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ECB four-flush

We already know that ECB is prepared to use so called OMT mechanism to buy on secondary markets government bonds in trouble. The only thing we know is that ECB is prepared but close details were never revealed to public. But the rhetoric was so strong that markets calmed down…

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More Debt Means Better Rating

The most important news of this week was connected with US and debt ceiling debate. But let´s start as usually with Europe. Austerity measures are more and more unpopular. One of the examples is Ireland today. Their budget proposal is not as austerity budget as it should have been. Ireland…

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Merkel won but reforms failed

German elections – actually the most important EU election – ended by the victory of Angela Merkel. On the other hand the election ended with the defeat of strong right wing policy. It seems that Merkel is willing to create a strong big coalition with German socialist and as it…

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We Intentionally Created Bubble

The hearing in front of the German Constitutional Court about the legality of the Outright Monetary Transactions (OMT) scheme of the ECB was on Tuesday and Wednesday, but the final verdict is not expected before autumn. The ECB reconfirm before the hearing that there is no upper limit of the…

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More centralization

ECB decided not to make any changes to the policy and all rates remained unchanged. Mario Draghi said that ECB sees 0.6 % decline in GDP within Eurozone in 2013 and some downsides risks persist in the economic outlook. On the other hand he reconfirmed that ECB policy will remain…

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We Need Reforms

The European Central Bank warned about the risk of a renewed banking crisis. The main reasons behind are the euro zone’s slumping economy and a surge in problem loans. The logic is simple. Prolonged recession will cause that many borrowers were not able to repay their debts which creates more…

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Furious Merkel

Does Europe remains focused on austerity and structural changes as its preferred strategy to deal with crisis? Most likely not. Why? The European Union statistics office on Wednesday noted that nine of 17 euro-zone member states are now in recession, with France being the newest significant member of that club.…

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New Definitions

The ECB cut basic rates last week to proceed with verbal interventions this week as well. Mario Draghi said that they are ready to cut interest rates again if needed and they will accommodate the policy to the data that arrives from the euro-area economy in the coming weeks. The…

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ECB Confirmed Recession

At Bratislava´s meeting the Governing Council of the ECB rewrote the monetary history of Eurozone. Council decided to lower basic interest rates to 0.5 % starting from May 8th 2013. It is nothing else just a confirmation that nothing was solved within the Eurozone. Otherwise they would raise rates. Mario…

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Euro Will End in 5 Years

European Commission President Barroso started to criticize the austerity measures that the EU has imposed on the mainly Southern European members states in economic crisis. He stated that while the policy may be „fundamentally right,“ it had „reached its limits.“ In the short-term, „a stronger emphasis on growth“ is needed.…

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UK and Germany Were Downgraded

Fitch Ratings has downgraded the United Kingdom to ‚AA+‘ from ‚AAA‘. The outlook is predicted as stable. The rating action reflects a weaker economic and fiscal outlook and possibility of higher UK budget deficits and government debt. The Egan-Jones rating agency which usually predicts thing more accurate than other official…

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We Are Not Still Better Off

Euro zone finance ministers backed a 10 billion euro bailout for Cyprus and the European Commission would try to help the island’s economy grow again with better use of EU structural funds. First tranche of 10 billion euro will arrive into the island in mid-May. Cyprus will have to find…

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Week of Weak Announcements

It was the week of central bank announcements – Japan (we will describe it below), Britain and ECB. Bank of England and ECB policy remained unchanged which means that interest rates are at the same low levels and the BoE maintained bond purchases. Monetary theory teaches us that once the…

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After Cyprus

The rescue package for Cyprus finally consists of a 10 billion euro bailout from the ESM and it has one crucial condition of taxation all deposits larger than 100,000 euros inflicting significant losses for depositors — possibly up to 40 percent. EU officials have stressed that this measure was a…

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