Browsing all articles tagged with Joerg Asmussen

ECB Says Has Tools Left to Act if Required

ECB policymakers said that European Central Bank still has room to plan should the euro zone economy persistent to worsen following it cut interest rates to a new record low previous week. The ECB cut its main rate to 0.5 percent previous Thursday.

Yves Mersch, a member of the ECB’s six-man Executive Board stated the bank still had tools at its disposal, however added that it could only spur lending to small euro zone companies in combination with other European institutions.

Joerg Asmussen stated the ECB had an open mind about what it could do to renew lending to small and medium-sized enterprises known as SMEs a growing concern for the central bank, principally in the crisis-stricken periphery countries.

Mersch said in a panel discussion in the northern German city of Aachen that we still have tools in our toolbox we are not a toothless tiger.

The ECB stated previous week it had set up a task force with the European Investment Bank known as EIB to assess ways to unblock lending to SMEs, for example by supporting a market for asset-backed securities known as ABS based on SME loans. ABS would permit banks to pass some credit risk on to other investors, enabling them up to lend more.

The move to promote ABS is controversial mainly in Germany, because during the financial crisis such securities became toxic due to the default of housing loans that underpinned them.

We have an open mind to seem at all things that we can do within our mandate and this relates to how can the market for asset backed securities, particularly backed by SME loans, be revitalized in Europe.

Asmussen was responding to a question regarding a Wednesday article in German newspaper Die Welt, which cited a central bank source as saying a majority of ECB Governing Council members seemed to be in support of the central bank buying ABSs itself.


IMF, ECB Square off in Europe Severity Debate

An intense debate about Europe’s austerity drive flared back into life on Thursday with leading IMF and European Central Bank officials harshly at odds and Angela Merkel declaring that Germany required superior interest rates.

With the threat of the currency bloc’s break-up retreating; some euro zone officials are saying currently is the time to throttle back on debt cutting drives as calmer financial markets will not react badly.

The International Monetary Fund is also pushing that prescription for both the Britain and euro zone however Germany and the ECB are opposed.

IMF First Deputy Managing Director David Lipton told a conference in London that there is a risk that Europe could drop into stagnation, which would have very serious implications for households, banks, companies and other bedrock institutions.

He further said that to decisively avoid that dangerous downside, policymakers must act now to strengthen the prospects for growth.

However at the same conference, the Economist’s Bellwether Europe Summit, ECB Executive Board associate Joerg Asmussen urged governments to push on with budget consolidation and reforms.

Asmussen said delaying fiscal consolidation is not a simple way out. If it were, we would have taken it; holdup fiscal consolidation is no free lunch. It means superior debt levels and this has real costs in the euro area where public debts are already very high.

The ECB is expected to cut interest rates coming week, even though a quarter-point reduction is unlikely to lift the euro zone economy out of recession.

Lipton said it will perhaps require additional unconventional measures from the ECB, as Asmussen said monetary policy was not an all purpose weapon.

The ECB is in a difficult position, for Germany it would really have to lift rates slightly at the moment, however for other countries it would have to do even more for more liquidity to be made available, she said at a banking conference, in a strangely outspoken comment on central bank policy.


Cyprus bank Impose Risks Perilous Euro Zone Precedent

A strike imposed on Cypriot bank shareholders by the euro zone has surprised and alarmed bankers and politicians who fright the currency bloc has set a standard that will upset citizens and investors equally.

On Friday, euro zone finance ministers agreed a 10 billion euro which is equal to $13 billion bailout for the suffering Mediterranean island and stated while so much of its debt was rooted in its banks, that sector would have to tolerate a huge part of the burden.

The ECB’s vowed to buy euro zone government bonds in infinite amounts if needed has calmed the stressed currency bloc for the previous five months. Although if investors worried regarding the Cypriot template could be frequent in any future rescues, that calm could be devastated.

Without a bailout Cyprus bank would default, which could loosen the investor confidence promoted by the ECB.

Bankers, Politicians and analysts stated that the tax could weaken banks in other euro zone countries, even though the ministers forced it was a one off and Cyprus represents just 0.2 percent of euro zone economic yield.

Annalisa Piazza, at Newedge Strategy said that the extraordinary move is an extreme measure, and in our outlook it will extend some fright across the EMU margin and we cannot rule out some capital outflows. In the short run we anticipate some effects on margin bond yield spreads and some deteriorating of the euro zone cannot be ruled out.

Euro zone officials made a point of saying they would observe any symbols of money moving out of Cyprus however did not say how they might respond in the event.

Joerg Asmussen, ECB legislator said for us Cyprus is systemically relevant, regardless of the small size of the economy, disorderly developments in Cyprus could weaken the significant growth made in 2012 in stabilizing the euro zone.