Month: June 2010

EU Finance Ministers Statements

Here‘s the text of the agreement on budgetary policies put together by the EU finance ministers yesterday. It seems pretty weak, with little by way of new concrete initiatives. It’s full of aspirations to reduce deficits. The new element that might have been expected in relation to an increased role for the European Commission is restricted to the following statement:

Ministers are committed to fully and strictly implement the surveillance framework defined by the SGP and to contribute actively to the Task Force set up by the President of the European Council, which will consider ways to strengthen the fiscal surveillance framework as well as the surveillance of competitiveness developments in the euro area.

A Task Force that’s going to “consider” things doesn’t sound like much to get excited about.

Here‘s the statement tasking the European Commission with running the €440 billion Special Purpose Vehicle. (You have to love how there’s a Special Purpose Vehicle at the scene of every economic disaster these days.)

Post-Keynesian Fiscal Policy

Jeff Sachs writes on fiscal policy in the FT: you can read the article here.

The ECB and Quantitative Easing

Commenter Eoin asks a good question “Should the ECB be doing quantitative easing?” My thoughts are as follows.

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€74 Billion in Guaranteed Bank Debt Maturing Before October

Last week, I provided calculations from annual reports showing that at the end of 2009, the banks covered by the State guarantee owed €71 billion in various types of bank debt (bonds, commercial paper, interbank loans) that matured before the end of the year (the reports did not provide information on how much matured prior to expiry of the guarantee at the end of September.)

The Department of Finance have now provided figures as of the end of April on how much covered debt expires before October. In a written answer to a question from Joan Burton, the Department have stated that €74.2 billion in bank debt expires before the end of October, €57.8 billion of this being senior debt and €16.4 being interbank deposits.

ECB Sovereign Bond Purchase Program

It’s hard to fully assess at this point the relative importance for the reduction in Irish government bond spreads of the €750 billion bailout fund committed to by the EU and IMF versus the ECB’s decision to purchase sovereign bonds on the secondary market.  However, the ECB’s presence or withdrawal from the secondary bond market may prove very important in relation to Ireland’s ability to keep issuing primary debt and staying out of the hands of an EU-IMF deal.

So, three weeks in, what do we know now about this program? A bit more than a few weeks ago but not as much as I’d like.  This speech from President Trichet appears to be the most comprehensive discussion of the rationale for the program.

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