Yesterday was a major day for the future destiny of the common European currency. On Tuesday, the European Court allowed the ECB to start buying the bonds emitted by Eurozone economies in order to save the Euro, Market Leader reports.
According to Masterforex-V Academy, yesterday’s decision is a crucial decision for the entire Eurozone. It means that form now on, the ECB can start saving the day for the entire Eurozone no matter what happens in Greece. This gave Mario Draghi a chance to keep his promise made in 2012. As you probably know, 3 years ago Mario Draghi promised to save the Euro whatever it takes. This phrase restored investment confidence in the future of the European currency union.
The mentioned step concerns unlimited purchases of Outright Monetary Transactions (OMT for short). These are the risky assets. So, the ECB will start acting if the yields exceed the level at which the countries are incapable of servicing them (the debt). If this is the case, the ECB will intervene to buy all the bonds. This leads to moderate yields as the countries get easier access to liquidity.
When the plan was just created, they expected that such help would likely be needed by Spain , Ireland, Italy and Portugal since back in 2012, those nations were paying high interest on their bonds. Still, the plan allows such bond purchases only in exchange for austerity and major structural reforms. With that said, the European Court saw no violation in such steps and allowed the ECB to act if needed. It is interesting to note that the ECB has never made such urgent steps before.
At the same time, there are adversaries of such OMT purchases. In particular, Germany showed its negative stand point towards the plan. Moreover, they gathered 35 000 votes, which included high-ranking politicians and economic experts. They call this decision a pitiful mistake. The petition is awaiting of the German Court’s approval, which will further address the European Court. It is very likely that the German Court will support the adversaries of the mentioned plan. However, the chances of banning this plan are miserable.
According to several experts, yesterday’s decision undermined Greece’s stance in the debt talks with its lenders. It seems like the true card up Greece’s sleeve is not that powerful anymore. Still, Athens are almost openly threatening the Eurozone with a major crisis in case the talks fail and Greece has to default on its debt. At the same time, Masterforex-V Academy reports that the situation cannot but affect the common European currency. it is unstable, vulnerable and sensitive to any news coming from Greece and the res of the Eurozone.
It should be noted that the ECB is now the last liquidity source remaining for Greece. Still, the ECB seems reluctant to buy Greek bonds while greek banks still can access the emergency liquidity mechanism.
