The babysitter that oversaw the Eurozone over the past decade, the one that let them eat all the candy they wanted, watch as much TV as they could and stay up way past their bedtime is about to be fired and a strict taskmaster is about to be hired. Tough fiscal oversight is about to become reality in Europe and many in the Euro region hope that the good behavior that may follow will be enough for the ECB to put aside their prudent central bank hats and put on their Federal Reserve money printing ones. The WSJ reports today that while it isn’t clear how the ECB would respond to such a fiscal pact in terms of the non sterilized purchases of European bonds, “at least some ECB officials are open to such a tacit bargain with governments, according to people familiar with the matter.” German officials though are still not open to this as their Finance Minister said such talk comes from “those countries that have to sort out their budget problems and chose to misunderstand that they have to make more efforts.” Either way, while further ECB involvement is certainly a fix markets would love, it only treats the symptoms of the debt disease. Elsewhere, the story that the IMF will lend a massive amount of money to Italy has been denied and European Finance Ministers will meet tomorrow with the EFSF being the main focus. The EFSF insuring up to 20-30% of new issuance seems to be the talk and a smaller leveraging than originally hoped for. Similar to the Jos. A. Bank one day only sales we get bombarded with on tv everyday, the Italian Banking Association is promoting “BTP-Day” today to encourage individuals to buy Italian bonds by waiving fees to do so. They will have another “BTP-Day” in a few weeks.
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