Sentralbanksjef Mario Draghis bazooka på 1000 milliarder euro er blitt rost og har gjenvunnet tillit. Men i virkeligheten har han bare forskjøvet problemet, som kommer til å komme tilbake med full styrke, sier kritikerne.
I to omganger har ECB, den europeiske sentralbanken, latt banker i eurosonen låne penger nesten gratis.
Mario Draghi’s latest half-trillion blast of credit averts a funding crunch for crippled banks and crippled EMU states, but raises the ultimate cost to catastrophic levels if the underlying crisis in southern Europe drags on into the middle of the decade.
Some 800 banks took up €529.5bn of loans at Mr Draghi’s second long-term refinancing operation (LTRO) on Wednesday, borrowing at 1pc for three years with almost any form of collateral. Citigroup said this amounts to €316bn of fresh liquidity, stripping out renewal of old loans. This compares with €200bn in extra stimulus at the first LTRO in December.
Draghi har fått ros for å ha avverget en bankkrise i det som kalles Club Med-landene, dvs. Hellas, Italia, Spania og Portugal.
Men ser man nærmere etter er krisen bare utsatt: bankene bruker nemlig de formidable beløpene til å kjøpe statsobligasjoner fra en gjeldstynget stat, slik at den indre gjeldsgraden stiger, det er ikke lenger utledninger som sitter med obligasjonene. Men gjelden er der, og ECB krever at de skal ha førsteprioritet i tilfelle krise, slik at andre kreditorer skyves nedover på listen.
ECB har krevet «collateral», dvs. sikkerhet og har godtatt utestående lån som sikkerhet. Det kan bli et pyramidespill. Hvis låntakerne ikke kan innfri, kan bankene gå over ende. Denne gang har også småbanker fått lov å låne av ECB, mot sikkerhet i lån.
Ambrose Evan-Pritchard viser at krisen ikke er over, den ligger i detaljene.
Yet there is a dark side to the Draghi magic. Spanish banks used the first LTRO to boost holdings of sovereign debt by 29pc to €230bn, with a similar pattern in Italy. The weakest banks are buying the weakest government bonds, often in volumes that exceed their equity base. «It is a levered option on sovereign risk,» said Alberto Gallo, a credit strategist at RBS.
Banks must provide the ECB with collateral at a stiff haircut, using up their balance sheets. Since the ECB has first claim on these assets, other creditors are pushed down the pecking order. «There is no such thing as a free lunch: liquidity today comes at the price of subordination tomorrow,» he said.
Bob Janjuah from Nomura said the whole credit system is being subverted. «We have monetary anarchy running riot where the elastic band between the real economy and the current liquidity-fuelled markets is stretched further and further beyond credulity,» he said.
Professor Charles Wyplosz from Geneva University said the ECB ploy of bailing out insolvent states by the back door will come back to haunt if Europe’s leaders fail to sort out EMU’s fundamental woes and later face a «contagious wave» of sovereign defaults.
«The LTROs make things massively more dangerous. The banks borrow cash from the ECB to acquire sovereign bonds. The more the banks accumulate these bonds, the riskier the situation is becoming. The ECB seems to be making a trillion euro bet,» he said.
«Should markets conclude that crucial public policy actions are missing, a bad equilibrium will prevail, debt defaults will spread and eurozone banks will fold, imposing such a massive cost to taxpayers that the euro might collapse.
«We must face the fact that many of Europe’s largest commercial banks are in a precarious situation. Serious estimates by New York University economists suggest a risk of $1 trillion to $1.5 trillion. A contagious wave of sovereign defaults would undoubtedly raise this amount.
«On this count, Germany, France and Spain are next in line for the sovereign debt crisis. This is the result of three years of Japanese-style forbearance,» he said.
Jaime Dannhauser from Lombard Street Research said the ECB data for January shows that the money supply in northern Europe has begun to recover but there is little sign so far that the first LTRO has done much to kick-start business credit where it is most needed.
«The LTROs have prevented a breakdown of the interbank lending system in Spain and Italy, and a banking catastrophe, but it has not yet improved credit conditions in these countries,» he said.
An extra 300 small banks took part in this week’s LTRO, taking advantage of new rules letting them pledge their loan portfolios as collateral at the ECB. «The small banks are crucial for lending to small business. They don’t always hold securities and could not borrow from the ECB before, so this could be an important change,» he said.
Simon Ward from Henderson Global Investors said the latest data show that real M1 deposits in peripheral Europe are still in a downward spiral, with falls of 12.9pc in Greece, 9.2pc in Ireland, 9pc in Portugal, 8pc in Italy and 1.5pc in Spain over the past six months alone — implying double-digit falls at an annual rate.
«These are depression-scale declines,» he said. There was no let-up in January. For all the talk of inflationary stimulus, the money supply in large part of Europe is still contracting more quickly than in 1931.
ECB’s Mario Draghi raises the stakes with trillion euro gamble
The European Central Bank is doubling up on a very risky bet.