Is The ECB Losing Its Appetite For PIIGS Bonds Again?

Tyler Durden's picture

The ECB just announced its bond purchases in the prior week, which came at €9.793 billion, a notable drop to the €13-14 billion purchased in the past two weeks. And while the cumulative total has now hit €154 billion (and we wish the ECB all the best as it seeks to sterilize an ever greater amount of bond purchases without a major operational failure), it appears that the ECB may be losing its appetite for transactions of this kind, which as is now known was the reason for Stark's departure from the ECB, and an indication of the growing chasm between Trichet and Merkel.The EURUSD, which just took out session lows, and is down 200 pips since the Friday close as it prepares to break 1.36 sure seems to think so.

As an indication of the disagreement within the ECB itself on the topic of open market debt purchases was the statement by ECB Executive Board member Jose Manuel Gonzalez-Paramo who today said that the bank’s purchases of government bonds are an “exceptional” measure and could have been avoided with a stricter fiscal framework. Cited by Bloomberg, Paramo said that "These types of unconventional interventions can only be seen as exceptional measures which would not have been necessary in the presence of appropriate institutional arrangements and credible rules for fiscal authorities," Gonzalez-Paramo said in a speech in Frankfurt today. “In light of the current crisis, the next major challenge for the European Union will be to design rules that are at the same time credible, effective and enforceable.”

Is the ECB preparing to halt the SMP program as it did earlier this year, and hanging Italy and Spain out to dry? If so, what does that mean about Greece (and its eventual/imminent bankruptcy)?