Britannia Radio

The Germans are beginning to apply the brakes to over-regulation and 
centralisation - for once, bless them.   Brown is far too busy 
dodging the boos and the brickbats to even notice.

This is followed by  tonight's dampener from the IMF.  It ain't over 
yet!  (which at least means we'll have electricity for longer! )

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FINANCIAL TIMES   16.4.09
ECB wary of market intervention
By Ralph Atkins in Frankfurt

Direct intervention in financial markets is not the European Central 
Bank's top priority, one of its leading policymakers has argued, 
highlighting the bank's reluctance to follow emergency steps taken by 
US and UK monetary authorities.

Axel Weber, German Bundesbank president, argued that the ECB should 
remain focused primarily on acting via banks, which play a greater 
role in providing finance to the eurozone economy than in the US.
Alternatives, including the outright purchase of private sector debt, 
should "stand lower" on the priority list.

This month the ECB's 22-strong governing council shelved until May 
the unveiling of further measures to combat continental Europe's 
worst recession since the second world war.

Mr Weber confirmed that a package, which would last at least until 
next year, was in the pipeline. But his comments in a speech in 
Hamburg suggested a significant lobby on the council opposes radical 
new steps. Although the Bundesbank president is regarded as among the 
ECB's more conservative policymakers, he is an influential voice 
within the council.

The US Federal Reserve and Bank of England have embarked on 
quantitative easing-style programmes that side-step the banking system.
The ECB has slashed its main policy rate by 300 basis points to 1.25 
per cent since October and has also embarked on "non-conventional" 
measures by supplying unlimited amounts of liquidity to the banking 
system at a fixed interest rate.

Mr Weber hinted that the maximum period over which such liquidity was 
provided would be extended beyond the current six months maximum.
But he stressed that eurozone market interest rates were responding 
to the ECB's actions, with 12-month rates lower than in the US, even 
though the ECB's official policy rate was higher than that of the Fed.

Bundesbank research showed that 75-80 per cent of the interest rate 
cuts unveiled by the ECB had been passed on to the short-term 
corporate credit market.

A recent sharp fall in the use of the ECB's "deposit facility" is 
likely to have strengthened Mr Weber's convictions. After the 
collapse of Lehman Brothers in September, banks took advantage of the 
ECB's unlimited liquidity provision but parked the funds back 
overnight at the ECB - sending use of the deposit facility soaring to 
more than ?300bn ($395bn, £265bn) in January. But this week the daily 
use had fallen to about ?23bn - signalling a clear improvement in 
financial market confidence.

Mr Weber repeated his opposition to cutting the ECB's main policy 
rate below 1 per cent, which he feared would create damaging economic 
distortions, and saw no room for cutting further the deposit facility 
rate - which has become an important benchmark for market interest 
rates and is currently just 0.25 per cent.

He also expressed satisfaction that the G20 summit in London this 
month had not pushed for further fiscal stimulus programmes in 
industrialised countries. Germany had taken considerable steps in 
boosting government spending, but the main effects had yet to be felt.
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TELEGRAPH    16.4.09
IMF predicts prolonged, deep global recession
The International Monetary Fund on Thursday forecast a prolonged, 
deep global recession, a "sluggish" recovery, and weak capital flows 
to emerging economies that would hammer eastern Europe.

Agence France Presse

The IMF, headed by Dominique Strauss-Kahn, forecast a prolonged, deep 
global recession and "sluggish" recovery.

"The current recession is likely to be unusually long and severe and 
the recovery sluggish," the IMF said in releasing two chapters from 
its twice-yearly World Economic Outlook (WEO).

The fund offered no timeline for a recovery from the first global 
recession in six decades.

The IMF also warned that "the decline in capital flows to emerging 
economies ... may be protracted, given the solvency problems facing 
advanced economy banks who provide significant financing to emerging 
economies."

Emerging economies in eastern Europe were particularly vulnerable 
because of the heavy presence of western European banks in their 
financial sectors and economies.

The IMF pointed out that past episodes of systemic banking stress in 
advanced economies, such as the Latin American debt crisis in the 
1980s and the Japanese banking crisis of the 1990s, shows that the 
decline in capital flows tends to be "sizeable and drawn out".

"Given their large exposure, emerging European economies might be 
heavily affected," said the 185-nation institution, whose mission is 
to promote global stability.

The IMF said its researchers looked at patterns of business cycles in 
21 advanced economies from 1960 to the present.

The study found that fiscal stimulus actions seemed "particularly 
effective" in helping ending recessions, while monetary policy, such 
as tax cuts, can help shorten their duration but is less effective.

The Washington-based IMF highlighted the need for global coordination 
to battle the downturn and contain the financial meltdown.
"A coordinated policy response by advanced and emerging economies is 
required to prevent further escalation and spreading of financial 
stress," it said.
"Reducing individual country vulnerabilities cannot insulate emerging 
economies from a major financial shock in advanced economies."

The publication of the first two WEO chapters, which focus on 
recovery from recession and the spreading of financial stress from 
the advanced to emerging economies, came as the IMF prepares for its 
spring meetings with the World Bank, to be held April 25-26 in 
Washington.