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New on the Open Europe Blog The death of the Bundesbank? Germans come out swinging against ECB bond-buying Open Europe Blog Cheap ECB cash could prove to be the worst form of bailout Open Europe Blog Has Draghi really saved the universe? Open Europe Blog
Daily Press Summary German outcry against ECB plans for bond purchases; Welt: “Financial markets celebrate the death of the Bundesbank” As expected the ECB yesterday announced a plan to perform unlimited, but sterilised, purchases of government bonds from struggling countries which apply for a eurozone bailout programme. Open Europe produced an analysis of the decision which is cited by Bloomberg Businessweek, Forex info and El Economista. Open Europe’s Raoul Ruparel is quoted on the front page of City AM saying, “Borrowing costs are mostly a symptom of the underlying differences and problems – not a cause…Unless these issues – mismatched competitiveness, undercapitalised banks, lack of growth prospects and political uncertainty – are tackled then masking the gap in borrowing costs can only, at best, buy time.” The market reacted positively to the decision with borrowing costs dropping for struggling countries and stock markets rallying across Europe. After Bundesbank President Jens Weidmann was the only member of the ECB Governing Council to vote against the measures. In a statement the Bundesbank said that Weidmann regarded the bond purchases “as being tantamount to financing governments by printing banknotes,” adding, “The announced interventions carry the additional danger that the central bank may ultimately redistribute considerable risks among various countries’ taxpayers.” Meanwhile, the ECB decision drew widespread criticism in Germany. Die Welt argued that “Financial markets celebrate the death of the Bundesbank”, adding that Draghi had “brazenly broken with the principles of German monetary policy.” CDU MP Klaus-Peter Willsch said Berlin should “not shy away from an action before the European Court of Justice against the ECB.” However, German Chancellor Angela Merkel supported the decision, saying the ECB had acted “within the framework of its mandate”. DPA reports that SPD parliamentary leader Frank-Walter Steinmeier argued that the ECB’s decision is the “documentation of Chancellor Merkel’s failure...[while Weidmann] protests but Merkel gives the green light”. Bruno Le Roux, leader of the Socialist Party in the French parliament, said the ECB’s decision was a “clear victory” for French President Francois Hollande, according to theFT. Open Europe press release Open Europe blog FT FT 2 FT 3 CityAM Bloomberg El Economista WSJEconomist IHT FT 4 FT 5 Telegraph: Warner BBC R4 Today Telegraph Guardian Guardian 2 Guardian 3EUobserver EurActiv European Voice Times Times 2 Independent FT Editorial FT: Mackintosh CityAM: Heath CityAM: Lilico WSJ Review & Outlook FT: Plender Independent: Leader Times: King Irish Times Rajoy repeats ‘wait and see’ position on Spanish bailout request Spanish Prime Minister Mariano Rajoy met with German Chancellor Angela Merkel yesterday just as Mario Draghi was making his announcement on future ECB intervention in the crisis. Asked whether Spain would now seek a bailout, Mr Rajoy said, “When there is news I will tell you. I haven't had time to read Draghi's speech yet.” He said he had not committed to any new reforms for Spain in his meeting with Merkel and had no intention of changing the pension system, which is an area where he has not yet cut spending. Following the meeting, a Spanish government source said, “Our decision will depend on the conditions, on the detailed mechanism and on the need for the Spanish economy. Right now we don't see any emergency. We've sold three bonds this morning, all went well.” The source also said the Spanish government wanted to see first how the market would react to the ECB plan. WSJ FT IHT FT: Gardener Euractiv Times: King Irish Independent Germany wants tighter controls on deficit rule breakers’ access to EU budget funds EurActiv reports that Germany has tabled proposals for the long-term EU budget, setting hurdles for countries with excessive deficits to access EU funding. The German proposal adds, “This applies in particular to those cases in which a member state is subject to a macroeconomic Excessive Imbalance Procedure, has to reduce its excessive deficit, has failed to take measures to implement adjustment programmes or is not complying with the conditions attached to ESM [bailout fund] financial assistance.” EurActiv Greek unemployment climbed to 24.4% in June from 23.1% in May, with 1.2m people out of work, according to figures released yesterday by Elstat, the independent statistical agency FT Guardian: Lapavitas Euobserver Money Marketing reports on the European Parliament’s attempts to insert a cap on banking bonuses into legislation implementing bank capital rules (CRD IV). They report the Parliament may now agree to a German compromise. Open Europe’s Raoul Ruparel is quoted discussing the issue. Money Marketing Open Europe is quoted in the Mail as saying that the Advocate General of the ECJ’s recommendation to reject a bid by MEPs to reduce the number of times they have to shuttle between the Strasbourg and Brussels parliaments is another illustration of how the ECJ "works against taxpayers to increase costs.” Mail Handelsblatt reports that a recent Bloomberg survey of traders, investors and analysts found that 85% of the respondents expected that Spain will request a bailout, while 59% believe that Italy will avoid one. 92% expect a Greek default, and 56% believe that the country will be ejected from the eurozone. Handelsblatt An online survey by YouGov has found that 53% of Germans are against the transfer of more competencies to the EU against 27% in favour, with 54% of the respondents wanting the German constitutional court to decide against the ESM and the fiscal pact reports De Welt. Welt