A parliament committee in Austria refuses to approve new capabilities to the European bailout fund – the EFSF. This move will likely delay the approval from September till October. The leaders of the European Union agreed to add two new capabilities to the EFSF: an ability to buy bonds in the secondary market, and an option to provide help to banks.
These measures were tailored to prevent contagion to Spain and Italy.
The changes require ratification in parliaments. The Slovak parliament will only deal with this in December. Opposition to bailouts has been growing in various European countries, with Finland being the most outspoken country.
In the meantime, the ECB has been buying Spanish and Italian bonds in order to lower the yields. It had great success with this, but hoped to transfer the portfolio to the EFSF – to the governments.
What the ECB should really is buy bond and not sterilize it. This is called Quantitative Easing / Balance Sheet Enhancement or simply money printing. The US and the UK are doing it. Why can’t the ECB join?
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