Great demand at the ECB auction for interbank lending at 1% rate from banks of the Euro areain order to increase their liquidity. But not to buy Bonds of weak countries, as Mr Draghi hoped. Banks have first to recapitalize themselves, as required by EBA to have strongerassets. Result: banks do not buy Bond and spreads remain high , the risk is to not providecredit to households and companies.
Investors will not trust the Eurozone untill ECB will not become the official lender of last resort "by putting his face" officially and only after this round of loans at low interest rateswill be welcomed by the markets.
The last day auction, the "bazooka" of Mr.Draghi is a brilliant idea but becomes a "toy gun" if all the Euro Countries first of all Germany will not decide this new clear role of the ECB. Thisreform is necessarily to be done togheter with the others to do not frustrate all the dutiful heavy efforts "done by the single Countries as Greece, Spain and Italy, in terms of taxes and growth, the requests from EBA to the banks, the strict State budget controls demanded byBerlin as a transfer of sovereignty that will bind togheter all the Euro countries, the real Europe at this time ,and not the formal but empty EU with the UK backhanded position of PM Mr.Cameron. After this is possible to attack the deregulated financial system,with a “Tobin tax” or similar by taxing pure financial transactions and overcome imbalances of an “English” capitalism vision.
In my opinion Draghi expected a not enthusiastics response from the markets about ECB auction and in this way he is telling to Merkel he can try everithing but untill she will not accept a reform of ECB, no further effort will work and the moves to exit from the crisisshould be made coordinated and contextual one another: constraints of State Euro budgets, fiscal harmonization, growth and power to print money. Without even one of these moves, the others remain idle.
COMMENT SENT TO WSJ ON 23rd DEC 2011