The European Central Bank has been at the centre of efforts to relieve the pressure of the eurozone crisis, cutting interest rates and introducing two crucial measures to boost liquidity in the banking sector. These actions have brought sovereign borrowing costs down sharply, particularly for Italy, Spain, Austria, and France.

They are not really brothers, but Mario Draghi and Mario Monti are countrymen and are doing a great deal to respond to the European debt crisis in ways that were unimaginable until very recently.

So the ratings agencies have finally followed through on the big threat and downgraded a number of the eurozone’s credit ratings, including France and Austria, both of which have now lost their coveted Triple AAA status. Italy, Portugal and Spain were downgraded a further two notches.

[credit provider=”Simone Foxman for Business Insider with Bob With on Flickr and AP/Markus Schreiber” url=”http://www.flickr.com/photos/figgenhoffer/2393675800/”] Economists—notably Nobel laureate Thomas Sargent—and the news media have drawn comparisons between the troubled eurozone today and the United States assuming states’ debts in the 1790s.But really, writes former advisor to the Fed Chairman at […]

FRANKFURT, Germany (AP) — Overnight deposits by banks at the European Central Bank have hit a record euro528.2 billion ($675.6 billion).

[credit provider=”Flickr” url=”http://www.flickr.com/photos/forumspbcom/4773911566/sizes/m/in/photostream/”] By now, everyone knows that S&P downgraded 9 eurozone countries on Friday, including France and Austria who were stripped of their coveted AAA ratings.  But many, like Goldman Sachs Asset Management Chairman Jim O’Neill, have noted that everyone saw this coming.From O’Neill’s latest Viewpoints From The Chairman […]

[credit provider=”AP/Riccardo De Luca”] Mario Draghi, head of the European Central Bank, has concluded the month’s rate conference — where he left the benchmark unchanged at 1.0%.Below is a summary of the most important commentary at the session with reporters:

[credit provider=”Bank Of Italy” url=”http://www.bancaditalia.it/media/fotogallery/eventipersone/conv_mezzogiorno/intervento_draghi”] Later today, the ECB will make its latest rate decision.The meetings hasn’t generated much buzz.

Based on reports from journalists who have seen a copy of a draft of Europe’s budget-stability treaty, it appears that the compact may be tougher and more binding on its signatories than previously thought. According to Bloomberg, a country faces sanctions if it fails to reduce its public debt/GDP by […]

The euro was recovering in early Europe, moving back toward the upper end of its recent narrow range and it reversed course sharply, triggering stops along the way as it dropped nearly a cent to $1.2695.  The technical failure yesterday at $1.2820 may also have been more telling.  Despite the […]

[credit provider=”Ian Gavan/Getty Images”] Good morning. Here’s what you need to know. Overnight trading in Asia was markedly higher, with the Shanghai SE Composite up 2.7% and Indian Sensex up 2.2%. Europe is sharply positive, while U.S. futures look to extend those gains. China’s trade surplus grew to $16.5 billion […]

[credit provider=”www.planetofsuccess.com via photosteve101 on Flickr” url=”http://www.planetofsuccess.com/”] The European Central Bank can actually solve the governance problems that got Europeans into this mess virtually immediately and without treaty change, Geneva-based economist Charles Wyplosz writes in a column out this morning on Wall Street Pit.In fact, the whole idea that EU […]

[credit provider=”Christopher Furlong/Getty Images”] 2011 was a busy year for the markets, even if they ended roughly where they started twelve months ago. News outlets are out with the top news of the year, and it all roughly reads the same: Europe was in crisis, MF Global went under, Steve […]

It’s not non-farm payrolls, retail sales or the ISM surveys.

