ecb

In fact, an unconditional ECB bail-out could be dangerous, just as a eurobond would be if not accompanied by a fiscal union.

Jean-Claude Trichet, ECB president, said the "very substantial" upward forecast revision followed an exceptional recent growth spurt.

But mostly because, after the mini-inflation scare following the ECB's bailout plans for Europe, we seem to be having a deflation scare.

He said the ECB was a "young, powerful but increasingly arrogant institution" .

Similarly Jean Claude Trichet, head of the European Central Bank, spoke about how the dust had begun to settle on the crisis.

As a bank, the European financial stability facility would be able to access ECB liquidity in a refinancing crisis.

How much longer before the European Central Bank acts?

He said he expected the European Central Bank would soon need to take some type of emergency action.

Any "pre-commitment" on interest rates might undermine the influence of the ECB, Mr Trichet warned in a speech in London.

"The ECB could well end up getting much of the blame for the sharp economic slowdown, which is now in the pipeline, " he said.

A euro zone central bank source told Reuters last week that the ECB would like to see its resources at least doubled.

When credit markets seized up in the fall, the ECB began offering banks unlimited loans at its policy rate for up to six months.

The economic risk is that it is uncertain how much ECB bond-buying will achieve.

That background might predispose the new ECB president to the sort of monetary-policy activism that the Fed has gone in for.

Giving consideration to private or public debt sustainability, at the cost of price stability, would be a violation of the ECB's mandate.

And then there is the matter of his nationality. Nationality is not supposed to count at the supranational ECB; but it always does.

But Mr Trichet said the ECB would not revise its economic forecast of a 1 per cent rise in eurozone gross domestic product this year.

At least until July, the ECB will continue to provide unlimited loans for periods of up to three months.

In Europe, the ECB is still likely to raise interest rates again, while the Bank of England looks as though it will now wait and see.

Before that, banks bid for funds in auctions; the ECB capped how much it doled out, giving more to banks that bid at higher rates.

He said the move opened the door wide for similar easing in the ECB's main policy rate next Thursday.

Conservative central bankers worry that it would still break the rule that bans direct purchases by the ECB, in spirit at least.

The ECB will say next Thursday how much of its crisis support --mostly ultra-easy loans for banks-- will remain in place beyond mid-January.

Less than an hour after the Bank of England's decision, the ECB reduced its main rate by three-quarters of a percentage point, to 2. 5%.

One of the main reasons for the strength of the European currencies this year is anticipation of a tightening of monetary policy by the ECB.

Jean-Claude Trichet, ECB president, said the bank was prepared to act "pre-emptively" to avoid excessive wage demands.

But to unleash the ECB or to embrace eurobonds could precipitate a domestic crisis that would be almost as catastrophic.

Strict surveillance and ECB independence was meant to make it impossible to end up in this situation; both have been undermined.

Trichet said the ECB had cut rates as it was "anticipating future bad news that we expect coming from the real economy. "

The German central bank's president, Jens Weidmann, is one of the strongest opponents of such measures on the ECB's governing council.

Athens would need to have an alternative currency and a strong candidate for central bank governor lined up with a hotline to the ECB.

There was no sign of a shift from the German chancellor either on a more ambitious mission for the ECB in addressing the crisis.

In ECB mode, each block of plaintext is encrypted independently of any other block.

To break out of this vicious cycle, the ECB will have to cut interest rates, and return to a policy of unlimited long-term funding.

She refuses to call on the European Central Bank to be the lender of last resort to stop contagion in the bond markets.

In a speech in Berlin, Weber said the ECB should be ready to tighten credit costs again once the financial sector was back on its feet.

Mario Draghi, the president of the ECB, has officially ruled out a vast expansion of its bond-buying programme.

Traders took solace in the hawkish demeanor of the ECB seemingly forgetting how they were let down by the bank at the last meeting.

After nearly two years of an escalating debt crisis, ECB officials still appear to be trying to find their footing.

The ECB president indicated the ECB was prepared to cut eurozone official interest rates if the economic outlook continued to deteriorate.

