The Ticking €34 Trillion Timebomb

Wednesday, June 12, 2013
By Paul Martin
June 12, 2013

The Wall Street Journal ran an interesting article yesterday. It was about the ECB’s Outright Monetary Transactions or OMT program… the “unlimited” bond buying program the ECB announced last September and which supposedly “ended” the EU Crisis.

Here’s the key section from the article:

The positive effects of the Outright Monetary Transactions, or OMT, program are “already visible,” Joerg Asmussen, a member of the ECB’s governing board, said in testimony before Germany’s Constitutional Court. He added that the program is not aimed at replacing the market, rather to address aberrations, and is limited in scope.

“The design of the OMT makes it obvious that the program is de facto limited, for example by being restricted to short maturities and the therefore limited pool of bonds which can be bought,” he said.

So far the ECB hasn’t bought any government bonds under the OMT program, set up at last fall to lower borrowing costs for Italy and Spain and prevent them from have to leave the euro zone. The mere presence of the program been enough to calm bond markets worried about the countries’ ability to keep paying their debts.

So… Europe was “saved” by a program that hasn’t officially DONE ANYTHING? Put another way, the OMT program saved Europe simply by “existing?”

The Rest…HERE

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