Five quick takeaways from the eurozone GDP numbers
You still need a strong constitution or a taste for gallows humour to read most eurozone economic statistics, as today’s release of the preliminary Q1 gross domestic product growth contraction data shows.
The bloc is now in its longest recession since the birth of the single currency, beating the post-Lehman Brothers slump in duration, though not in the depth of the downturn. Read more
Almost a year ago to the day, the European Central Bank averted financial disaster in the eurozone by offering banks an unlimited injection of cheap three-year cash. Hundreds of banks participated in the ECB’s loan programme and by March about €1tn had been pumped into the banking system via two tranches of the ECB’s longer-term refinancing operations.
The LTRO sugar hit was deemed a success, avoiding a liquidity squeeze, temporarily lifting markets and encouraging a flurry of bond issuance in January and February. But as eurozone worries resurfaced, it was Mario Draghi’s pledge in July to do “whatever it takes” to save the euro followed by the ECB’s September offer to buy up the debt of ailing governments via so-called outright monetary transactions that changed the tone of markets.
Gender politics meets monetary policy
Still not there: Yves Mersch
Yves Mersch’s long, slow ascent to a place on the six-member executive board of the European Central Bank has just hit another potentially serious roadblock.
The governor of the Bank of Luxembourg is male, like all his central bank peers in the eurozone, and the economic and monetary affairs committee of the European Parliament has decided it is time to draw a line in the sand.
In September, the committee, which has to approve his appointment, postponed his confirmation hearing because no women candidates had been considered for the job. This evening, the news from Brussels is that the committee will hold a formal hearing on October 22, but it will make a negative recommendation about his candidacy.
The reason for this remains the committee’s objection that no female candidate was offered for consideration. It is saying it will not make any judgment on Mr Mersch’s competence as a central banker. Read more
Now the Bundesbank takes on the IMF
The dust has yet to settle on the Bundesbank’s fight with the ECB over bond-buying, but this has not stopped Germany’s central bank from taking on another heavyweight global financial institution: the International Monetary Fund.
BuBa’s monthly report, published on Monday, includes a whole chapter entitled: “The IMF in a changed global environment.” It becomes clear fairly quickly that eyebrows are being raised in Frankfurt at some elements of the IMF’s stance in the eurozone sovereign debt crisis, where the Fund has taken on its own lending and acted as a member of the “troika” of IMF, ECB and European Commission officials advising on bailouts.
“By taking on excessive risks, the IMF would gradually transform from a liquidity-providing mechanism into a lending institution,” the bank says on the first page of its 15-page discussion. “Such a transformation would neither accord with the legal and institutional provisions of the IMF agreement, nor with the fund’s financing mechanism or its risk control functions.” Read more
Towering ambition at the ECB
There is, in these troubled days for the eurozone, arguably a hint of Ozymandias-in-reverse about the enormous new €1bn headquarters that the ECB is building for itself on the eastern edge of Frankfurt.
The risk is not so much that a traveller will one day find “two vast and trunkless legs of stone” in a desert, but rather a vast and shiny glass-and-steel tower block near the river Main with no one in it. At least that might be the suspicion of those who think the euro may not last long enough to see the moving vans arrive from the centre of town in 2014, where the ECB now has its offices. Read more
The week ahead in central banking
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More QE from the Bank?
The Bank of England‘s Monetary Policy Committee meets on Wednesday and Thursday, when the decision is due out at noon UK time (11am GMT).
Will the MPC vote for more QE? Read more
The week ahead in central banking
Our week ahead email helps you to track the most important events in central banking. To see all of our emails and alerts visit www.ft.com/nbe
FOMC/ BoJ votes
The big events next week are the Federal Open Market Committee and Bank of Japan policy votes.
The FOMC decision, due out Wednesday afternoon DC time, is not expected to see further quantitative easing announced. However, the FT’s Gavyn Davies says this does not necessarily mean we’ve seen the last of QE from the Fed: Read more
From FT Alphaville
1. The central bank bashing doesn’t start and end with Bernanke.
Central banks just about everywhere make fantastic political punching bags, and the popularity of this tactic is growing. For example:
FRANKFURT — As the eurozone crisis shows signs of heating up again, political leaders are once more looking to the European Central Bank for help.
Indeed they are:
François Hollande, the front-running Socialist candidate in the French presidential election, said on Monday the European Central Bank should have intervened “massively” by lending directly to eurozone countries to save Greece and counter the sovereign debt crisis.
This particular election campaign-driven episode was sparked by Nicholas Sarkozy breaking his “no ECB bashing” pact with Angela Merkel over the weekend.
Even Australia’s central bank, whose board could be forgiven for thinking they were showing admirable restraint by “taking away the punch bowl”, is being roundly beaten up by everyone from TV presenters to union leaders to, er, former political advisors for daring to wait for inflation data before deciding on an all-but-certain rate cut.
Which takes us to the next (possible) trend:
The Bundesbank’s balance sheet and Eurosystem politics
Jens Weidmann, the Bundesbank’s president, claimed today that the decision by the central bank to more than double the provisions for losses on assets held on its balance sheet on the back of “risks stemming from monetary policy operations” was not politically motivated.
Here at Money Supply, we beg to differ.
In fact, the three figures below, taken from the Bundesbank’s 2011 balance sheet, out today, highlight rather nicely just why the relationship between Buba and the European Central Bank is becoming more fraught. Read more
Where’s all that easy money heading? Err back to the ECB…
Wondering where all of that cheap cash that the European Central Bank doled out earlier this week has gone?
Well it would appear a sizeable chunk of it has ended up back at the central bank.
Yesterday the amount of cash that eurozone banks held on deposit at the ECB hit a new record high for the year of €346.994bn. That’s €133bn higher than at the start of the week. Read more
| About this blog | Blog guide |
Chris Giles has been the economics editor of the Financial Times since 2004. Based in London, he writes about international economic trends and the British economy. Before reporting economics for the Financial Times, he wrote editorials for the paper, reported for the BBC, worked as a regulator of the broadcasting industry and undertook research for the Institute for Fiscal Studies. RSS
Michael Steen, Frankfurt bureau chief, covers the ECB and the eurozone's economies. He joined the Financial Times in 2007 as Amsterdam correspondent and later worked as a front page news editor in London. Before joining the FT, he spent nine years as a correspondent at Reuters, mostly in foreign postings that included a previous stint in Frankfurt, as well as Moscow, Kiev and central Asia. He read German and Russian at Cambridge.RSS
Robin Harding is the FT's US economics editor, based in Washington. Prior to this, he was based in Tokyo, covering the Bank of Japan and Japan's technology sector, and in London as an economics leader writer. Robin studied economics at Cambridge and has a masters in economics from Hitotsubashi University, where he was a Monbusho scholar. Before joining the FT, Robin worked in asset management and banking. RSS
Ralph Atkins, capital markets editor, has been writing for the Financial Times for more than 20 years following an economics degree from Cambridge. From 2004 to 2012, Ralph was Frankfurt bureau chief, watching the European Central Bank and eurozone economies. He has also worked in Bonn, Berlin, Jerusalem and Brussels. RSS
Claire Jones is Money Supply economics team writer, based in London. Before joining the Financial Times, she was the editor of the Central Banking journal and CentralBanking.com. Claire studied philosophy and economics at the London School of Economics. RSS
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