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ESM Banking License: Merkel Allies Harden Opposition!

  • Written by Syndicated Publisher No Comments Comments
    August 1, 2012

    So far it’s been nothing but hot air and no action from ECB president Mario Draghi after he pledged to do whatever it takes to save the euro.

    One of the highly-touted ideas as of late has been a ESM banking license. However, the idea is not really new, and has been shot down repeatedly already. Nonetheless eurocrats like Jean-Claude Juncker, chairman of the eurogroup, keep bringing the idea up as if the answer will change.It won’t. Bloomberg reports Merkel Allies Harden Opposition to Granting ESM Bank License
     German Chancellor Angela Merkel’s coalition rejected granting the permanent euro rescue fund access to European Central Bank liquidity via a banking license, as the Finance Ministry said it saw no need for any such move.

    The rules of the European Stability Mechanism don’t provide for refinancing through the ECB, the ministry in Berlin said today in an e-mailed response to questions. The ministry isn’t holding talks on the topic nor are secret meetings taking place on such proposals, it said.

    France and Italy are building support for a previously floated plan to allow the permanent backstop to wield unlimited firepower courtesy of the ECB, Germany’s Sueddeutsche Zeitung newspaper reported today, citing a European Union official it didn’t name. Leading ECB governing council members are among those who now back the idea, the newspaper said.

    Lawmakers from all three parties in Merkel’s coalition immediately repudiated the suggestion. It is a “dangerous attempt” to bypass the ban on the central bank financing states directly, said Hans Michelbach of the Bavarian Christian Social Union. The Free Democratic Party’s Rainer Bruederle told Die Welt newspaper such a mechanism is a “wealth-destroying weapon,” while Norbert Barthle of Merkel’s Christian Democratic Union said it won’t happen.

    “Those who try to circumvent their own rules through the back door lose their legitimacy in the eyes of the public,” Michelbach said in an e-mailed statement. “Financing debt by means of the printing press leads to growing inflation dangers.”

    One would hope this message would sink through the thick heads of the eurocrats, but it probably won’t.

    OK Mario, ball is in your court. What are you going to do?

    Mike “Mish” Shedlock
    http://globaleconomicanalysis.blogspot.com
    Click Here To Scroll Thru My Recent Post List

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    http://globaleconomicanalysis.blogspot.com.au/2012/07/esm-banking-license-not-happening-as.html#ua53TIiYL3kE6D2c.99

    Images: Flickr (licence attribution)

    About The Author

    Mike Shedlock / Mish is a registered investment advisor representative for SitkaPacific Capital Management. Sitka Pacific is an asset management firm whose goal is strong performance and low volatility, regardless of market direction.  Visit Sitka Pacific’s Account Management Page to learn more about wealth management and capital preservation strategies of Sitka Pacific.

    You are currently viewing my global economics blog which typically has commentary every day of the week. I am also a contributing “professor” on Minyanville, a community site focused on economic and financial education.  Every Thursday I do a podcast on HoweStreet and on an ad hoc basis contribute to many other sites.

    When not writing about stocks or the economy I spend a great deal of time on photography and in the garden. I have over 80 magazine and book cover credits. Some of my Wisconsin and gardening images can be seen at MichaelShedlock.com.

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