Jörg Asmussen, a German member of the ECB, said that the current calm in the markets is deceptive. While he said that all countries, including Germany, need to reform, his words could also be a hint for Spain – without a bailout request there will be no ECB money.
He also removed the option that the ECB will give Greece more time,. But as everybody knows, time is money. By extending maturities, the ECB would practically be funding governments. EUR/USD begins the week with a small gap lower:
EUR/USD Gaps Lower – Click image to enlarge
EUR/USD moved higher after the NFP on Friday but failed to settle above resistance at 1.3060. It is now getting close to support at the round line of 1.30.
1.2960 and 1.29 are below. For more, see the euro dollar forecast.
Asmussen Toughens Up
His clear words put an end to speculation that the ECB would be flexible, answering Greece’s request for ECB accommodation with a clear NO. So, perhaps lower interest rates? The answer to Germany’s Bild am Sontag was a clear no as well:
…both concessions would be a form of debt forgiveness and therefore a direct financial support for the Greek state. “That would not be allowed under the law governing the ECB
Asmussen was an appointment of the German government and is considered close to Chancellor Angela Merkel. So, his position shows that Merkel will have limited concessions to make when she visits Athens on Tuesday.
In the not so distant past, Asmussen backed Draghi’s bond buying program, thus showing that the German government supports it, despite the fierce objection of the German central bank (Bundesbank).
However, it is important to remember that when the ECB wanted to help Greece, it found a very interesting revolving door mechanism that kept Greece from defaulting.
