Anyone hoping that the European Central Bank (ECB) might change its traditional too-slow-to-act will be disappointed. The ECB announced that its Thursday meeting will not yield any change in its approach to solving the European Union’s sovereign debt crisis. This is news which most certainly will be unwelcome to the capital markets.
This Website Is For Financial Professionals Only
Europe’s austerity program is hindering distressed countries’ ability to gain more solid footing after the 2008 financial crisis. Financial markets have been pressing the ECB to reactivate its Securities Markets Program to buy Spanish sovereign bonds. The German Bundesbank is standing against the ECB’s consideration of lowering interest rates and purchasing the bonds of debtor countries.
If the yields on Spanish bonds go as high as 7%, it may force some sort of buying action. For now, the only action the ECB is taking is to praise Spain’s attempts to cut spending. The ECB has left the door open for an interest rate cut in June. Meanwhile, markets may continue to suffer as the European austerity program fails to produce sufficient results.