News and views on the euro area's debt crisis
January 24, 2013 1 Comment
Research teams across Europe are busy estimating the size of the repayments the European Central Bank will accept next week on the long-term refinancing operations, or LTROs, that banks borrowed last year. I think they’re asking the wrong question.
Much more important is whether repayment will be positive or negative for the euro area, and both are possible. Read more of this post
March 23, 2012 14 Comments
The Eurozone crisis has been in retreat since the introduction of the European Central Bank’s (ECB) three-year long-term refinancing operations (LTROs) in late December 2011. At the European Council Meeting in early March, journalists who cover the crisis fretted that boredom loomed. The current lull does not indicate that the Eurozone is in the clear, but rather it is simply in the eye of the storm, and more drama inevitably awaits. Read more of this post
January 30, 2012 3 Comments
There has been relative calm in the EZ crisis since December last year, when the ECB announced a three-year long term refinancing operation (LTRO) and a sharp widening of its collateral requirements. Government bond yields fell in the periphery and debt issuance in January went remarkably well, particularly for Spain and Italy. Has the LTRO fundamentally changed the likely path forward in the EZ crisis? Read more of this post
December 21, 2011 15 Comments
The 3-year LTRO was announced by ECB president Mario Draghi following the December governing council meeting, alongside (among other things) a drop in collateral requirements at the ECB. These measures were designed to short circuit the endless feedback loop between sovereigns and banks by sticking the ECB right in between them. The idea is for banks to offload questionable assets from their balance sheets in exchange for cheap liquidity from the ECB, which banks can use to lend and invest as banks are meant to do. Will attempts to break the circular reference between sovereigns and banks and prevent the interbank markets from freezing succeed with this new 3-year LTRO, or will banks take advantage of the carry-trade and strengthen the feedback loop? Read more of this post