[credit provider=”Steve Hodgson on Flickr” url=”http://www.flickr.com/photos/craiglea/6032968014/#/”] As the news cycle winds down for the year, it remains clear to investors that the eurozone crisis is far from over.After action by the European Central Bank last week to shore up bank liquidity, investor sentiment has soured. Banks are storing a record […]

[credit provider=”AP/Riccardo De Luca”] With German CPI coming in this morning at a cool 2.4% compared with 2.8% in November, analysts are wondering if another rate cut—and possibly even more drastic measures like quantitative easing—could really be ahead for the European Central Bank.According to Bloomberg, analysts expect euro area inflation […]

While sovereign spreads are leaking modestly tighter this morning as European credit markets emerge from the holiday hibernation, the ECB Deposit Facility surged 10% further to a LTRO-busting EUR452bn.

[credit provider=”Getty”] Significant economic and political changes will make 2012 a historical year.The globe has experienced relative calm for the past 24 months. That stability won’t last much longer. Events that are not on anyone’s radar screen will matter the most. The following are the things that I think might […]

The yield on the Italian 10-year spiked to 7.121% this morning, the highest level since November.

When on Friday we penned “And This Is Where The LTRO Money Went” we said that the final nail in the “Carry Trade” theory was that instead of using the LTRO “Bazooka” cash to collect meaningless pennies in front of a steamroller, Europe’s banks turned around and deposited it right […]

Peter Tchir blasted the following out this pre-holiday morning. He is clearly concerned that there’s a hole in the ECB’s phantom bailout bucket.  I see his point and encourage further investigation and comment.

[credit provider=”Adam Berry / Getty Images” url=”http://www.gettyimages.com/detail/news-photo/the-europe-sculpture-by-belgian-artist-may-claerhout-news-photo/134033791″] The European Central Bank’s action to lend €489 billion to the region’s banks at low interest rates, will stave off immediate concerns, but will not be the silver bullet the continent needs, Scott Bugie, managing director of Standard & Poors financial institutions division, told […]

[credit provider=”AP”] Eurobonds and radical ECB intervention might not be as far away as investors might think.Lorenzo Bini-Smaghi, the outgoing member of the European Central Bank, spoke to FT about the measures that can be taken to fix the eurozone.

[credit provider=”AP”] Writing in The Telegraph, Ambrose Evans-Pritchard, reports on the suspicious of London bankers who are anticipating Mario Draghi’s next move as head of the ECB:The small band of City specialists who really have their fingers on the pulse of the ECB are split on what happens next:

[credit provider=”DieselDemon via Flickr” url=”http://www.flickr.com/photos/[email protected]/4298600063/”] The market is selling off in the wake of the ECB’s 3-year LTRO, but considering the gigantic rally yesterday, and the tendency for investors to “sell the news” this isn’t that remarkable.In a note out this morning, Goldman explains why the big result was a […]

[credit provider=”Financial Times photos via Flickr” url=”http://www.flickr.com/photos/financialtimes/6440873573/sizes/l/in/photostream/”] This morning saw the results of the ECB’s massive liquidity operation.The operation — which has been the subject of intense chatter and speculation for the last couple of weeks in Europe — allowed banks to borrow super-cheap money for up to 3 years […]

Brent Schneeman via Flickr

[credit provider=”Daniel Goodman / Business Insider”] All eyes will be focused on Europe tomorrow, when the European Central Bank publishes statistics about a new, 3-year bank funding operation (LTRO) meant to ease liquidity for the banks.Bulls have been hoping that this funding operation will amount to a back-door bailout vis […]

[credit provider=”Wikimedia Commons NOAA” url=”http://commons.wikimedia.org/wiki/File:Lightning_NOAA.jpg”] The European Central Bank published a financial stability review today, presenting a remarkably cynical assessment of the risks to the eurozone right now.In fact, while the paper says December 9’s summit contained “several basic elements that are key for the restoration of financial stability in […]

Ratings agencies were at the centre of a speech by the European Central Bank’s Mario Draghi in front of the European Parliament today.

Think tank Open Europe’s Raoul Ruparel is the latest economist to denigrate ideas that the European Central Bank has introduced some kind of back-door bailout with its new liquidity support measures.

