Fri Nov 26th, 2010 at 06:15:41 AM EST
iMarketNews via Zero Hedge: ECB Weber: EFSF Should Convince Markets; If Not Will Do More (November 24, 2010)
The European Financial Stability Fund should be sufficient to dissuade markets from speculating against the solvency of Eurozone member countries, and if not, more money will be provided, European Central Bank Governing Council member Axel Weber said Wednesday.
In other words "we're waving this pot of money in front of the markets and every time they seize, we give them a chunk. This should make them stop but, if it doesn't, we'll make the pot even bigger".
Seriously, if this is not convincing evidence that Axel Weber is unfit to serve as ECB President after Trichet, I don't know what would be. I mean, look at this:
It should be "easy to convince markets" with the EFSF backstop that speculation against governments will not be successful, Weber argued.
Isn't it the case that speculators are succeeding in forcing governments to tap the fund to give to bondholders?
Weber said he was convinced that if the E750 billion is not enough, Europe's political leaders "will do more."
Yeah, how about 1.5 trillion? Is he proposing to drop the money from helicopters, too?
Presumably, given Axel Weber's reputation for being an inflation-fighting hawk (after all, he's the Bundesbank chief, not just a random joe at the ECB), one would have to conclude that adding a few hundred billion to the bailout fund would not be inflationary in the way that supporting crisis-appropriate active employment policies would.
In fact, while advocating saddling European governments with even more debt in order to give money to bondholders, Weber continues to insist the problem here is the public finances:
The sovereign debt crisis is not a crisis of the euro or the Eurozone, but rather one of individual countries, he stressed. The structural problems of Greece and Ireland are not comparable to those of other members, he insisted.
Or to each other, clearly...
EMU member states should retain as much sovereignty as possible in fiscal matters, Weber argued. Rather than demand that Ireland harmonize its 12.5% corporate profit tax with the higher rates elsewhere, EMU conditionality should focus on the bottom line -- the country's deficit and debt.
Right, preserve the corporate tax breaks and continue to focus on the German Stupidity Pact.
In any case, it appears (WSJ) that
the German government views Mr. Weber's comments as badly timed
oh, dear, did Weber piss outside his pot?
In the end, "the crisis will be positive for the Eurozone," since it will oblige the governments to extend their surveillance structures and establish a permanent mechanism to deal with future crises, which will "certainly" occur, Weber predicted.
Especially if you Herr Weber are appointed to the ECB, they will, in short order.
Meantime, the EU is engaging in the usual round of rumours and contradictory statements from officials at various levels:
The European Commission floated a proposal Wednesday to double the size of Europe's 440 billion ($588 billion) bailout fund for indebted euro-zone countries, but the idea was quickly dismissed by Germany, according to people familiar with the situation.
With friends like these...