Thursday, 4 September 2014

A comment on ECB's ABS move

Hello again! Today a link to the brilliant economics commentator and Blogger extraordinaire Frances Coppola. A comment on today's move by the ECB to kick start in October a programme of Asset-backed securities purchase, which the Central Bank hopes will be decisive for resuming robust Growth in the Eurozone. Coppola's comment is sceptical. Is she right.....?:

'' So as far as I can see, the SME ABS programme is either going to be too
small to make much difference, or is likely to encounter serious
problems with loan quality at some point, putting the ECB's balance
sheet at risk. I'm particularly worried by the way in which SME ABS
purchases by the ECB is being promoted in some quarters as the primary
means of "fixing" the periphery (though Draghi himself does not make
this mistake). If only we can get credit flowing to periphery SMEs, the
thinking goes, all our troubles will be over. This is simply not true.
SME ABS purchases cannot substitute for flawed institutions and
inadequate fiscal and monetary support. And even more importantly, they
cannot compensate for a lack of creditworthy borrowers.''

Coppola Comment: Don't pin all your hopes on SME asset-backed secur...: Here's a neat chart from JP Morgan (h/t @debtnerd) (larger version here ) What it says, essentially, is that although the total...

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