EU to speed up pace of printing money
Bond market raises concern
THE EUROPEAN Central Bank (ECB) would accelerate the pace of money printing to buy government bonds over the next two months, one of its top officials said, while voicing concern about recent swings on bond markets.
The comments from Benoit Coeure, initially made in private on Monday at a conference attended by one of UK’s richest hedge fund managers Alan Howard, some of his peers and academics, sent markets into a flurry when they were published yesterday.
Anticipating a flood of yet more euros onto the market, the single currency tumbled when the ECB released its executive board member’s remarks, sending European shares rising to near multi-year highs.
Coeure said the speed of the recent spike in bond yields was worrisome and that the ECB could “moderately” increase its buying this month and next month so that it did not fall below its monthly buying target. He said, however, that the two were not linked.
Other central bankers chimed in with support for the ECB’s fledgling scheme to buy
60 billion (R797bn) a month of chiefly government bonds, a programme known as quantitative easing. “The Eurosystem is ready to go further if necessary…,” Christian Noyer, who as governor of the Bank of France also sits on the ECB’s decision-making governing council, said.
The excitable market reaction, pulling the euro down below $1.12 (R13) and paring back the returns or yields on government bonds, illustrates how critical money printing is to confidence.
An ECB spokesman said that the intention had been to publish Coeure’s speech immediately but that an error delayed it until yesterday.
Money printing is already helping to boost bank lending and buoy price inflation, although both stay at low levels.
German think-tank ZEW said yesterday its monthly survey of economic sentiment fell to 41.9 points from 53.3 in April – far below even the lowest forecast in a Reuters survey.
But there are some signs of hope that one of the biggest clouds hanging over the currency bloc, Greece, may be about to lift.
Greece’s labour minister said Athens would soon strike a deal with its foreign backers to unlock further loans to the cash-starved country.
Greece’s new Leftist government has been in talks with its European and International Monetary Fund lenders about the release of about 7.2bn in loans. – Reuters A NUMBER of banks had put off possible investments in Britain until after a referendum on its future in the EU, a lobby group said yesterday, after Deutsche Bank revealed it was considering cutting down its UK operations should the country pull out. With banks complaining about uncertainty on the EU question and “punitive” tax increases, the British Bankers’ Association (BBA) also said a former financial regulator would lead a review of the UK’s competitiveness on behalf of the industry and report to the government. Prime Minister David Cameron has promised to renegotiate Britain’s relationship with the EU and then hold the referendum by the end of 2017 on whether to stay in the bloc or leave. Deutsche Bank, which has almost 9 000 staff in Britain, had formed a working group to consider moving some operations to Germany or elsewhere in the euro zone in case of a “Brexit”, a spokeswoman for the bank said. It is not the only one to rethink its operations, according to the BBA, which lobbies on behalf of UK and international banks. “Some banks have recently moved operations and jobs out of the UK… Other banks have deferred decisions… until after the referendum.” – Reuters