ECB’s Draghi faces heat over euro, Monte Paschi



Reuters

Published — Thursday 7 February 2013

Last update 7 February 2013 6:57 pm

| نسخة PDF Print News | A A

FRANKFURT: Mario Draghi faces a grilling over the European Central Bank’s sensitivity to the euro’s sharp rise and his connection to an Italian banking scandal at an ECB meeting on Thursday where interest rates are almost certain to be unchanged.
Ireland is on tenterhooks whether the ECB will sign off on a new proposal to reduce the country’s debt burden, for which its government rushed through emergency legislation early on Thursday to liquidate failed Anglo Irish Bank.
A source close to the negotiations told Reuters the ECB came close to agreeing a deal on Wednesday night, but in the end more work needed to be done and the Governing Council would continue discussions at its Thursday meeting.
Investors will seek to gauge how much further the euro must rise before its strength forces the ECB to express concern, or even reverse course and contemplate a rate cut — a scenario that shows virtually no sign of materialising on Thursday.
The euro has risen to a 14-month peak against the dollar this year, though it slipped on Wednesday, with traders becoming cautious in the event that Draghi expresses concern about the currency’s strength.
French President Francois Hollande said on Tuesday the euro zone must develop an exchange rate policy to protect the currency from “irrational movements.”
Erkki Liikanen, an ECB Governing Council member, later dismissed any prospect of the bank pursuing such a policy, saying “we have no foreign exchange target” — a line ECB chief Draghi is likely to take at his 1330 GMT news conference.
“The market will want to hear stronger words on the foreign exchange front to stop the upwards trend that’s in place but we doubt this will happen,” said Nomura economist Nick Matthews.
“I think he will focus more the comments around the exchange rate on the G20.”
At his news conference last month, Draghi read out a G20 statement on exchange rates. The G20 group of economic powers holds a mid-February meeting and France said on Wednesday it would raise concerns about the euro’s strength then and at talks among euro zone finance ministers next Monday.
BANK SCANDAL
At Thursday’s news conference, Draghi can also expect to be asked how much he knew about the derivatives scandal at Siena’s Monte Paschi bank, and what he did about it when he headed Italy’s central bank from 2006 to 2011.
Italy’s third largest bank has been at the center of a financial and political storm as a result of facing losses of about 1 billion euros from a series of derivatives and structured finance trades.
Draghi’s news conference offers reporters their first chance to quiz him directly on the scandal since his role came into focus late last month.
He faced criticism then after former Italian economy minister Giulio Tremonti said it was “stupefying” that in his role as supervisor of Italy’s banking system Draghi failed to discover or prevent loss-making derivatives trades at Monte Paschi.
Monetary policy should prove easier for Draghi to handle.
None of the 75 economists surveyed in a Reuters poll last week forecast a cut in rates from their record low of 0.75 percent on Thursday. The poll suggested the ECB would not change its rates until at least July 2014.
A batch of indicators cited by Draghi at his Jan. 10 news conference show the economic distortions of the euro zone debt crisis are starting to correct themselves, with the data flow positive over the last month.
One of the indicators shows the ECB’s balance sheet shrinking after banks jumped at the chance late last month to repay early 137 billion euros in long-term loans they took from the central bank.
This market-driven unwinding of ECB crisis funding measures is in stark contrast to the expansionary policies being pursued in the United States and Japan.

What's happening around Saudi Arabia

Deputy Crown Prince Mohammed bin Salman bin Abdulaziz, the Second Deputy Prime Minister and Minister of Defense, on Thursday led the delegation of the Kingdom of Saudi Arabia taking part in the meeting of the international coalition countries to coun...
Munich: Minister of Foreign Affairs Adel bin Ahmed Al-Jubeir led the Saudi delegation to the meetings of the International Syria Support Group meetings, taking place here.The meetings, which have begun, in Vienna, exert efforts to find a political so...
Brigadier General Ahmad Al-Assiri, the Military Advisor to the Minister of Defense, asserted the Kingdom is ready to send ground troops to fight Daesh, as soon as the international coalition gives the green light, and that this decision of Saudi Arab...
RIYADH: Custodian of Two Holy Mosques King Salman has issued a directive allocating SR3.5 billion to support livelihood projects for needy families.Social Affairs Minister Majed Al-Qassabi made this announcement during a visit to the Janadriyah festi...
JEDDAH: Saudi Arabia will host the first meeting of the 34-member Islamic Military Alliance next month. According to a report in the local media, the meeting will bring together all nations of the newly formed coalition, led by Saudi Arabia.The allia...
JAZAN: Seven lives were snuffed out and several others sustained injuries as a gunman went on a killing spree in Al-Dair governorate of Jazan on Thursday. Employees at an education department office came under a hail of bullets resulting in casualtie...
RIYADH: The ongoing Janadriyah national heritage and culture festival welcomed German government representatives as the guests of honor, marking a new era in Saudi-German ties.Detlef Daues, chief executive officer of a German business group, said: “I...
RIYADH: Highlighting the importance of caring, preservation and better maintenance of mosques located along highways in the Kingdom, the Saudi Commission for Tourism and National Heritage (SCTNH) and the Masajedna Foundation will honor excellence in...
ABHA: Women graduates in Asir say they are looking for private companies to hire them for online jobs which can be done at home.They asked businessmen to open new production lines for women in both factories and banks.The women said that this would c...
ABHA: Deviant groups have attempted to attract Saudi women to carry out terrorist operations by various means and in sinister ways.Many women have been found to have been recruited by terrorist groups inside and outside the Kingdom.Islamic scholar Mo...
RIYADH: Makkah Gov. Prince Khaled Al-Faisal has written a patriotic poem to inspire Saudi troops at the southern borders.Titled, “I wish to be with you,” the poem infuses encouragement in the hearts and minds of troops guarding the borders in Najran,...
RIYADH: A delegation of senior officials from King Abdullah University for Science and Technology (KAUST) visited the King Abdullah City for Atomic and Renewable Energy (KACARE) to discuss cooperation between the two institutions on sustainable energ...
RIYADH: The Office of the Education Department in eastern Taif has launched a program called “Fatin” which aims to protect students from intellectual threats around them.Fahhad Al-Zuibi, director at the Office for Education said, “The program aims to...
RIYADH: The Taif theater group won two awards when it participated recently in the ninth edition of a theatrical festival in Bahrain. The group, which represented the Kingdom in the theatrical festival, mounted a play production titled “Out of Contro...
RIYADH: Riyadh Gov. Prince Faisal bin Bandar inaugurated the first festival for families with handicapped members at the King Fahd Cultural Center (KFCC) on Wednesday evening. The festival, which will last for three days, features a bazaar that displ...

Stay Connected

Facebook