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Bond Buys a Risky Business
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The London based think tank Open Europe says the exposure from Greece puts the ECB's balance sheet at risk. A small 4.25% drop in the value of the ECB's asset holdings could wipe out the whole capital base of the ECB, according to Open Europe. The ECB holds at present 75 billion euros of Portuguese, Greek and Irish bonds on its balance sheet. In the last 12 months the ECB has increased its capital base to 10 billion euros. The decision to buy Spanish and Italian bonds increases the risk. The ECB loses money if the borrowing bank goes bankrupt or the collateral of the borrowing bank loses value. During the negotiations for the eurozone debt deal in July 2011, the ECB obtained guarantees from eurozone governments for the collateral it holds from Greece. This increases the need for the European Financial Stability Facility to take on the role of buying bonds of troubled eurozone countries.
EFSF credit ratings, borrowing rates and yields on bonds
08/08/2011
Grouped Articles
Return of Long-Term Bond Buyers Seen as Crucial to Europe
New York Times 06/29/2012
Wall Street Journal 08/08/2011
Questions Mount for Europe Bailout Fund
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European Union Financial Stability Facility (EFSF)
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Some Bailout Providers May One Day Need Help Too
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Germany Opposes Larger Rescue Fund
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Five Steps to Solving Europeâs Debt Crisis
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Rescue of Spain's banks with a $125 billion committment from the European Financial Stability Facility (EFSF)
02/25/2010
EU finance ministers persuaded Spain to borrow from the EFSF and place the money in a special fund intended to recapitalize its banks. The IMF will provide some oversight over the banks but no conditions or oversight will be imposed on Spain only on its banking system as a compromise. Problems in the banking system arise from a housing bubble in Spain and failing cajas savings banks. Spain has already committed to adhering to fiscal deficit targets on a longer term basis with the EU. This makes it a rescue of the banks more than a bailout of the kind deisgned for Greece, Ireland and Portugal.
Grouped Articles
Wall Street Journal 08/08/2011
A Warning Light to Alert the I.M.F.
New York Times 09/21/2011
The Pain in Spain Falls Mainly on the Cajas
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Economist 05/29/2010
Spain's Bankia Returns to Profit
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Spain requests bailout help - The Washington Post
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ECB president Jean-Claude Trichet
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Grouped Articles
ECB Chief Seeks Tighter Fiscal Union
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Europe’s Central Banker Engineers His Economics
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Europe's Central Banker Seeks Deeper Fiscal Union
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Trichet's Solution for an Imperfect Union
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Trichet Urges Creation Of Euro Oversight Panel
New York Times 06/02/2011
European Central Bank Raises Rates as Expected
New York Times 07/07/2011
The European Union agreement for the eurozone debt crisis in Greece and other countries in July 2011
06/30/2011
The first really workable agreement was finally reached in Brussels after a year of sharp differences between the ECB, EU leaders, Greece government and opposition parties, and leaders of France, Germany and other EU countries. Fears of contagion for Italy and Spain and a sense of the dangers to the EU and the Euro currency itself led to the agreement, with the EU governments coming up with the financial support which will be channelled through the European Financial Stability Facility. The debt ceiling crisis in the U.S. may have added to the urgency to reduce nervousness in the markets about a breakdown in EU governance along with that in the U.S.
Grouped Articles
Wall Street Journal 07/13/2011
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A Guide to the New Deal in Athens: How a 'Selective Default' Works
Wall Street Journal 07/22/2011
Wall Street Journal 07/22/2011
Euro Zone's Imperfect Path to Union
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The ECB and buying of government bonds of troubled eurozone countries
08/07/2011
The purchases of Italian and Spanish bonds by the European Central Bank in addition to its holdings of 75 billion euros of Portuguese, Greek and Irish bonds creates additional balance sheet risk for the ECB. Losses in the value of collateral could wipe out the 10 billion euro capital base of the ECB. The pressing need to give resources and new powers to the European Financial Stability Facility so that this agency could do the bond buying in the place of the ECB.
Grouped Articles
German Court to Weigh Bond Buying by E.C.B.