[credit provider=”Qfamily on Flickr” url=”http://www.flickr.com/photos/dasqfamily/1455144539/”] Speculation that the European Central Bank may already have solved the sovereign debt crisis is all the rage today, but jubilation over the new measures is short-sighted.While the ECB’s liquidity support measures may indeed slow the momentum of the crisis significantly, they still do nothing […]

Everyone’s chattering over whether the European Central Bank has actually introduced a back-door policy that will essentially allow banks to bail out Europe.

[credit provider=”Marko Milosevic on Flickr” url=”http://www.flickr.com/photos/nictalopen/188360287/”] Yields on short-term peripheral sovereign bonds are plunging, despite the fact that EU leaders appeared to make little progress at their highly-anticipated summit last week.Pundits continue to expound on the flaws of the eurozone but markets are telling a different tale.

That big Europe deal last week was supposed to have solved everything.

In a new note this morning, Deutsche Bank’s Jim Reid argues that “austerity is making it harder for countries to grow out of their debt burden,” comparing the current measures to those which stalled economic recovery during the Great Depression.

[credit provider=”Bloomberg TV” url=”http://www.bloomberg.com/video/81804378/”] In his latest weekly letter, hedge fund manager John Taylor says that for all the experimentation and aggression that Ben Bernanke has exhibited, the risks to the Fed don’t hold a candle to the risks facing the ECB right now.He writes:

[credit provider=”Flickr/Faramarz Hashemi” url=”http://www.flickr.com/photos/fhashemi/84663672/”] Don’t blame yourself if you missed a few key things this week. Even with one eye on CNBC and the other on your Bloomberg terminal, it’s likely you’d only remember news coming out of Europe.

[This post is published with permission from CNBC.]

[credit provider=”AP/Riccardo De Luca”] European Central Bank President Mario Draghi spoke in Frankfurt today, explaining the ECB’s decision to cut interest rates for the second month straight and extend maturities on loans to banks.But anyone looking for signs that the ECB would step in to bolster sovereign bond-buying was severely […]

[credit provider=”AP/Riccardo De Luca”] European Central Bank President Mario Draghi spoke to reporters from Frankfurt today.He explained the ECB’s decision earlier today to cut interest rates by 25bps to 1.00%.

We had a rally going earlier this morning after ECB chief Mario Draghi revealed a new suite of non-standard measures to deal with liquidity strains in the eurozone.

European Central Bank President Mario Draghi will speak to reporters from Frankfurt in just a few moments.

The euro is exploding higher.

UPDATE: The ECB cut rates by 25 bps to 1.00%, meeting expectations of a cut.

[credit provider=”Zechariah Judy on Flickr” url=”http://www.flickr.com/photos/[email protected]/4268587808/”] Wall Street analysts appear unequivocal in their forecasts for today’s monetary policy decision by the European Central Bank: the ECB will cut rates by 25bps and throw a bone to banks, but not much else.Hopes for the summit of EU leaders on Friday lean […]

[credit provider=”PIMCO” url=”http://www.pimco.com/EN/Insights/Pages/Waiting-for-All-In–.aspx”] A crisis of confidence and uncertainty is antagonizing the global economy as everyone waits for central banks, around the world—led by the European Central Bank—to go “all in,” PIMCO’s Mark Kiesel writes in a new column out today.Ultimately, he argues, the central banks have the power and […]

At their crucial meeting ahead of the December 9 EU summit, German chancellor Angela Merkel and French president Nicolas Sarkozy reached a “complete agreement” on a new treaty that includes imposing restrictions on the size of deficits and spending by governments. 

[credit provider=”Wikimedia Commons”] The market isn’t reacting that badly to the S&P downgrade warning, even though it potentially torpedoes the European Financial Stability Facility (EFSF), which was to be a major component of the bailout/rescue plan.What gives?

Markets have taken a tumble since a report surfaced that six AAA-rated EU countries—including Germany—are about to be put on creditwatch negative by Standard & Poor’s ratings agency.

