MBS RECAP: Choppy And Slightly Weaker Ahead Of Big Ticket Events

It may have been hard to hear over the sound of Draghi’s Bazooka last week, but the theme of conditionality is building since then, and is set to get a major dose of clarity with tomorrow’s German Court vote. We also had Spain’s Rajoy out yesterday saying the Euro zone shouldn’t set budget conditions for Spain in a tone that bordered on defiant (it was reminiscent of Greek leaders’ austerity gripes). Here’s a Reuters piece from ECB’s Asmussen today that essentially reiterates the same stuff, continuing to set the stage for dueling ideologies in the conditionality debates ahead.

(Reuters) – The European Central Bank’s new bond-buying programme is no substitute for government reforms and belt tightening, ECB policymaker Joerg Asmussen said on Tuesday, keeping the heat on Spain to reform its foundering economy.

Asmussen’s comments, just five days after the ECB agreed its potentially unlimited bond-buy plan, show the German ECB board member wants to deter Madrid and Rome from slowing reforms at the prospect of the ECB intervening to lower their borrowing costs.

The ECB has made any buying under its new plan conditional on the country concerned tapping the euro zone rescue fund for aid, which would come with strict conditions – a design aimed at calming German fears about the ECB’s strategy.

European policymakers are now posturing over the nature of these conditions. Another ECB board member, Frenchman Benoit Coeure, said on Saturday countries that apply for help will not necessarily be asked to make more cuts.

“The OMT is in no way a substitute for continued efforts in structural reforms and fiscal consolidation on the side of governments,” Asmussen said of the ECB’s new bond-buying purchases, to be known as Outright Monetary Transactions (OMTs).

“They are essential steps to regain trust and to ensure the sustainability of the euro area in the long run,” Asmussen, a member of the ECB’s Executive Board, added in a speech at Goethe University in Frankfurt.

Article source: http://www.mortgagenewsdaily.com/mortgage_rates/blog/274231.aspx

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