Tag Archives: debt securities markets

The Euro Crisis: Come What May

The eurozone crisis caused by the Greek debt problems is now taking a significant turn.The ECOFIN Council agreed on the creation of a European Financial Stabilisation mechanism with a total volume of up to € 500 billion and €250 billion from the IMF. The facility will be organised in two schemes.

The first will fall under Art. 122, para. 2 TFEU and will amount to €60bn. Its activation is subject to strong conditionality, in the context of a joint EU/IMF support. The second part will be based on an intergovernmental basis among eurozone members although Sweden and Poland have volunteered to take part, and will amount to up to €440 billion. It will be organized as a Special Purpose Vehicle on a pro rata basis by participating Member States in a coordinated manner and that will expire after three years.

Meanwhile the Bank of Canada, the Bank of England, the European Central Bank (ECB), the Federal Reserve, and the Swiss National Bank are announcing the re-establishment of temporary U.S. dollar liquidity swap facilities. The ECB also decided to conduct interventions in the euro area public and private debt securities markets to ensure depth and liquidity in those market segments which it believes are currently dysfunctional.

Bloomberg quotes Marco Annunziata, chief economist at UniCredit Group in London, saying that the measures should be more than sufficient to stabilize markets in the near term, prevent panic and contain the risk of contagion.

A strong statement by Olli Rehn: “We shall defend the euro whatever it takes”.

But how is this going to work out in reality? We don’t know yet.