European Central Bank President Jean- Claude Trichet staked his reputation on propping up banks with cheap cash during the financial crisis. Now credit markets wonât let him take away that support. Near-record borrowing costs for nations across the euro regionâs periphery are making it harder for the ECB to wean commercial banks off the lifeline it introduced two years ago. The extra yield that investors demand to hold Irish and Portuguese debt over Germanyâs rose last week to 454 basis points and 441 basis points respectively. Spainâs spread hit a two-month high. The risk for the ECB is that it gets pulled deeper into helping the banking systems of the most indebted nations in the 16-member euro bloc. Governing Council member Ewald Nowotny said Sept. 6 that addiction to ECB liquidity is âa problemâ that âneeds to be tackled.â Complicating the ECBâs task is that interbank lending rates have risen, tightening credit conditions and making access to market funding more expensive for banks. âThe ECB is trapped and the exit door is blocked,â said Jacques Cailloux, chief European economist at Royal Bank of Scotland Group Plc in London. âThe state of credit markets is going to force them to stay in crisis mode for longer than some of them would like.â The ECBâs 22-member Governing Council convenes today in Frankfurt. Policy makers will set the benchmark lending rate at a record low of 1 percent for an 18th month, according to all 52 economists in a Bloomberg News survey. That announcement is due at 1:45 p.m. and Trichet holds a press conference 45 minutes later. CLICK ON LINK FOR FULL STORY http://www.bloomberg.com/news/2010-...nks-stay-hooked-on-ecb-funds-euro-credit.html
lets not also forget unchanged interest mate meeting and no bond purchases on a thursday. 24 hours later quantative easing and a bond purchase program by the weekend. tres bien.