Venetian cunning of Draghi-Monti masterplan (Evans-Pritchard)
The European Central bank will not move until Spain requests a full sovereign rescue from the EU bail-out fund (EFSF), and cedes yet more ground to EU commissars. Spain in turn will not move until the ECB lays out the exact terms of any deal, and until the Teutonic bloc signals whether it intends to crush Spain into abject humiliation - a la Grecque - or seek a fraternal outcome...
... We have known for weeks that the `Draghi Plan' for mass purchases of Spanish and Italian bonds requires the political trigger of an EFSF bail-out, with supplicant states signing a "Memorandum". The EFSF is the enforcer. The ECB is the cash cow. One unlocks the other...
... Mr Draghi has secured a mandate for "unlimited open-market operations", a far cry from the half-hearted and self-defeating bond purchases of the last two years. The ECB at last has a licence to act with overwhelming force, like the US Federal Reserve.
The Governing Council has formally stated that "convertibility risk" -- ie, euro break-up risk -- is playing havoc with monetary policy, pushing Club Med debt costs out of control. The term is crucial. Italy and Spain are deemed victims of forces beyond their control. Action by the ECB no longer constitutes a "fiscal rescue". The `no bail-out' clause of the Maastricht Treaty has been elegantly finessed...
/... http://www.telegraph.co.uk/finance/comment/9453667/Venetian-cunning-of-Draghi-Monti-masterplan-may-save-euro-for-now.html
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