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In RealTime posts, PIIE senior staff and colleagues discuss the fast-moving economic news, financial developments, and public policy choices confronting the United States and the world.
The euro area’s efforts to stabilize its financial picture got a boost from several developments in the last week, as the effects of the outright monetary transactions (OMT) announced last summer by the European Central Bank (ECB) continues to take hold. At the European Union Council, for example, leaders confirmed their political commitment to a [...]
Waiting for Prime Minister Mariano Rajoy to ask for lending assistance to Spain is enough to make you ask: Where are the bond vigilantes when you need them? The verbal intervention by Mario Draghi, president of the European Central Bank (ECB), on July 26, followed by the ECB’s new Outright Monetary Transaction (OMT) program in [...]
After a quiet few weeks, political pressures are rising again in Europe. Pictures of petrol bombs exploding among riot police officers in Athens have returned to global television and Bloomberg screens, and news reports suggest mounting support for the rightist Golden Dawn party, bringing back questions about the durability of the summer stabilization in the [...]
Several people have asked me in recent days about my assertion that a Spanish government and indeed the euro area as a whole would benefit from seeking a lending lifeline from European authorities, including the European Stability Mechanism/European Financial Stability Facility (ESM/EFSF) and the European Central Bank’s new Outright Monetary Transactions (OMT) facility. Arguments opposed [...]
After a couple of good weeks for the euro area, the inevitable question has arisen over whether the gains can be sustained, or if another cycle “one-step forward, two-steps back” is in the offing. On the positive side have been actions to shore up finances by the European Central Bank, a favorable German Constitutional Court [...]
The unscripted comments on July 26 by Mario Draghi, beleaguered president of the European Central Bank (ECB), will be remembered as one of the more effective cases of verbal market intervention in recent history. Spanish two-year yields dropped from record levels of around 6.5 percent then to 3.5 percent, and Italian two-year yields likewise are [...]
Yes, the headlines from the euro area are discouraging. The region’s Purchasing of Managers Index (PMI) is falling again—to 45.9 in May, with even German levels down. The European stock markets are down. The euro has slid to 1.25 vs. the dollar, accelerating preparations for a Greek euro exit. No resolutions of the political crisis [...]
As Europe’s growth prospects take a beating, critics of austerity seem to be riding high. In France, the Socialist Francois Hollande seems poised to be elected president on a wave of protest over record high unemployment in the euro area. Meanwhile, the fiscally hawkish Dutch government has fallen victim to its own rhetoric, after failing [...]
When a minister of finance and economics states that his country “does not need a rescue at this time” and the central bank governor cautions that banks will need more capital “if the economy worsens more than expected,” private bondholders are likely to take notice. As someone who has repeatedly maintained that a prolonged crisis [...]
Henry Kissinger once said that while "the illegal we do immediately, the unconstitutional takes a little longer."1 Perhaps this is why it took the European Central Bank (ECB) until this week to begin buying up Italian and Spanish bonds in the euro area secondary bond markets. The ECB’s initial hesitation stemmed from its understandable reluctance [...]