The European Central Bank (ECB) will introduce quantitative easing (QE) this week, but in a manner that shares risks among all eurozone nations, following concerns from Germany, the Financial Times reported yesterday.
The ECB is to hold its first policy meeting of the year on Thursday and is widely expected to announce some sort of program of sovereign bond purchases — or QE — to try to kick-start the eurozone’s sluggish economy.
German government officials, as well as central bank Deutsche Bundesbank President Jens Weidmann, have repeatedly voiced concern about such a program.
They believe it will take away the pressure on governments to push through essential, but painful, economic reforms, and taxpayers, particularly German ones, could end up footing the bill should another country be unable to repay its debt, the critics argue.
The Financial Times reported that, in a compromise move, “the most likely option at this stage [is] for the ECB to force the 19 national central banks that make up the eurozone stand behind their own sovereign bonds.”
German news magazine Der Spiegel reported on Friday that national central banks would only be allowed to buy the sovereign debt of their respective countries, to ensure they alone carried the risk of a possible default.
The weekly said that ECB president Mario Draghi had presented the scheme to German Chancellor Angela Merkel and Finance Minister Wolfgang Schaeuble in a meeting on Wednesday.
Merkel’s office confirmed a meeting took place, but refused to reveal what was discussed.
The weekly, in a pre-released copy of a story to appear in today’s edition, said that under the revised scheme, the national central banks will only be allowed to buy the sovereign debt of their respective countries.
That means that each national central bank alone will carry the risk of a possible default by their government, and that Germany, Europe’s paymaster, will not have to bail out another country, the magazine said.
In addition, a ceiling of between 20 percent and 25 percent will be set on how much a central bank can buy of a government’s debt, Der Spiegel said, without revealing its sources.
Greece will not participate in the scheme, because its sovereign debt does not fulfil the necessary quality criteria, the report said.
The US dollar was trading at NT$29.7 at 10am today on the Taipei Foreign Exchange, as the New Taiwan dollar gained NT$1.364 from the previous close last week. The NT dollar continued to rise today, after surging 3.07 percent on Friday. After opening at NT$30.91, the NT dollar gained more than NT$1 in just 15 minutes, briefly passing the NT$30 mark. Before the US Department of the Treasury's semi-annual currency report came out, expectations that the NT dollar would keep rising were already building. The NT dollar on Friday closed at NT$31.064, up by NT$0.953 — a 3.07 percent single-day gain. Today,
‘SHORT TERM’: The local currency would likely remain strong in the near term, driven by anticipated US trade pressure, capital inflows and expectations of a US Fed rate cut The US dollar is expected to fall below NT$30 in the near term, as traders anticipate increased pressure from Washington for Taiwan to allow the New Taiwan dollar to appreciate, Cathay United Bank (國泰世華銀行) chief economist Lin Chi-chao (林啟超) said. Following a sharp drop in the greenback against the NT dollar on Friday, Lin told the Central News Agency that the local currency is likely to remain strong in the short term, driven in part by market psychology surrounding anticipated US policy pressure. On Friday, the US dollar fell NT$0.953, or 3.07 percent, closing at NT$31.064 — its lowest level since Jan.
The New Taiwan dollar and Taiwanese stocks surged on signs that trade tensions between the world’s top two economies might start easing and as US tech earnings boosted the outlook of the nation’s semiconductor exports. The NT dollar strengthened as much as 3.8 percent versus the US dollar to 30.815, the biggest intraday gain since January 2011, closing at NT$31.064. The benchmark TAIEX jumped 2.73 percent to outperform the region’s equity gauges. Outlook for global trade improved after China said it is assessing possible trade talks with the US, providing a boost for the nation’s currency and shares. As the NT dollar
The Financial Supervisory Commission (FSC) yesterday met with some of the nation’s largest insurance companies as a skyrocketing New Taiwan dollar piles pressure on their hundreds of billions of dollars in US bond investments. The commission has asked some life insurance firms, among the biggest Asian holders of US debt, to discuss how the rapidly strengthening NT dollar has impacted their operations, people familiar with the matter said. The meeting took place as the NT dollar jumped as much as 5 percent yesterday, its biggest intraday gain in more than three decades. The local currency surged as exporters rushed to
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