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EU Commission delays euro area report due to Greek referendum
Worries about any potential impact on Sunday's Greek bailout referendum led the European Commission to postpone the publication of a technical report on the eurozone on Thursday.
PHOTO: REUTERS
[BRUSSELS] Worries about any potential impact on Sunday's Greek bailout referendum led the European Commission to postpone the publication of a technical report on the eurozone on Thursday.
The quarterly report on the euro area usually attracts little media attention but tensions over Greece's vote on a bailout deal led the Commission to delay publication to avoid any risk of interference, according to several officials at the Commission.
The latest edition includes chapters on the euro area services sector, the macroeconomic effects of oil price changes and business cycle synchronisation in the euro area.
Another recent edition contained a chapter on cross-border spillovers of financial shocks in the euro area.
The document is prepared by the economic and financial experts of the Commission, the EU's executive arm, and does not necessarily replicate the official positions of the political head of the institution.
It was due on Thursday, but it has been put on hold until at least until next week.
IMF warns Greece needs debt extension, may require writedown
[WASHINGTON] The International Monetary Fund warned on Thursday that Greece would need an extension of its European Union loans and a large debt writeoff if it grows more slowly than expected and economic reforms are not implemented.
The IMF warning in a preliminary draft of its latest debt sustainability report came as Greece readies for a Sunday referendum on an international bailout deal that Prime Minister Alexis Tsipiras has urged voters to reject.
The Washington-based institution, which is part of a "troika" that includes the European Commission and European Central Bank that is overseeing the bailout, said that even if Greek policies came back on track, loans made by Europe "will need to be extended significantly" and that the country would need further concessional financing.
ECB decided to 'look through' market volatility, accounts show
The European Central Bank concluded that the sell-off in the region's bond markets in the first quarter of the year wasn't sufficient reason to change the course of monetary policy.
PHOTO: AFP
[FRANKFURT] The European Central Bank concluded that the sell-off in the region's bond markets in the first quarter of the year wasn't sufficient reason to change the course of monetary policy.
"It was widely felt that it was advisable for the Governing Council to look through recent financial market volatility," the ECB said in a summary of the June 2-3 monetary-policy meeting in Frankfurt published on Thursday.
"If there were factors that led to an unwarranted tightening of monetary policy or if the outlook for growth and inflation were to materially change, the features of the monetary policy programs in place would have to be reviewed. There was, however, no reason to do so now."
ECB board member Benoit Coeure said at the council meeting that the slump in debt prices was probably due to a pick-up in the outlook for growth and inflation, as well as technical factors. At a press conference after the meeting on June 3, ECB President Mario Draghi said financial markets would just have to get used to higher periods of volatility, spurring a further fall in bond prices.
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After a debt rally early in 2015 spurred by the market's anticipation of the ECB's 1.1 trillion-euro asset-buying program, policy makers are now greeting the reversal as a sign that their plan to boost inflation and growth is working. Since an intraday low of 0.049 per cent, reached on April 17, the yield on German 10-year bonds has risen to about 0.88 per cent.
Governing Council members agreed that "volatility could subside again as markets adjusted to the new market environment," according to the accounts.
"However, there were also reasons to expect that increased volatility would persist in an environment of low interest rates in which asset prices tended to be more volatile."
ECB worries about Greece as source of market volatility
The European Central Bank worries about the wrangling over a debt deal with crisis-hit Greece as a source of financial market volatility, said minutes of a past meeting released on Thursday.
PHOTO: REUTERS
[FRANKFURT] The European Central Bank worries about the wrangling over a debt deal with crisis-hit Greece as a source of financial market volatility, said minutes of a past meeting released on Thursday.
At the same time, the ECB's governing council believes its contested bond purchase programme is bearing fruit, although it was too early to declare it a success just yet.
"Prevailing geopolitical risks and continued uncertainty about the outcome of negotiations between one euro area government and its official creditors were also seen as likely sources of market uncertainty and volatility," according to the minutes of the ECB governing council's meeting on June 2-3 released on Thursday.
Nevertheless, "there was broad agreement among members that the monetary accommodation provided by all the ECB's monetary policy measures was bearing fruit," the minutes revealed.
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The effects of those measures were "gradually working their way through to the economy, thereby contributing to the recovery, the pick-up in inflation and improvements in money and credit growth," the minutes said.
"The view was widely shared that it was, nonetheless, too early to declare them a success," they continued.
In March, the ECB embarked on a programme of so-called quantitative easing or QE, a massive 1.14-trillion-euro sovereign bond purchase scheme aimed at bringing inflation across the eurozone back up to levels consistent with healthy economic growth.
Under the QE programme, the ECB aims to buy 60 billion euros of bonds per month until September 2016.
Just three months in, top ECB officials are convinced that the purchases are having the desired effect and inflation rates in countries such as Germany and France are gradually moving upwards.
Nevertheless, QE has its critics, not least the head of the German central bank or Bundesbank, Jens Weidmann, who fear it will lessen pressure on governments to get their economies and finances in order.
And given its early success, there is some speculation that the programme's opponents on the ECB governing council could argue for an early roll-back as the eurozone recovery picks up speed.
But the success of the QE programme depended on it being implemented fully and it was too early to consider "tapering" the purchases just yet, the governing council agreed.
The purchases "were only in the third month," the minutes noted.
"Moreover, the economic recovery remained moderate and it still faced headwinds and remained subject to risks and vulnerabilities.
"Against this background, members widely agreed that it was essential to maintain a steady course of monetary policy, looking through short-term economic and financial market developments," the minutes said.
"This included leaving the key ECB interest rates unchanged in line with the governing council's forward guidance and firmly implementing the non-standard monetary policy measures adopted," the governing council concluded.
