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Memo to Mario: your D-Day options

Wednesday, September 05, 2012 - 02:41

Sept. 5 - The future of the euro hangs on the choices facing Mario Draghi, as the ECB president prepares for Thursday's crucial policy meeting.

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It's. ECB and president money looks like he said the bank -- bygones and do what ever it takes to save the Euro. But what will -- beat. We look at five nonstop on the policy options. He could count on you was -- it's. This scenario the Central Bank to buy the bonds of countries such as Spain and Italy once you speech except sexual. To aim. To slashed these countries' borrowing costs and give them breathing space to -- farm before but turning to the market. But it's unlimited size could cause huge risks and has not gone to Germany. It could contravene the ECB treaty on financing governments and not a practical level what -- the -- feet. The same for every country on dogs. And the ECB will have -- times to the market. So not able to -- -- unveiled a -- to yield spread cap. It was a -- along the same lines by the ECB would not reveal the thresholds. The pros and cons would be similar although the ECB would retain an element of surprise. How about revamping the ECB's existing bond buying program and making it unlimited. This would look country's borrowing costs and ECB would detain a -- element of surprise and flexibility. But the S&P has had limited success so far and diamonds fans have been inadequate. Fixing more technical excited to save these people addressed seniority. This would -- essential -- that's what it's perfect but it's a status on its government fund's holdings sold in the event of country defaulting. The ECB would take a loss just like any private sector bondholders. This content private sector and investors to -- against him in debt to countries and the taxpayers would potentially be on the hook for huge losses. -- capitalizing ECB would cost money. Tax Payer money as well as -- instead of bond buying this ECB could cut its overnight deposit rate below zero making it negative. This is the interest rate banks and from talking opening cast the Central Bank. Negative -- would mean banks paying the ECB to hold the cash. Could this intelligence until late morning into the real economy. Perhaps. But it could complicate the nuts and bolts functioning of monetary policy. What -- the ECB chooses it will be heading deeper into uncharted territory. Whatever it takes right. -- to give up. For Reuters.

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Memo to Mario: your D-Day options

Wednesday, September 05, 2012 - 02:41