New York Times 06/10/2013
ECB’s Coeuré Sends Strong Signal on Asset Purchases
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European Markets Jolted by ECB Proposal
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Wall Street Journal 03/10/2015
Wall Street Journal 08/08/2011
EFSF S&P ratings downgrade to AA+ from AAA
08/08/2011
The European Financial Stability Mechanism was downgraded by S&P to AA+ on Feb. 16, 2012. This is the bailout fund in the eurozone financial crisis.
Grouped Articles
Wall Street Journal 08/08/2011
S&P Cuts Rating on Europe's Bailout Fund
Wall Street Journal 01/17/2012
Questions Mount for Europe Bailout Fund
Wall Street Journal 01/17/2012
Euro Crisis Calls for Mix of Moves
Wall Street Journal 05/26/2012
Wall Street Journal 06/01/2012
Rating Changes Ripple Through Bailout Funds
Wall Street Journal 07/24/2012
Moody's credit ratings for the European Financial Stability Facility, the EFSF
08/08/2011
Grouped Articles
Wall Street Journal 08/08/2011
Rating Changes Ripple Through Bailout Funds
Wall Street Journal 07/24/2012
Wall Street Journal 07/25/2012
The EFSF (or ESM) and the European Central Bank
08/08/2011
The EFSF was authorized to purchase government bonds of EU countries at the June 2012 summit of EU leaders. The EFSF will coordinate the purchase with the ECB with new purchases being on the EFSF books.
Grouped Articles
Wall Street Journal 08/08/2011
European Finance Ministers Agree to Speed Up Bailout of Spanish Banks
New York Times 07/09/2012
Rating Changes Ripple Through Bailout Funds
Wall Street Journal 07/24/2012
ECB to Discuss Rescue Plan With Bundesbank
Wall Street Journal 07/27/2012
Bundesbank Stresses Divide on Bond Buying
Wall Street Journal 08/02/2012
Merkel Backs Bond-Buying Program
Wall Street Journal 09/18/2012
European Central Bank policies in 2010-2012.
02/05/2008
The ECB rate changes and policy in 2010-2012.
Grouped Articles
ECB Moves Markets, Not Economy
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Shares Rise on Wall Street and in Europe
New York Times 06/06/2012
Europe’s Central Banker Engineers His Economics
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2 Major European Banks Keep Record-Low Rates
New York Times 11/04/2010
ECB Seeks Funds for Capital Base
Wall Street Journal 12/17/2010
Rate Rise Signaled for Euro Zone
Wall Street Journal 03/04/2011
Greece: EU, ECB, and EFSF negotiations for a selective default in July 2011
04/19/2010
Grouped Articles
Weber Sees Greece Needing More Aid
Wall Street Journal 04/19/2010
Greece Defaults on IMF Loan Despite New Push for Bailout Aid
Wall Street Journal 07/01/2015
Euro Zone Moves Toward Greek Deal
Wall Street Journal 07/21/2011
Europe Must Choose Currency or Financial Union
New York Times 07/21/2011
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Wall Street Journal 07/22/2011
A Guide to the New Deal in Athens: How a 'Selective Default' Works
Wall Street Journal 07/22/2011
The European Central Bank and the July 2011 Eurozone leaders agreement for Greece
08/08/2011
Linked Articles
Wall Street Journal 08/08/2011
Wall Street Journal 08/08/2011
The European Central Bank and the July 2011 Eurozone leaders agreement for Greece
08/08/2011
Linked Articles
Wall Street Journal 08/08/2011
Wall Street Journal 08/08/2011
Problems with the EU July 2011 Plan for Greece and other troubled eurozone countries
07/28/2011
The lack of funding and powers for the European Fiinancial Stability Facility to deal with future crises. EFSF lacks adequate funding and power to buy bonds of troubled eurozone countries including Italy and Spain. Other issues that remain unresolved A sense that the EU leaders are a step behind each developing crisis and have not wrapped their hands around the whole problem.
Linked Articles
Wall Street Journal 08/08/2011
The Euro Crisis: Big Rescue, Big Doubts
BusinessWeek 07/28/2011
The European Central Bank, the European Financial Stability Facility and "selective default" under the eurozone agreement of July 20111
07/21/2011
Linked Articles
Wall Street Journal 08/08/2011
Euro Zone Moves Toward Greek Deal
Wall Street Journal 07/21/2011
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