Deepening Global Financial Trouble - by Stephen Lendman
Troubled Eurozone economies spread contagion globally
Desperate times call for desperate measures, especially for troubled Eurozone economies.
Trapped under euro straightjacket rules, everything tried so far failed, despite hooplas announcing each new plan.
On December 21, the big overnight news highlighted demand for long-dated European Central Banks (ECB) loans drawing 489 billion euros, more than expected. A total of 523 banks borrowed money. In response, Capital Economics' chief European economist Jonathan Loynes said:
"While this might help to address recent signs of renewed tensions in credit markets and support bank lending, we remain skeptical of the idea that the operation will ease the sovereign debt crisis as banks use the funds to purchase large volumes of peripheral government bonds."
"Does it solve problems? Clearly not. Italy and Spain have serious deficits," said Rathbone Brothers fund manager David Coombs.
FXPro Group's chief economist Simon Smith said "(m)ore important than the size of the (injection) is what banks do with this cash." Don't expect added lending to follow or other actions to ease crisis conditions.- Advertisement -
According to Royal Bank of Scotland's chief economist Jazques Cailloux, "it's not going to bring about a turning point in this crisis." Societe Generale's Sebastien Galy agreed in a statement highlighting Europe's unresolved "deep-seated" problems.
In fact, overnight ECB loans show tight interbank lending problems. They also reveal how banks are pressured to buy sovereign government bonds in an attempt to lower rates at a time their own solvency is shaky.