Nout Wellink, Dutch central bank governor, has outed himself as an opponent of the European Central Bank’s bond purchasing programme. At least, he is now. Whether he voted against the plan last May, when it was agreed by the ECB’s governing council, is still not known.
“We have to stop the current policy because the risks are becoming too big,” Mr Wellink said in an interview with Het Financieele Dagblad. “We are buying paper from banks, from the private sector, and from governments. That is not what we are on earth for. If things turn bad the value decline is for our account.”
His comments suggest the mood on the governing council is turning increasingly hostile towards the programme. Read more
Dublin probably pushed too hard – and too publicly – for a special European Central Bank liquidity facility to help its struggling banks. The Financial Times reported last Saturday that Enda Kenny, the new Irish prime minister, was asking for medium term funding as an alternative to dependence on regular ECB monetary operations and emergency liquidity assistance from the Irish central bank.
But it was clear that the ECB’s priority all along would be to see Dublin taking action to recapitalise Ireland’s banks – and it did not want to be seen as responding to political pressure. There were almost certainly legal and technical issues that would also have hindered any such plan from being rolled out this week.
So there was no announcement on Thursday. I don’t think the idea is dead. Read more
Recent comments by ECB policymakers have a quarter percentage point rise in the central bank’s main interest rate all but certain when its governing council meets next Thursday. Seemingly overlooked is the impact on troubled economies such as Spain, Portugal, Greece and Ireland.
Adding to the apparent incongruity of next week’s move, the ECB continues to meet, in full, banks’ demand for liquidity – its version of US-style “quantitative easing” – as it has since the collapse nearly three years ago of Lehman Brothers. As a result the ECB has turned on its head the sequence central banks were expected to follow the world over – in which such “non-standard” measures would go before any monetary policy tightening started. Read more