It would be a nonsense if the ECB's dogged defence of monetary rigour led, say, to an Italian default and a global depression.

The European Central Bank (ECB) is reluctant to go down that path, partly for fear that it might be seen to be bowing to political pressure.

So far, the ECB and European politicians have done just enough to keep the pot simmering without rolling into full boil.

The ECB and the Bank of England do all three of these things. So far the Fed has got along without them.

The first is to stay more or less where we are, expanding the ECB's bond-purchasing program and simply trying to hang in there.

This explains why the ECB's commitment to an exit did not wane as investors' unease spread from Greece to elsewhere in Europe.

Given the urgency of the crisis, therefore, it may be necessary to turn to the ECB for assistance.

France had tacitly accepted that the next ECB head would be a German, after the previous presidents came from the Netherlands and France.

In times of such peril, even a small cut in interest rates by the European Central Bank and the Bank of England would send a helpful signal.

Although markets had largely priced in a quarter-point rise by the ECB, the Bank of England move wrong-footed markets.

From this perspective, money does not deserve to be central to one of the two "pillars" of the ECB's monetary policy strategy.

ECB board member Lorenzo Bini Smaghi of Italy said the plan "looks like a syndicated loan, which brings together several banks. "

Exiting the eurozone was "not in the [European Union] treaty, " he said, reflecting ECB alarm about the signal sent to investors.

At least some on the ECB's 23-strong governing council would agree the bank could be more aggressive.

A non-German would be the best bet to hold the ring in an ECB council that looks likely to become more fractious.

"Neither the ECB nor the EFSF (European financial stabilization facility) would buy any more bonds in the market, " he said.

We welcome the actions taken by the ECB and the national central banks since the beginning of the turmoil.

Just as the ECB bought time for European banks, rescues have been attempted for the struggling governments of Greece and Ireland.

He also refused to rule out the possibility of eurozone governments issuing joint bonds, although the ECB was not endorsing such a step.

Should it come to the worst, any significant ECB losses on the SMP would have to be met through a politically toxic recapitalisation.

French banks were encouraged by the Bank of France to take advantage of the new ECB facility.

Over the next two days, the European Central Bank will host a conference to discuss the role of money in monetary policymaking.

Financial markets, however, see the ECB increasingly as the only institution with pockets deep enough to ease the crisis.

Second, it may be impossible to obtain such consent, particularly if funding relied heavily on the ECB, at least in the short run.

and, whatever clout the ECB has gained from the crisis, it would be dangerous for its legitimacy to let it embark on mission creep.

Some traders were disappointed that the ECB had not embarked on US-style "quantitative easing" .

Trichet said the ECB expected banks to make their contribution to dealing with the turmoil in financial markets.

Looking ahead, the peacefulness should end in London with a slew of top tier data that will be capped off by the ECB statement at 12: 45GMT.

The ECB would be ill advised to go that far without a political agreement on how the eurozone should work.

While the ECB does not target economic growth, it cannot ignore such a rapid deterioration either, as it poses price stability risks.

The US Federal Reserve, the European Central Bank and the Bank of England are currently doing much more than working out this lesson.

Money markets remain at the heart of the ECB's efforts to fight off the financial crisis.

But an article in the bank's latest Monthly Bulletin shows that it is the housing market that the ECB is watching most keenly.

As Lewis says: 'Massive ECB buying of government bonds unwanted by private investors would be an obvious case of monetizing the debt.

ECB President Jean-Claude Trichet said Fed policy actions do not suggest the United States was actively seeking a weaker dollar.

Building up a fund at the European Central Bank, that can be drawn in the event of a Greek default, would be one option.

The ECB's move is therefore being seen as a sort of bridge loan to allow time for the member countries to pass the necessary changes.

Subordinating monetary policy to exchange rate policy would be painful for institutions like the ECB.

With the ECB determined to tell investors that sovereign debt can default, they have created a perfect recipe for a self-imposed disaster.

Jean-Claude Trichet, the ECB president, denied that the eurozone's 16 governments had bounced the bank into the bond purchase programme.