[credit provider=”Flickr” url=”http://www.flickr.com/photos/forumspbcom/4773911566/sizes/m/in/photostream/”] Everyone is talking about how December 9’s EU leaders’ summit could prove pivotal for the fate of Europe.In his latest Viewpoints From The Office Of The Chairman letter, Jim O’Neill notes:

[credit provider=”Nienetwiler, Wikimedia Commons” url=”http://commons.wikimedia.org/wiki/File:Appenzeller-Spitzhauben1_PSR.jpg”] Right now, the hope among Eurozone optimists is that this week, European leaders will be able to quickly move to an agreement on a fiscal pact, and be ready to announce something on December 9 (Friday).Then, if it’s clear that the governments have committed to […]

The European Central Bank will cut rates and take new non-standard measures to support bank funding, but there’s not going to be a big bazooka, writes Goldman Sachs economist Dirk Schumacher.

[credit provider=”Anthony Dawson via flickr “] EDIT NOTE: We originaly published this early Thursday, but more publications are talking about this now, and wanted to resurface it, as this is a very important point for understanding the next steps in Europe.The Eurozone could still end up in smouldering ruins, but […]

[credit provider=”AP”] These are definitely the comments of the morning.New ECB chief Mario Draghi spoke to the European parliament about what it will take to restore order in the Europe.

Economists at major international banks are sounding off this morning on today’s big announcement of a coordinated action by central banks  around the globe.

[credit provider=”Reuben Whitehouse on Flickr” url=”http://www.flickr.com/photos/rcktfld/2264092951/”] This is a new day for Europe.A failed German bond auction last week has spurred a turnaround in Europe, according to WJB Group Chief Market Strategist Brian Reynolds.

The focus is on next week’s ECB meeting and the EU summit. Nearly every one is expecting a 25 bp rate cut and if expectations are wrong, it is more likely that it is because of more aggressive action, like a 50 bp cut, than less. Separately, it will also […]

[credit provider=”Wikimedia Commons” url=”http://www.businessinsider.com.au/cms/posts/edit?id=4ed1958feab8eac727000023″] The European Central Bank has repeatedly refused to step in and bail out European sovereigns, but now investors are chattering about another possible way out.National central banks (NCBs) could technically print money through the Emergency Liquidity Assistance program and loan that to the International Monetary Fund, […]

[credit provider=”Shutterstock”] Good morning. Here’s what you need to know. Asian markets were mostly lower, with the Shanghai SE Composite shedding 3.3%. Europe followed suit, with the French CAC and German DAX down moderately. U.S. futures are pointing to a higher open. The Federal Reserve, in conjunction with five other […]

[credit provider=”Daniel Goodman / Business Insider”] There are a ton of negative headlines coming out of Europe this morning.Besides rumours about an impending downgrade of France’s credit rating and worries about rising Italian bond yields, today brings new fears about the eurozone crisis.

[credit provider=”Wikimedia Commons” url=”http://www.businessinsider.com.au/cms/posts/edit?id=4ed1958feab8eac727000023″] A team of Citi analysts led by Chief Economist Willem Buiter predict that the European Central Bank will ultimately step in to save the eurozone, but not just yet.According to an investor note released yesterday, four conditions must be met in order to warrant stronger ECB […]

[credit provider=”Wikipedia” url=”http://en.wikipedia.org/wiki/File:DeMilleTenCommandmentsDVDcover.jpg”] Last weekend, we wrote about how the Euro-crisis should be resolved: The same way all debts-that-can’t-be-repaid get resolved–via bankruptcy and restructuring.This is the simple, fair solution to the crisis, but of course no one is discussing it because it would involve “losses.”

[credit provider=”AP”] 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 […]

Current bond yields suggest that, to date, the European Central Bank’s purchases of sovereign bonds on the secondary market have done little to reassure markets that Portuguese, Italian, Irish, Greek, and Spanish sovereign bonds are not risky assets.

