ECB stands ready to act
ECB stands ready to act
The head of the European Central Bank (ECB) signaled Thursday it stands ready to act more aggressively to fight Europe’s debt crisis if political leaders agree next week on much tighter budget controls in the 17-nation EuroZone. In France, President Nicolas Sarkozy called for a new treaty incorporating tougher budget discipline, a European Monetary Fund to support countries in difficulty and decisions in the EuroZone taken by majority vote instead of unanimity.
Addressing supporters in the port city of Toulon, Sarkozy said he and German Chancellor Angela Merkel would meet next Monday to outline joint proposals to put to a December 9th EU summit, seen as make-or-break for the 12-yr-old single currency.
“Let us not hide it, Europe may be swept away by the crisis if it doesn’t get a grip, if it doesn’t change,” Mr. Sarkozy said, warning that a collapse of the Euro would make France’s debt unmanageable and wipe out people’s savings. “We do not have the right to let such a disaster happen.”
ECB President Mario Draghi painted a dark picture of the state of Europe’s banking system, speaking a day after the World’s major central banks took emergency joint action to provide cheaper dollar funding for starved European banks.
“A new fiscal compact would be the most important signal from the EuroZone governments for embarking on a path of comprehensive deepening of economic integration. It presents a clear trajectory for the future evolution of the EuroZone, thus framing expectations,” he told the European Parliament.
Mr. Draghi did not spell out what action the ECB might take, saying only a commitment by political leaders to stricter budget discipline and binding their economies more closely “is definitely the most important element to start restoring credibility. Other elements might follow, but the sequencing matters.”
In the short-term, economists expect the central bank to relieve pressure on banks and an economy heading into recession by cutting interest rates next week and announcing longer-term cheap liquidity tenders with easier collateral rules. Markets are pricing in a 25 basis point cut to 1.0% on December 8th.
Paul A. Ebeling, Jnr.
Paul A. Ebeling, Jnr
Paul A. Ebeling, Jnr. writes and publishes The Red Roadmaster’s Technical Report on the US Major Market Indices, a weekly, highly-regarded financial market letter, read by opinion makers, business leaders and organizations around the world.
Paul A. Ebeling, Jnr has studied the global financial and stock markets since 1984, following a successful business career that included investment banking, and market and business analysis. He is a specialist in equities/commodities, and an accomplished chart reader who advises technicians with regard to Major Indices Resistance/Support Levels.
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