Interbank loans and unsecured term funding are seizing up in the euro area, with short-term ECB loans and secured debt taking its place.

"Some of the foreign central banks, led by the ECB, have been more hawkish than they needed to be, " King said.

The risk, however, is of the ECB's credibility being questioned if it lacks German support for its actions.

If the ECB were to take the lead among the large central banks, the euro could rise to intolerable levels.

Although the ECB and the Bank of England have sounded sanguine about tightening credit, central bankers are not entirely unperturbed.

Once we see that the ECB can effectively support the euro's value, then it does not matter whether this government or that defaults.

The agreement of the bank's policy-making governing council is a watershed moment for the ECB.

To any sensible observer, all this screams that ECB policy has been far too tight.

It is as if the ECB were setting its monetary policy to meet the conditions of Spain alone.

Mr. Frieden said the bailout fund would have to act 'together with' the IMF and the ECB.

The rate increase put the ECB still further ahead of the game among the central banks of the largest advanced economies.

Without swift action from the European Central Bank, this will prove to be a contagion process with a disastrous end.

Soros said the ECB could then encourage countries to finance themselves with Treasury bills bought by banks.

The ECB's monetary tightening was all the more uncalled for as countries on the periphery had to undertake fierce austerity programmes.

The ECB now seems ready to massively raise its programme of debt monetization.

French Budget Minister Valerie Pecresse challenged the view that the ECB has no mandate other than to keep inflation low.

And were the ECB ready to provide unlimited liquidity to solvent states, as it does for banks, it might not have to buy so many dodgy bonds.

The least bad option would be for the ECB to ensure liquidity for solvent governments and financial institutions, without limit.

This was how the ECB's monetary policy produced a more or less adequate rate of expansion of overall eurozone demand.

Jean-Claude Trichet, ECB president, said the impact on the real economy of the global credit squeeze remained unclear.

"All in all, the costs seem to outweigh the benefits, " said Mario Draghi, incoming ECB president.

Now, the ECB bank must decide if it needs to stray even farther from its core mission in to save the euro.

As I've said many times, it's a shame that the ECB's attempt to create rules for financial stability has been the undoing of the euro.

As you know, the ECB keeps refusing to save the world by printing money.

Creating a credible financial firewall has been a key demand by Mario Draghi, president of the European Central Bank.

Both the Bank of Canada and the ECB are considering outright purchases of government or corporate debt to boost the quantity of credit.

Yields on Greek, Portuguese, and Italian bonds show that the ECB will not change market sentiment if it pulls its punches.

The ECB and others should stand ready to defend Belgium, Italy and Spain if need be.

Italy is not in danger of default and can turn itself around and the ECB's independence must be preserved at all costs.

The Bank joined the Federal Reserve, the Bank of Japan, the ECB, the Bank of Canada and the Swiss National Bank in making the announcement.

It would make no sense for the ECB to put its own reputation for orthodoxy before the ravages of deflation.

The situation is somewhat analogous to a bank run on the sovereign bonds of these countries, with the ECB acting as the FDIC.

It does suggest, however, that this will not work unless the ECB also starts cutting rates.

"You could end up with a divided ECB with the majority saying we're facing an existential crisis, " said Mr Kapoor.

The ECB insists that this participation must be "voluntary" so that no technical default occurs.

Short of that, the European Central Bank will have to continue buying Italian bonds.

Mr Draghi's comments, however, for the first time indicate that the ECB is willing to intervene more aggressively than it has done so far.

The most probable compromise, EU diplomats said, would be to have another member of the ECB's governing board direct the council.

Asked if the ECB was prepared to react flexibly to soaring financial market tensions, he responded: "Yes, sir. "

I think that the ECB has done all it could to be up to its responsibilities in exceptional circumstances . . .

Every quarter the EU, the IMF and the European Central Bank (ECB) scrutinise Greece before releasing the next chunk of money.

Another danger is a disagreement between Greece and its trio of rescuers (the EU, the IMF and the ECB) over the conditions of its bail-out.

The euro "can only be credible now if the ECB makes a statement that it stands unequivocally behind Italian banks, " Mr Portes said.

