The IMF/EC/ECB mission has released its updated view on the implementation of the Greek adjustment package: you can read it here .
Barry Eichengreen and Peter Temin have written classic accounts of the Great Depression. If you haven’t read Golden Fetters, and Lessons from the Great Depression, you should.
But if you don’t have time for that, they have a piece on Vox which reprises the main conclusion of their work:
an international monetary system is .. a system in which countries on both sides of the exchange rate contribute to its smooth operation. Actions by surplus countries, and not just their deficit counterparts, have systemic implications. They cannot realistically assign all responsibility for adjustment to their deficit counterparts.
This is as true for EMU and “Bretton Woods II” as it was for Bretton Woods, or the Gold Standard, but it is a lesson that at times seems to have been completely forgotten.
On RTE radio this morning (on Today with Pat Kenny with, em, Myles Dungan) Fianna Fail TD Frank Fahey said:
I stand by what I said about NAMA from the very beginning. NAMA is being funded … the bonds are being funded by the European Central Bank.
Now I know that language is a flexible thing and perhaps philosophy graduates could spend all night debating what the meaning of “being funded” is. But, I would suggest that the only reasonable interpretation of this statement is that it implies NAMA are receiving funds from the ECB.
This is not at all true. The ECB has no direct relationship with NAMA at all. NAMA bonds can be used by the banks that have received them as collateral for loans from the ECB but that’s it, that’s the full extent of the ECB’s involvement in relation to NAMA. Furthermore, AIB and BoI executives told the Oireachtas last year that they had no particular plans to use the bonds in this fashion.
The NAMA bonds are fully backed by the Irish government. They are a liability of the Irish state, albeit one entered into at the same time that it acquired some property assets that may or may not yield enough to pay off the bonds.
It is long past time for government politicians to stop misleading the Irish public that NAMA somehow involves the state getting money from the ECB. I would plead with any journalist interviewing Deputy Fahey or any other commentator making this claim in the future to point out to them that it has no grounding in fact.
The Joint Oireachtas Committee on European Affairs has produced a report titled “European Monetary Union: Challenges and Options”. The report is available here and the executive summary is here. Senator Paschal Donohoe acted as Rapporteur on the Report, which was drafted in association with my former UCD colleague, Rodney Thom
Though as I write the official release has yet to appear here, the FT is already reporting that the ECB only acquired about €1 billion in sovereign bonds last week, down from the €4 billion or so seen in previous weeks and the €16 billion that occured during its first week. The winding down of the program was quasi-predicted here a few weeks ago.
One interpretation of what has happened with this program is that the ECB reluctantly launched the program despite some internal disagreement to ease tensions in sovereign debt markets, and that once the Stabilisation Mechanism funds were put in place, they have been quick to head for the exit.
Increasingly, it seems unlikely that the ECB will at any point engage in large-scale purchases on the secondary market aimed at keeping access to the primary market open for a specific country such as Ireland. Rather, a closing primary market will instead lead to a country to tapping the Stabilisation Mechanism funds.
Of course, one cannot completely rule out the ECB will re-activate the program on a larger scale if tensions start to mount again. But I wouldn’t bet on it.
Update: Official announcement confirms the figure at 796.5 million.