No More LTRO Shots for Eurozone?
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  • Dean Jackson

    Yes and possibly no. First, I think Dalio is probably correct. However, while there are limits on the ECB, some of them have been circumvented and others may be in the future. For example, the ECB has consistently lowered the standards of what it will accept as collateral as various countries have been downgraded. Another example is having governments place guarantees on bank debt solely so said debt can be repo’d with the ECB. Possibly the biggest trick has been the ELA where a national central bank can set its own standard and essentially the bad collateral is what backs the Target2 balances which are ballooning the Buba’s balance sheet.

    Another take was presented by Evans-Pritchard of the Telegraph this past weekend. While I think he overstates the case, you might want to consider it.

    “Venetian cunning of Draghi-Monti masterplan may save euro for now”

  • Andrew Allison

    The eurozone, ex Germany, is bankrupt. The current debate is about whether Germany (which has undoubtedly benefited greatly from it) can be persuaded to bail it out. Methinks the answer is “reset”, i.e., only if there’s power to prevent members from spending irresponsibly.

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