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9 Responses to “France Sees Budget Rules Paving Way for ECB Support Bloomberg”
Germany’s Schaeuble still only hammers on Discipline and again ruled out any eurobonds or increased ECB bond buying.
Austria now also announced it is in favor of eurobonds and more ecb involvement. These proposals even got support from German economist, adviser to govt, Peter Bofinger. He said Germany’s attitude is just based on fears, no rationale.
Germany becomes more and more isolated, but seems to take it all the way to the edge to get most out of it.
I wonder how much more time investors keep hanging around waiting.
Bundesbank itself seems to have German govt bonds for about 30% of gdp. If that is any guideline there is still some space for ecb to go, even to german standards, you would think.
It’s remarkable that almost nobody speaks about the 50% Greek haircut, that is by the way still not implemented, as the turning point for investors’ appetite for any european bonds, incl efsf.
Some argue that the possibility for restructuring of govt debt came in exchange for cancelling SGP fines, an agreement made between Merkel and Sarkozy during their famous Deauville walk.
It looks like the introduction of credit risk on govt bonds on top of already existing interest rate risk, currency risk and risk of inflation for investors created the current mess.
I understand that MMT signaled the credit risk as inherent to the euro set-up.
Do you think it would be a possible solution if they would cancel the Greek haircut now?
Wouldn’t markets read that as ‘there is no credit risk’ and a yield convergence would follow?