In his latest note from last night, BTIG’s Dan Greenhaus makes a good observation:…it appears that pressure is growing on the ECB to act more decisively. While many in the markets choose to view the ECB purely and solely through the prism of German “tolerance,” numerous countries and their leaders have shifted rhetoric as the crisis has worsened. Luxembourg’s central banker said before the weekend that he could “imagine” a situation in which the ECB played a larger role. Over the weekend Austria’s Chancellor suggested that the ECB could play a larger role, as did Finland’s Finance Minister. It should not go unnoticed that the countries mentioned are among the strongest in the region even though Germany’s position has not moved. It seems quite clear that at a minimum, another rate cut by the ECB is assured as is additional non-standard liquidity support mechanisms (the ECB meets next week). While we do not expect any increase in the size of the SMP at this time, we do believe that a more robust purchase program will materialise in 2012.
Of course, the ECB is independent and doesn’t need to listen to anyone, even the Germans. But eventually if popular sentiment in Europe keeps moving in the direction of ECB intervention, the current position of ECB chief Mario Draghi and the Germans will grow more untenable.