In the publication of the interim Financial Policy Committee’s first minutes this morning, we were witness to the birth of the body the Treasury and the Bank of England want to be the glue that links monetary policy and banking supervision.
Alongside the Bank’s financial stability report, which the FPC rubber-stamped, the new committee without powers produced an interesting analysis of the financial scene containing few surprises. Its main conclusion – that peripheral eurozone sovereign debt is the biggest risk to financial stability – is hardly new.
The really fascinating aspect of the FPC minutes and the news conference was the insight they gave into the new super-powerful Bank and the personalities involved. Read more
This time the European Central Bank blinked first. A week ago, Berlin caved into ECB pressure and agreed that private sector involvement in a fresh Greek bail-out would be voluntary. On Friday, it was the ECB that backed down in the face of government demands.
Nicolas Sarkozy, France’s president, successfully argued that Italy’s Mario Draghi’s appointment as the ECB’s new head would mean too many Italians on its six-man executive board – and not enough Frenchmen. He threatened to hold up Mr Draghi’s appointment if Lorenzo Bini Smaghi, the other Italian on the board, did not agree to go. Today, Mr Bini Smaghi gave assurances that he indeed expects to have gone by the end of the year.
In many eurozone quarters, this will be seen as a worrying development. Read more
Day two of the European Union summit is already underway, and among the issues we will be watching closely is the nomination of Mario Draghi to become head of the European Central Bank, which even at this late date appears not entirely a done deal. Read more