Ambrose Evans-Pritchard of The Telegraph is usually one of the foremost purveyors of the Euro doom argument, so it’s worth sitting up and taking notice at his latest column…
In it, he says The Telegraph can corroborate the Der Spiegel article from this weekend, which said that the ECB is preparing some kind of scheme to cap borrowing costs for Spain and Italy.
But anyway, in addition to saying that the Spiegel article has some truth to it, AEP notes a broader point, which is that contra the cliche everyone has, German political leaders and the ECB are mostly on the same page.
A currency can only be stable if its future existence is not in doubt,” said Jörg Asmussen, the powerful German member of the ECB’s executive board.
He signalled full backing for the bond rescue plan of ECB chief Mario Draghi, brushing aside warnings from the German Bundesbank that large-scale purchases would amount to debt monetisation and a back-door fiscal rescue of insolvent states in breach of EU treaty law.
Mr Asmussen told the Frankfurter Rundschau that the surge in Club Med bond yields over recent months “reflects fears about the reversibility of the euro, and thus a currency exchange risk” rather than bad economic policies in struggling states.
The choice of wording is crucial. If it can be shown that the ECB is acting to avert EMU break-up – known as “convertibility risk” – bond purchases would no longer be deemed a bail-out for Italy and Spain.
He goes on to write, in regards to yield capping, “This may prove to be the ‘game changer’ that critics around the world have been demanding for two years.”
Anyway, read the whole thing here. It’s still early, and there have been tons of false hopes in this crisis, but there seems to be something percolating at the ECB that might actually work.