The ECB is finally realizing that Greece will be a major issue for years if not decades to come. Which is why Jean-Claude Trichet finally put the debate of whether his bank will accept BBB- rated collateral beyond 2010 to rest. The answer is yes. This also takes out Moody's ridiculous A2 Greek rating out of the equation: finally Moody's can vote with its conscience. "It is the intention of the ECB's Governing Council to keep the minimum credit threshold in the collateral framework at investment grade level (BBB-) beyond the end of 2010. In parallel, we would introduce, as of January 2011, a graded haircut schedule, which will continue to adequately protect the Eurosystem." Considering how well the Eurosystem has been protected to date, we can't wait to see just how well this experiment will play out.
Jean-Claude Trichet Makes A Moody's Downgrade Of Greece Irrelevant, Says ECB Will Ease Collateral Rules In That CaseSubmitted by Tyler Durden on 03/22/2010 12:26 -0500
Presented is the full text of speech by ECB head Jean-Claude Trichet before the Committee on Economic and Monetary Affairs of the European Parliament in Brussels. While the speech itself has nothing new to say, further entrenching the bubble mentality of the Bernanke Put, some of the comments by JCT in the Q&A are rather relevant, namely that the ECB will once again look at the "collateral issue" of government bonds. Just in case Moody's grows a conscience, here is how the ECB will deal with it: "The European Central Bank does not expect Greek government bonds to be downgraded again, but if they are it might have to reconsider its plan to revert back to pre-crisis collateral rules at the end of this year." This is amusing because earlier today Alphaville posted a research note by UniCredit which shows just how increasingly impaired by "rubbish" the collateral provided by European banks to the ECB has become. This is inline with extended disclosures provided on Zero Hedge about how our own Fed has recently allowed total crap to be lent against in both its discount window and the Primary Dealer Credit Facility. Another amusing soundbite: "High government bond spreads don't justify emergency loans." Oh, so the CDS speculators won't be summarily executed after all, even despite all the disclosure by BaFin and everyone else that CDS speculators had no impact whatsoever on blowing up bond spreads? What an anticlimactic development.
* Bundesbank President Axel "I'm German, That's All You Need Know" Weber
* Portugal's Central Bank Governor Vitor "Policy Wonk" Constancio
* Italy's Mario "What the Hell Are You Laughing at?" Draghi
* Greece's George "But, I've Been in The Lion's Den" Provopoulos
* There's Going to be a Euro Next Year?
Quotes from Germany's Finance Minister:
G-7 To Discuss Greece, Portugal On Sidelines
Crisis Not Yet Fully Over
Market Moves Exaggerated But Must Be Taken Seriously
Euro Is And Will Remain Stable
Will Not Spare Greece From Efforts To Reduce Deficit
Europe Isn't Only Place With Budget Problems
EU Commission Will Enforce Tough Demands On Greece
Just as it appeared that the wheels were about to come off, stocks, euro, gold, and oil were all u-turned late in the day. No doubt, somebody spotted Trichet heading into a massage parlor, providing traders with a heads up that a possible intervention was in order.
Not good for Europe: all the posturing about how Greece will never, ever be bailed out was just destroyed courtesy of a few words out of place by the IMF. IMF Managing Director John Lipsky just noted that the International Monetary Fund is ready to help Greece "in any way necessary." The quote comes from a Bloomberg TV interview conducted earlier.Perhaps that is why Greek CDS just hit another all time wide at 410 (+35). And joining the foot in the mouth crew is ECB president Trichet who said that "Debt on both sides of the Atlantic are unsustainable." So should we now assume that even Central Bankers admit we are headed for a brick wall at 120 mph?
FOCUS: Do you consider this independence to be a great advantage? The Chairman of the Federal Reserve was appointed by the President – and the Senate is currently deciding whether Ben Bernanke can have a second term in office.
Trichet: It is of key importance that the ECB’s independence is guaranteed by an international treaty and not just by national law. National laws can be adopted, but they can also be overturned again.