Rumour mill keeps spinning: now ESM to get ECB funding

More Mads Koefoed, 3 days ago07 December 2011 Non-Independent Investment Research Despite it being another light day data wise we can anticipate more action today ahead of the highly anticipated December 9 EU Summit on Friday. In other Eurozone news Greek Prime Minister Papademos' 2012 budget got parliamentary approval; a budget which aims to cut the deficit in half to 5.4 percent of GDP.

ESM to get ECB funding? The latest rumour in a long line of rumours to keep us busy is that EU officials are apparently seeking to operate not one, but two bailout funds (European Financial Stability Facility and European Stability Mechanism) and furthermore will see to it that the ESM - which was originally scheduled to take over from the EFSF in 2012/13 - will get access to European Central Bank funding. It is particularly peculiar that the EU believes that it can operate two funds (possibly leveraged) when the bond markets have already baulked at an earlier EFSF auction (which failed) and the EFSF could well be downgraded post-summit along with 15 of the then 17 Eurozone members. Nevertheless there are of course a number of ways for the Eurozone policymakers to concoct a cocktail potent enough to ease the problems short-term; we are just quite sceptical that the same can be said about the long-term outcome of any such (leveraged) concoction.