Thursday, December 4, 2014

"Draghi Loses The Majority" Blasts A Triumphant German Press

Wondering why stocks suddenly found a soft patch in the last few minutes of trading? Here is the reason: according to a report in German Die Welt, the ECB's president and former Goldman Sachs employee, Mario Draghi, has just lost the majority on the ECB Executive Board:
Back row (left to right): Yves Mersch, Peter Praet, Benoît Cœuré
Front row (left to right): Sabine Lautenschläger, Mario Draghi (President), Vítor Constâncio (Vice-President)
From a just released report (google translated) in Germany's Die Welt:
The outlooks for growth and inflation are bleak. Mario Draghi will therefore open the gmoneyates - and is met with increasing resistance. And on the ECB's Executive Board, he has just lost the majority.
According to information obtained by "Die Welt", internal resistance to Draghi is now larger than previously thought. He can no longer count on a majority within the Board currently. In the vote on the official opinion of the Governing Council on monetary policy are for information of the "world" three of the six directors supported by the President to the original tune.

In addition to Sabine Lautenschlager and Yves Mersch, who had already previously expressed skepticism about bond purchases, one can now add the Frenchman Benoît Coeuré who is against Draghi's course.  ...There had been dissenting voices within the Board on several occasions, but there was always a majority behind the President.
Not this time. Then again, "Draghi is still able to enforce his position easily. Because ultimately decides the proportion of votes on the Board, but in the 24-member Governing Council, in addition to the directors and the governors of the national central banks are represented. Among them there were reportedly more votes against, among others, Bundesbank President Jens Weidmann."
So will Draghi follow Obama in pursuing QE by "executive decision" without a clear majority support? Recall that even Kuroda had a slim 5:4 majority when he decided to go full-Krugman. And if he does so, expect the cold war between South and North Italy to go ballistic and make the smoldering cold war 2.0 between Russia and the West seem like a dress rehearsal.