ECB has introduced an upper limit of €20bn per week for SMP interventions

According to Frankfurter Allgemeine Zeitung, the ECB governing council has introduced an upper limit of €20bn the central bank can spend per week to help ailing euro countries to stabilize the spreads on their government bonds. This move is interesting in the sense that the market expectations are that with the arrival of Mario Draghi and the intensification of the crisis the ECB would go the other way and loosen its limits of the program. The paper, however, argues that there is a growing scepticism among the governing council's members about the program which has resulted in lowering the weekly ceiling from a previously higher figure to €20bn. According to FAZ discusses at each of its bimonthly meetings the SMP and sets a ceiling for the coming two weeks. Whether the €20bn ceiling was maintained at yesterday's governing council meeting is unclear. According to the ECB's official SMP figures it spend only €4.5bn last week, much less than the markets had expected.

• Downthread afew quotes Flawed Role Model: Germany's Finances Not as Sound as Believed by Ralf Neukirch and Christian Reiermann. I frankly didn't expect this piece (from the current print issue) to be translated to English.

• A few days earlier, the German-language Spiegel On-Line published a different version of the above article as a commentary under the byline of a different author (a new ex-FTD guy), which differs in being sharper. Already the title, which translates to "The Fairy Tale About The German World Champion In Saving". It also mentions Volker Kauder's "Europe now speaks German" comment and calls it chauvinistic, explicitly compares Germany's debt level with that of Spain, doesn't just mention Juncker's swipe but judges it correct, completely diverges in its argumentation by crediting Germany's good situation on deficit-boosting stimulus measures in 2009, and ends with:

  Die aktuelle Regierung dagegen macht mit ihren überheblichen Lobgesängen auf die deutsche Staatsdisziplin vieles kaputt in Europa. In Griechenland, Spanien oder Italien - wo die Deutschen für ihre Tugenden einst zumindest geschätzt wurden - werden sie nun vor allem als arrogante Zuchtmeister wahrgenommen, die den Menschen auf dem Rest des Kontinents erklären wollen, wie sie zu leben und zu arbeiten haben. Das kann auf Dauer nicht gutgehen.

  The current government, however, ruins a lot in Europe with its arrogant hymns of praise upon the German state discipline. In Greece, Spain or Italy - where once the Germans were at least valued for their virtues - they are now viewed primarily as arrogant taskmasters who want to tell the people on the rest of the continent how they have to live and work. This cannot go well on the longer run.

• Two days ago, they published a guest commentary by the deputy chief editor of the Spiegel group's business magazine, which argues for allowing the ECB to act as lender of last resort and portrays the German government and central bank as being alone in their position in the world [which is unfortunately not entirely correct]. I found this most noteworthy because the author seems far from being free of neolib received wisdom (he says no central bank intervention is correct on the longer run), but recognises the short-term role in fighting the crisis. Also, he dismisses comparisons of the ECB to the pre-Euro Bundesbank on the basis of the different environment they operated in: federal Germany was a transfer union, and finance was not yet deregulated.

• Yesterday, they published another guest commentary by Wolfgang Münchau, allowing him to call the two notions that the crisis is one of public finances (rather than private finances which became a problem for previously low-deficit/surplus countries too due to crisis mismanagement) and that Germany's pre-WWII main economic crisis was the hyperinflation of the twenties (rather than the ensuing depression of the thirties; also see comment by Metatone followed by debate between IM and afew) "old German lies".

An argument could be constructed that the government could control amount of money circulating by on one hand regulate the CB rate and the conditions it is borrowed out under, and on the other give the opportunity to park your money with the state to suck up money that is not invested. Then as a rule, the bond rate should be slightly below the CB rate (if it is over banks can borrow from CB and to government, which is just another bank subsidy, if it is far below you get a wide span where the profitability of investment does not depend on CB rate), and the amount that the government borrows should be irrelevant.

Can I have this argument chopped up now?

Sweden's finest (and perhaps only) collaborative, leftist e-newspaper Synapze.se

The Central Bank needs a sufficient stock of government bonds to be able to set rates.

It doesn't, actually. There is no operational reason it can't defend any yield curve it may please it to defend with pure discount window operations.

- Jake

Friends come and go. Enemies accumulate.

...usually Central Banks can sell bonds short into the bond market, but peculiarly the Bundesbank sells from actual bond stock...

(In our view, the European Council should consider bringing forward the date of the December 9 summit, and adopt proposals for a Treaty Reform for a fiscal union and Eurobonds right away. Without this, there will be no crisis resolution. At this rate of market panic, it is not clear that the eurozone will otherwise make it until December 9.)

1. Hungary is not in the Eurozone and has a mad right-wing government.
   
2. If just one of the PIIGS leaders had the acumen to think outside the box and rebel against the austerity dictate, Merkozy would have nothing to say years ago already.