impossible except in the fevered imagination of Hayekians. Friedmanites believe all you can do with fiscal policy you can do better with monetary policy, but they don't believe the two can be kept separate.

If you are not convinced, try it on someone who has not been entirely debauched by economics. — Piero Sraffa

by Migeru (migeru at eurotrib dot com) on Fri Sep 7th, 2012 at 08:59:24 AM EST
[ Parent ]
means "out of reach of left-wing politicians, not all of which have been brought into the Consensus yet"...

Wind power
by Jerome a Paris (etg@eurotrib.com) on Fri Sep 7th, 2012 at 10:40:22 AM EST
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"Note that these are Germany's two most important newspapers, straddling a wide ranging of public opinion from the right (FAZ) to the centre-left (SZ)."

That would be "centre-right (SZ)."

"Life shrinks or expands in proportion to one's courage." - Ana´s Nin

by Crazy Horse on Fri Sep 7th, 2012 at 07:19:38 AM EST
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centrist in the political section, primitive neoliberal in the economic section.
by IM on Fri Sep 7th, 2012 at 07:26:14 AM EST
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12% for the extreme-right? Minuscule by Neuro (FR, AT, NL, etc) standards...

Wind power
by Jerome a Paris (etg@eurotrib.com) on Fri Sep 7th, 2012 at 10:39:16 AM EST
[ Parent ]


"Life shrinks or expands in proportion to one's courage." - Ana´s Nin
by Crazy Horse on Fri Sep 7th, 2012 at 02:36:32 PM EST
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Jerome presumably intended to reply to this.

If you are not convinced, try it on someone who has not been entirely debauched by economics. — Piero Sraffa
by Migeru (migeru at eurotrib dot com) on Fri Sep 7th, 2012 at 02:38:54 PM EST
[ Parent ]
FN is not the Chryssi Avgi analog, though. FN is the LAOS analog. Chryssi Avgi hit its head while it was tumbling down the rabbit hole.

- Jake

Friends come and go. Enemies accumulate.

by JakeS (JangoSierra 'at' gmail 'dot' com) on Fri Sep 7th, 2012 at 03:32:26 PM EST
[ Parent ]

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