The refusal of the European Central Bank to buy new public bonds continues to fuel the debate. Nevertheless, the ECB is firm in its position. Explanations on a crisis that goes into extra time.
It should first be remembered that the countries most mired in the crisis such as Greece, Spain or Italy have already benefited from vast programs to buy back their debts. And the ECB has largely put its hand in its pocket, since since May 2010, it has intervened to buy back more than 200 billion euros of bonds .
Yes, but here we are, the crisis is dragging on, the countries most in difficulty are seeing their 10-year rates soar and the austerity measures are barely sustainable for the populations. In this context, the fact that the ECB has not bought debt for 4 months reinforces the idea that the rescue funds EFSF (European Financial Stability Facility) and MES (European Stability Mechanism) must take more responsibility.
The European Central Bank has informed that if it does not wish to intervene again on the bond market, it is quite simply because it does not fall within its remit. She recalls that her mission is to ensure price stability and believes that buying public debt is now the responsibility of the EFSF.
Moreover, the Frankfurt institution once again refers the States to their responsibilities. One can however wonder what countries like Spain or Greece may think, which have gone as far as they could in the application of austerity measures and which are today on the verge of a social explosion.
On Friday July 20, the ECB went even further by informing the banks that it would no longer accept the deposit of securities issued by Greece. This measure would be temporary and the Central Bank would wait for the members of the Troika (European Commission, ECB and IMF) to submit their report. However, it would not be returned before the end of the summer.
An unsustainable bond situation
The situation of the states most in difficulty has nevertheless become unsustainable. It is therefore hard to see how these countries could manage without further massive intervention, including that of the ECB. Indeed, the European Central Bank has sufficiently radical means to reverse the negative spiral, such as printing money.
A new plan to buy back Greek, Spanish and Italian bonds would also have an immediate effect by lowering long rates that have become unbearable and putting an end to speculation.
10-year yields have just crossed the 7.50% mark in Spain, thus reaching a new record. They are above 6% in Italy, whereas they are barely above 1% in Germany and in France, the 10-year TEC remains low and is around 2%.
This situation also contributes to widening the gap between the most affected countries and those which are coping and which manage to finance themselves at low rates.