The ECB said on Thursday that it had encouraged Portugal to seek financial aid.

Mario Draghi, the ECB's new president, has hinted that were a fiscal pact to be agreed, the ECB might buy bonds on a larger scale.

One of the most frequently asked questions is whether the European Central Bank should follow the Fed into quantitative easing.

The ECB has brought overnight interest rates back in line with its main policy rates.

The same may be true in the euro zone too, but the ECB is not yet ready to make that leap of faith.

Some ECB rate-setters seem to suggest that a liquidity trap can be avoided simply by not reducing interest rates.

But if the ECB were to embark on unlimited bond buying, the sums involved would be too vast to withdraw.

Some have said the ECB's one-year LTROs helped exacerbate the link between eurozone sovereigns and their banking systems.

A quicker, more powerful alternative would be for the ECB to stand behind solvent sovereigns with unconditional and unlimited liquidity.

Well, the French president's attitude to Italy was coloured by his understandable annoyance about the allocation of seats at the ECB.

They were one of the few countries last week that voted against the ECB entering the secondary markets.

"It's as if the ECB has sinned and has to do penance, " says Julian Callow at Barclays Capital.

The ECB could "diminish rates without adding to inflationary risks in the medium term" , he said.

ECB leaders are sounding more hawkish, and an interest rate increase is certainly looking more likely at the next meeting.

Precisely because he is Italian, Mr Draghi may have to be even stricter in insisting on a narrow interpretation of the ECB's mandate.

The last time the ECB's deposit facility was so flush was more than five months ago, on Feb. 7, when banks stashed 137 billion euros there.

The ECB and the Bank of England do all three of these things.

Draghi expressed strong resistance to the ECB being used as a lender of last resort, insisting that it was not its remit.

In exchange for a guarantee, the major banks would have to agree to abide by the instructions of the ECB.

Governments in Athens, Dublin or Madrid may be cheering that they won't have to deal with Mr. Weber at the helm of the ECB.

Despite the deteriorating growth outlook, Trichet said that the ECB was more concerned about the risk of inflation.

If it is, then the EFSF or even the ECB may buy as many bonds as it takes to stabilise market interest rates.

The central bank has so far insisted that the main responsibility for acting lies with national governments.

In the short term, it must be enough to free the ECB to intervene without limit, by assuaging fears of moral hazard.

Of the major regions, only Europe, led by the European Central Bank, has resisted joining the stimulus party so far.

The ECB is not allowed to fund member governments, but it or national central banks could lend to the IMF.

Banks are having trouble securing short-term funding; two banks had to turn to the European Central Bank for dollars again this week.

The ECB is the only institution in Europe that has sufficient resources to guarantee European sovereigns.

Furthermore, they were supervised by their national central banks and by the ECB, which "seemingly raised no objection to this lending" .

On a purely technical level, it does not really matter whether you create a eurobond, or whether the ECB buys all the debt.

Banks could rediscount the bills with the ECB but they would not do so as long as they earned more on the bills than on the cash.

The ECB expects growth to continue at a moderate but uneven pace, he said.

Interest rates should be cut to bottom levels and the ECB should pledge to keep them low for quite a while.

Some economists said it was a sign that the hardliners were in retreat and the ECB was becoming more dovish.

The ECB was "strongly concerned" about such "second-round" effects, he said.

"All models that depend on ECB participation are off the table, " Mrs Merkel insisted in her parliamentary address.

However, the board of the ECB is an independent authority whose independence has to be respected even by the Bundesbank.

Mr Trichet is quite wrong to claim that the rise in interest rates has nothing to do with the ECB's monetary stance.

A fascinating speech by Lorenzo Bini Smaghi, a member of the executive board of the European Central Bank, makes the point.

Many influential Germans think the ECB has reneged on the "no bail-out" pledge at the heart of monetary union.

On Thursday the European Central Bank set out to diagnose and cure the problems of the eurozone; but it gave too small a dose.

But Mr Weber could not stomach some of the measures the ECB was taking in response to the euro crisis and bowed out of the race.