[credit provider=”Copyright — Tomasz Raś” url=”http://www.flickr.com/photos/rasmachine/sets/72157628104533122/”] As Europe barrels ever closer toward the edge of the cliff, it’s worth reviewing the different ways the crisis might get resolved (or resolve itself).Here are the 4 basic possibilities:

[credit provider=”wikimedia commons” url=”http://commons.wikimedia.org/wiki/File:Darkness_Light_bulb_2.jpg”] Europe has been abuzz with lots of talk about a eurozone endgame, and the talk is promising. While EU leaders may not yet have reached an agreement on exactly what to do, all the signs point to a far more radical intervention than they previously planned […]

This weekend we explained the real reason Germany isn’t so hot on the ECB bailing out the rest of Europe: It’s done a fantastic job of keeping labour costs contained, with very little wage growth over the past decade.

The Euro crisis is getting deeper into the uncharted territory with bond yields surging across Europe on Friday Nov. 25, after Fitch Ratings cut Portugal’s debt rating to “junk” status.  Standard & Poor’s later also delivered a debt downgrade to Belgium to AA from AA+.  Moody’s stayed busy and lowered […]

As I have been saying at Credit Writedowns, the ECB’s opposition to monetising sovereign debt is not about immediate inflation concerns but rather its resistance to moving into a politicised quasi-fiscal role. Arguing in defence of the ECB last week, I wrote the following:

Almost exactly one year ago I wrote the following:

[credit provider=”Wikimedia Commons” url=”http://www.businessinsider.com.au/cms/posts/edit?id=4ed1958feab8eac727000023″] There are reports going around about how France and Germany might engage in some kind of new “stability pact” to fight the sovereign debt crisis. This Reuters report, which itself is citing a German newspaper, is fairly sparse when it comes to details, but it would […]

Personal challenges may help one overcome certain modes of thought and behaviour.  So too,  a crisis allow officials to transcend ideological constraints.  First principles and sacred cows can get sacrificed if political necessity is strong enough. 

[credit provider=”Bloomberg” url=”http://www.bloomberg.com/apps/quote?ticker=GBTPGR2:IND”] Imagine that your household is spending ~5% more than it takes in every year, which means that you have to keep adding that extra 5% to your credit card debt to make ends meet.And imagine that, from years of spending more than you take in, you have […]

The balance sheets of European banks are piled high with legacy assets — mortgages, real-estate, and other loans–that are tying up precious capital and constricting the banks’ ability to make new, more productive loans.At the same time, the banks’ traditional sources of funding–other banks and institutional investors–have begun drying up […]

As the European crisis gets worse, banks are getting more cautious about lending to one another.

German Chancellor Angela Merkel met with President Nicolas Sarkozy and Italian PM Mario Monti today, and it looks like all these proposals for massive intervention by the European Central Bank are not going anywhere.

[credit provider=”Wikimedia Commons”] Just to give you a quick sense of how isolated German has become…According to WSJ, the top banker at the Vatican is now urging the ECB to become Europe’s lender of last resort.

Many observers are confused.  They cry for the ECB to “man up” and “do what it is supposed to do” and be the lender of last resort.  It does have that function for banks, not for sovereigns.  The lender of last resort to sovereigns in the IMF.

[credit provider=”Charlotte McKnight on Flickr” url=”http://www.flickr.com/photos/indigo-eyes/5978065808/”] Today’s announcement by the International Monetary Fund that it would offer massive credit lines to sovereigns targeted by external shocks sparked a brief market rally, but any momentary confidence behind that move has faded—and for good reason.In reality, today’s proposal changes nothing for Europe. […]

Bank borrowing from the ECB reach a new high for the year at today’s 7-day repo operation. Banks borrowed 247.17 bln euros for a week at 1.25% fixed rate.

