So Much For That Shootout

I still don’t know who Gary Cooper was here, but Mario Draghi just went from “I will do whatever it takes to preserve the euro” (and buy up Spanish and Italian bonds) to “the ECB may consider” doing so at a later date.

Needless to say, the markets were not amused. Cherchez la femme, I’d say (and it ain’t Grace Kelly).

What’s the hold up? Germany, perhaps. During a press conference afterwards, ECB vice-president Vítor Constâncio noted that only one member of the ECB was adamantly opposed to bond purchases. This seems to be a reference to Germany’s Bundesbank, which had vigorously opposed a central-bank bailout of Spain and Italy. And even though the Bundesbank doesn’t have a direct veto over ECB actions, it seems Germany, as the richest country in the euro zone, still has plenty of sway.

“For all the criticism of Merkel, she distinguishes herself from politicians on both sides of the Atlantic in that she has a plan.”

Bonds, German Bonds

That’s the thing about a crisis: There’s always a winner, too. Take the euro crises, for instance. And the demand for German bonds these days.

Demand for German bonds, seen as the safest haven in the euro zone, has pushed Berlin’s borrowing costs so low that some investors are effectively paying Germany for the privilege of lending it money.

Damn. This gives German bondage a whole new meaning.

Low interest rates on German bonds are translating into billions in savings. Now economists have calculated that the country should be able to balance its budget by next year — something that is likely to increase criticism of Germany’s crisis management.

…The perception that Germany is benefiting financially from the crisis while imposing strict austerity measures on countries in southern Europe is unlikely to win many friends for Chancellor Angela Merkel, who is already highly unpopular in countries such as Greece.