The fund will not be capable of acting quickly even if its resources are expanded by giving it access to the ECB's liquidity.

Jean-Claude Trichet, the head of the ECB, is effectively gambling with the eurozone's future by taking on this huge commitment.

However, the devil is always in the details and such measures by the ECB could come with severe consequences.

Contrary to what various Germans in the ECB's governing council may have been saying, we are not in this situation yet.

If it came to it, the European Central Bank could simply buy up all the bad debts.

Added to this, ECB member Bini Smaghi, in an interview with a UK newspaper, said that a restructuring of Greece would not work.

Some on the ECB's council might have hoped soon to make the terms more restrictive, but that now seems unlikely.

The Fund could then take over the work of the ECB, whose courageous buying of indebted countries' bonds requires adequate fiscal policies.

In Germany, whose conservative Bundesbank was the model for the ECB, fears are growing that its expanded role will blur its priorities.

"The solution has to be a euro devaluation through the ECB purchasing peripheral euro zone government bonds, " said Tullett's Komileva.

Loan growth is wilting and a survey by the European Central Bank (ECB) suggests that lending conditions are becoming stricter.

The ECB could credibly stand ready to buy debt of a country like Italy.

Whereas the "traffic light" approach proposed by the ECB may help structure the policy discussion, a mechanical approach would be wrong.

The only reasonable objection to a lender of last resort role for the ECB is moral hazard.

The issue has gained importance as the ECB has taken on a more political role as guardian of the embattled single currency.

In exchange for a guarantee, the eurozone's major banks would have to agree to abide by the ECB's instructions.

FOR such a young institution, the European Central Bank (ECB) has some old-fashioned ideas.

The only institution able to perform this role is the ECB.

The Spanish government this week pleaded for the ECB to be aware of the liquidity needs of its financial system.

From a UK perspective , that would be far better than using the ECB , which may volunteer its services .

The ECB's auction may make a credit crunch less severe, but it is not enough to avoid one.

The surprise was not so much that rescue action was needed, but that the Frankfurt-based ECB had taken the global lead.

Inflation in the euro zone may be the new concern, with data due on Monday and a European Central Bank meeting on Thursday.

So far, the ECB has argued that it has the instruments in place to provide euro liquidity.

Deterioriating economic prospects have spurred the Bank of England and the European Central Bank into action.

"The ECB hiking [interest rates] in July would be consistent with a stagflationary feel, " said Michael Hume at Lehman Brothers.

He stressed that the ECB abides by the 'spirit' of its founding charter that prohibits the central bank from financing governments.

The ECB could no longer accept their collateral, Greek debt, which would immediately have less than junk status.

But if events keep playing out just as they did seven years ago, the ECB will be forced into lowering rates later this year.

More niggling is the suspicion that the ECB has caved in to political pressure to help out spendthrift governments.

The pressure on the ECB to go down to zero per cent will become immense just for that single reason.

Earlier Thursday, the ECB dashed investor hopes it would signal strong action to shore up the euro zone's ailing bond markets.

The ECB meeting on Thursday will also garner plenty of attention especially as the ECB is likely to shift its tone from hawkish to neutral.

Therefore, if the eurozone periphery is to be saved, investors need to believe in the ECB and its leadership.

Indeed, if the European Central Bank were similarly audacious, the euro-zone might be better off today.

Moreover within the euro zone, crisis response is crippled by the ECB's constitutional ban on bailing out its own banks.

A spokeswoman for the ECB declined to comment on who uses the bills. The ECB and its member governments are beneficiaries of the demand.

Much will depend on bank "stress tests" , with which the ECB has assisted, results of which are scheduled for publication this month.

Yet again, disaster will loom. And yet again, the ECB will end up staving it off.

"With this fine-tuning operation, the ECB is further supporting the normalisation of conditions in the money market. "

The responsibilities of the ECB, national financial and regulatory authorities and EU officials can be defined in different ways.

The ECB, she said, was responsible for monetary policy alone.

He foresees politicians being granted control of Europe's key industries and of the European Central Bank.

It would have enough money to do that without borrowing from the ECB, but not if it uses up lots of ammunition recapitalising banks.

