19 Jan 2015
Did Draghi present a QE scheme already? – DB
FXStreet (Barcelona) - The Deutsche Bank team comments on the recent press reports suggesting that Draghi might have presented a probable QE scheme to German Chancellor and the Finance Minister Schaeuble, and further adds that there is a large speculation that a QE program worth EUR 600bn might be in play.
Key Quotes
“In terms of the press reports, according to the Der Spiegel the ECB’s Draghi was reported to have presented a scheme to both German Chancellor Merkel and Finance Minister Schaeuble on Wednesday.”
“The report suggests that a ceiling of 20-25% will be set on how much a Central Bank can buy of its own government debt with Greece excluded from the equation. In support of the idea was the ECB’s Knot who was quoted as saying (Reuters) that ‘if each central bank was only buying debt of its own country, the danger of an unwanted redistribution of financial risk would be lower’, before going on to say that ‘we have to avoid decisions that are taken though the back door of the ECB balance sheet that have to continue to be reserved for elected politicians in euro-area countries’.”
“Also in support is the Italian Economy Minister Padoan who was quoted in the Italian press (Il Sole) on the weekend calling for a QE programme ‘without constraints’. The comments go against the Bundesbank President Weidmann, who, in the past has rejected the proposal of ECB QE and following the ECJ decision last week, somewhat reiterated that his views haven’t changed as well as noting that the ‘Central Bank mustn’t engage in economic policy, even though the line between monetary policy and economic policy can be drawn differently’.”
“Interestingly, a report in the UK Sunday Times this weekend took a slightly different view. Specifically, the article noted that ‘a bitter row has erupted between the ECB and Germany over a giant stimulus programme to save the eurozone from a deflationary crisis’. The report suggested that a programme worth up to €600bn was in play, however German and ECB officials ‘remain at loggerheads over the basic points of the plan’.”
“Finally a Bloomberg survey this morning showed 93% of respondents expecting a QE program to be announced this week with a median size package of €550bn.”
Key Quotes
“In terms of the press reports, according to the Der Spiegel the ECB’s Draghi was reported to have presented a scheme to both German Chancellor Merkel and Finance Minister Schaeuble on Wednesday.”
“The report suggests that a ceiling of 20-25% will be set on how much a Central Bank can buy of its own government debt with Greece excluded from the equation. In support of the idea was the ECB’s Knot who was quoted as saying (Reuters) that ‘if each central bank was only buying debt of its own country, the danger of an unwanted redistribution of financial risk would be lower’, before going on to say that ‘we have to avoid decisions that are taken though the back door of the ECB balance sheet that have to continue to be reserved for elected politicians in euro-area countries’.”
“Also in support is the Italian Economy Minister Padoan who was quoted in the Italian press (Il Sole) on the weekend calling for a QE programme ‘without constraints’. The comments go against the Bundesbank President Weidmann, who, in the past has rejected the proposal of ECB QE and following the ECJ decision last week, somewhat reiterated that his views haven’t changed as well as noting that the ‘Central Bank mustn’t engage in economic policy, even though the line between monetary policy and economic policy can be drawn differently’.”
“Interestingly, a report in the UK Sunday Times this weekend took a slightly different view. Specifically, the article noted that ‘a bitter row has erupted between the ECB and Germany over a giant stimulus programme to save the eurozone from a deflationary crisis’. The report suggested that a programme worth up to €600bn was in play, however German and ECB officials ‘remain at loggerheads over the basic points of the plan’.”
“Finally a Bloomberg survey this morning showed 93% of respondents expecting a QE program to be announced this week with a median size package of €550bn.”