Draghi Continues Giving Advice to Governments

5

In his testimony in the European parliament, Mario Draghi continued passing the ball to the governments’ court. The president of the ECB gave advice about needed reforms, gave marks to different countries, bashed the “unusable” EFSF, and also rejected criticism that the ECB is not transparent.

On the monetary policy front, Draghi said that the ECB remains ready to act if necessary. So, more rate cuts and LTROs are on the cards. EUR/USD remains depressed in low ground.

  • The EFSF was designed in a way that was “very hard to use” – more criticism on the governments. “EFSF was a big firewall, but not usable”.
  • Draghi had good words to say about Ireland, Portugal, Spain and Italy. Greece wasn’t mentioned. “The euro is here to stay”.
  • The new ESM is more flexible.
  • Recent decisions try to break the link between sovereigns to banks, even if more could be done.
  • Draghi rejected a call for more supervision on the ECB, and insisted it should stay independent.
  • “A fiscal union cannot be a transfer union” – this is what the Germans would like to hear.
  • Q: Why don’t we publish the minutes? Because we want to preserve the independence of every central bank. This protects the process and the independence.

Last week, the European Central Bank cut the main lending interest rate to a new historic low o 0.75% and eliminated the deposit rate: cutting it to 0% from 0.25%.

Together with Draghi’s pessimistic words about the materialization of downside risks, sent the euro tumbling down.

For more on the euro, see the EURUSD forecast.

Get the 5 most predictable currency pairs

About Author

Yohay Elam – Founder, Writer and Editor I have been into forex trading for over 5 years, and I share the experience that I have and the knowledge that I’ve accumulated. After taking a short course about forex. Like many forex traders, I’ve earned the significant share of my knowledge the hard way. Macroeconomics, the impact of news on the ever-moving currency markets and trading psychology have always fascinated me. Before founding Forex Crunch, I’ve worked as a programmer in various hi-tech companies. I have a B. Sc. in Computer Science from Ben Gurion University. Given this background, forex software has a relatively bigger share in the posts.

5 Comments

  1. He also said that increasing the VAT will increase the recession.

    It is not a problem, the spanish minister of the hacienda (IRS) said today that they will increase the VAT.

    Same shit different day. Europe making laws and everybody breaking them, and of course with the citizen’s money or international investor money.

    An advise of a spanish: Don’t buy Euros or you will loose your money

  2. He also said that increasing the VAT will increase the recession.

    It is not a problem, the spanish minister of the hacienda (IRS) said today that they will increase the VAT.

    Same shit different day. Europe making laws and everybody breaking them, and of course with the citizen s money or international investor money.

    An advise of a spanish: Dont buy Euros or you will loose your money

  3. Pingback: EUR/USD July 10 Euro-zone Finance Ministers Meet, but Make Little Progress | Forex Crunch

  4. Pingback: EUR/USD July 13 Steady as Chinese GDP Dips, New Italy Worries | Forex Crunch