The ECB holds at least 20 per cent of the Greek, Portuguese and Irish debt, yet yields remain painfully high.

The European Central Bank began buying government bonds days after insisting it would not.

If Europe wanted to adopt one, the ECB and finance ministers would have to agree on such a policy jointly. This is highly improbable.

A prominent ECB official says increases in Europe's imported inflation "cannot be ignored" .

The ECB initially performed this role in a timid way, while making it clear that it was unwilling to continue doing so.

In its monthly bulletin on Thursday, the ECB warned of the dangers of such steps, saying they put financial stability in jeopardy.

The European Central Bank, the Bank of England and the Swedish Riksbank are all inflation-targeters.

The beauty of this outcome would be that the ECB would not have to buy government bonds any more.

Yet the ECB has permitted nominal GDP and the money supply (supposedly, the "second pillar" of its policies) to stagnate.

At the height of the financial crisis, the ECB lowered interest rates aggressively in the face of downside risks to price stability.

That the ECB has not purchased government bonds is in line with this institutional framework.

Both the Bank of England and the ECB cut rates last month by a half-point.

When the ECB restarted the programme in August, it made clear it was a stopgap until the EFSF assumed responsibility.

The ECB, despite its misgivings, is the only institution with the power to reverse a self-fulfilling panic.

The Bank of England has been conducting a much more aggressive monetary policy than the ECB.

This is an issue which must be dealt with economically as the ECB's monetary policy is drafted with the overall needs of the euro zone.

Prior to the payrolls figure, a number of ECB speakers before lunchtime could set the stage for a further leg higher in the euro.

Jean-Claude Trichet, the ECB's chief, has warned that the effect of dear oil on potential growth "should not be considered negligible" .

Calm, composed and consistent are the watchwords of the European Central Bank. Except perhaps if you listen in Spanish, French or Italian.

Italy's yields could have been even higher, except for another reported round of bond-buying by the European Central Bank.

The first policy summit of 2008 is very likely to end with a decision to keep rates on hold, just as the January 2001 meeting did.

He said last month the ECB was in "strong vigilance" , which was virtually a promise of a rate rise this month.

The European Central Bank did not signal anything.

The European Central Bank kept rates on hold at 1. 00% as expected and ECB President Trichet did not disappoint the hawks.

Until the bailout fund gets new powers, the ECB remains the only institution with the firepower to prevent contagion.

The ECB's commitment to tightening, however, will to a certain extend depend on the robustness of the euro zone economy.

Particularly disappointing is the ECB's decision not to lower the rate paid on funds deposited with the central bank.

But the message kept the euro from leaping against the dollar, and eased some of the public pressure on the ECB.

Some analysts also expect the ECB to keep its three-month liquidity operations unlimited to help banks struggling for cash.

When Spain and Ireland adopted the euro, they imported low interest rates from Germany: the ECB was the Bundesbank writ large.

But the collapse of Dexia in October after it ran out of cash suggests that the ECB may not provide unlimited liquidity.

She also stressed the difference in policy direction between the ECB and its U. S. counterpart the Federal Reserve.

Mr Draghi, the ECB president, called for a "fiscal compact" between eurozone governments to restore investor confidence in the region.

Traders said the European Central Bank had been in the market buying Italian debt, although its action appeared limited.

Italy didn't take on this 55 billion euro austerity plan on a whim -- it was essentially forced to do it by the European Central Bank.

The interest rate outlook has also shifted for the Euro, with fresh talk emerging of a potential ECB rate cut later this year.

This should go some way to placate hawkish ECB members who disagree with the Bank's bond-buying programme.

So when Italian and Spanish bond yields jumped up again (see chart right) there was only one institution with the capacity to act: the ECB.

but a sharp fall of the euro is unlikely given the trade strength of Germany and the hawkish policies of the European Central Bank.

The Fed's assets are likely soon to exceed the ECB's, as the reach of its operations extends far beyond liquidity support for banks.

The European Central Bank (ECB), which some economists had been expecting to lower interest rates, left them unchanged.