Tagged with ECB

So where now for Europe?

The irony for the EU, wPlanet of the Euros, by DonkeyHotey, Flikr, Creative Commons licensed Attribution 2.0 Generic, source image for the European Central Bank sign is a Creative Commons licensed photo from UggBoy?UggGirl's Flickrhich even its leaders now recognise must change course radically, is that it can’t. At least it can’t in its present structure without such dislocating changes as to be scarcely credible.

The central problem has been, and remains, the single currency. As long as countries, particularly on the southern periphery, remain locked within the eurozone interest rate and exchange rate and unable thereby to operate their own monetary policy, they have no option but to resort to austerity (i.e. cutting public expenditure, squeezing wages, letting unemployment soar) to regain competitiveness. But even that route is now blocked by these European election results. Even if that route were still open, it is clearly impossible for some eurozone countries under current conditions to raise their rate of growth sufficiently to prevent their indebtedness continuing to grow. Continue reading →

Another credit crunch looms

The finance sector is signalling alarm, and our politicians are once again asleep at the wheel. Another “credit crunch” may be looming. The most significant evidence emerged from the ECB’s second Long Term Refinancing Operation (LTRO) on Thursday last week.

The LTRO is simply language intended to disguise the “printing of money” by the ECB for lending to private European banks at a very low rate of interest – 1 per cent. In fact, the money is not even printed: it is created by entering digits into an ECB computer, and then transferring hundreds of billions of euros as ‘bank money’ to private banks. Continue reading →