Panic is spreading says Steen Jakobsen, chief economist at Saxo Bank. Steen eyes the perfect storm including a potential “Chapter 11” call for European banks. Via Email:

[credit provider=”Wikimedia Commons” url=”http://commons.wikimedia.org/wiki/File:EUR_5_holographic_band.jpg”] While support for intervention by the European Central Bank to fix the eurozone crisis has never been stronger, serious doubts remain about the likelihood that such intervention would actually fix the euro or that Germans would be likely to approve it.And while the media may remain […]

[credit provider=”AP”] “ECB bailout or bust.”  So says Paul Krugman and he’s one of many.Outside of Germany, a consensus among economists has emerged that the European Central Bank is the only body capable of arresting the debt crisis coursing through the region’s veins. With the European Financial Stability Facility (EFSF)  […]

In his latest weekly note, John Hussman joins the sceptics who think the ECB will never intervene in sovereign debt markets to stop the crisis.

[credit provider=”AP”] It kind of got lost in the shuffle, but Mario Draghi, the head of the ECB — and the only guy who anyone thinks can really solve this crisis — gave a horrible, heartbreaking speech this week in Frankfurt.Paul Krugman flagged the key bit from the text:

Europe is again at centre stage. At conferences and meetings and in private conversations, it is the topic of the hour. I have thought a lot this week about Europe and its impact, so once again we delve into what is an evolving situation.

[credit provider=”AP/Riccardo De Luca”] Contra some pundits, Nomura argues that it would absolutely be legal and mandate consistent for the ECB to use a bazooka to stop the crisis.To pick up on the last point, the ECB would appear to have more legal authority to take radical action to quell […]

[credit provider=”10,000 Year Clock” url=”http://www.10000yearclock.net/learnmore.html”] A couple of nights ago we wrote about how obvious it was that the only solution that was left in Europe was the money printing solution. The ECB needs to use its unlimited balance sheet to depress interest rates on peripheral debt.The number of people […]

Opponents of European Central Bank intervention to bail out the eurozone consistently cite Germany’s experiences with hyperinflation in the early 1920s as a reason that the bank can not or should not go ahead with such a plan.

In his latest note, Nomura’s famously bearish strategist Bob Janjuah pours cold water on the idea that the ECB can just snap up all the debt and make the eurozone crisis go away.

As the pressure on ECB grows to step up its “bid of last resort” for European sovereign bonds, the folks over at Zero Hedge ask the very important question what are consequences if the ‘zone  resorts to massive debt monetization?    Here is one plausible scenario we’re looking at.

There are only two real game-changers left in the euro crisis: fiscal union and the ECB stepping in as a lender of last resort (LOLR). The former for now is resolutely off the table, particularly in the time period necessary for it to keep the eurozone together. Very bright people […]

[credit provider=”Erik Stabile on Flickr” url=”http://www.flickr.com/photos/erikstabile/3888091614/”] There are lots of cooks in the kitchen in the eurozone.It’s hard to remain grounded with EU leaders yelling—or worse, politicking—at each other all the time, let alone keep track of all the rumours that are driving markets crazy.

[credit provider=”Wikimedia Commons” url=”http://commons.wikimedia.org/wiki/File:EUR_5_holographic_band.jpg”] This whole debate about whether or not the European Central Bank should be more involved in bailing out Europe has been dominating headlines.But although this debate is earning a lot of air-time, the reasons the ECB is not so keen on this plan have not changed.

The crisis has spread to the core. Not only have Italian and Spanish bond yields shot up to unsustainable levels, but Belgian, Austrian and French spreads over the comparable German bunds have risen sharply in recent days as well. If the EU, the ECB and the IMF do nothing and […]

The European Central Bank published an iPhone app last week that allows you to simulate monetary policy decisions and see what happens to the economy.

[credit provider=”AP”] Everyone knows that expanding the role of the European Central Bank—by making a commitment to unlimited sovereign bond purchases or providing virtually unlimited funds to the European Financial Stability Facility—is the obvious way out of this crisis, and now all bets are off between Germany and France about […]

[credit provider=”Wikimedia Commons” url=”http://commons.wikimedia.org/wiki/File:Complicated_Balls.JPG”] If you’ve got the guts, Citi’s Steven Englander has a trade for you in Europe.There is an upside tail to the euro, despite our baseline view. There is overwhelming market pessimism with respect to euro zone outcomes. Positioning is euro negative but not as extreme as […]