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As the positions between the Greek government and the Troika harden, it appears that an agreement to extend the current bail-out program or secure some other form of official financing becomes ever more elusive. Yet, it is highly unlikely that … Continue reading
As ECB policy rates skirt the zero bound, expectations for the use of alternative tools, such as negative deposit rates are again on the rise. However, this is an ineffective and potentially harmful policy option. Several problems may arise: transmission across other … Continue reading
The numbers involved are small. Yet, the Troika/Cyprus move to renege on deposit insurance and appropriate private funds is set to reverberate beyond the tiny island. The decision bodes ill for future rescue efforts: 1) it derails popular support for … Continue reading
The reduction of the ECB’s deposit rate to 0% led to an immediate Eur500 mn drop in deposit holdings but prompted a simultaneous increase in current account holdings, leaving overall bank reserves unchanged. Yet, focus on these figures is misplaced: … Continue reading
A fiscal union in the Eurozone (EZ) – whether in the form of additional financing or debt mutualization – is not only politically unrealistic but also counter-productive in dealing with the issues at hand. Transfers or grants would work, but … Continue reading
The changes to the modus operandi of the ESM agreed at the latest summit appear significant at first (sovereign bond purchase, non-preferred creditor status, direct lending to banks plus the quid pro quo of ECB-led banking supervision) and can help … Continue reading