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Second ECB targeted lending operation falls short of expectations, increases chances of QE

11 Dec 2014

The ECB announced this morning that it had allotted €129.84bn to 306 banks in its second Targeted Long Term Lending Operation (TLTRO), below expectations of at least €150bn. The result is likely to increase pressure on the bank to take further action to boost its balance sheet, including purchases of sovereign debt. Separately, a poll of economists by Reuters found that 25 out of 27 expect the ECB to be buying sovereign bonds within the next few months, with March looking the most likely time. Meanwhile, in an interview with the WSJ, Estonian Central Bank Governor Ardo Hansson said, “I’m still quite sceptical about the idea of long term, large scale purchases of sovereign assets…There’s an issue of possible effectiveness…[since yields are] in many cases extremely low.”
ECB allotment WSJ Reuters Reuters 2

French government’s new liberalising bill faces immediate resistance
French Economy Minister Emmanuel Macron yesterday presented a new package of liberalising measures, including plans to open up a number of regulated professions and allow French shopkeepers to open more often on Sundays. Tens of thousands of lawyers, notaries and other professionals who would be affected by the proposed reforms took to the streets in Paris yesterday. Writing in Le Monde, Martine Aubry, a senior member of Macron’s Socialist Party, describes the increased Sunday shop openings as “social regression” and pledges to “fight” against the proposal.
FT WSJ BBC Le Figaro Le Monde: Aubry Le Figaro 2

Beppe Grillo, the leader of Italy’s anti-establishment Five-Star Movement, announced yesterday that his party will be collecting signatures to hold a referendum on euro membership – in which the Five-Star Movement would campaign for Italy to leave the single currency. Such a referendum is currently forbidden by the Italian Constitution. Separately, Italy’s industrial output decreased by 0.1% in October compared to the previous month and shrank by 3% compared to October 2013.
Istat La Repubblica FT

ECJ President: Juncker’s key task is to protect European integration
The President of the European Court of Justice, Vassilios Skouris, told European Commission President Jean-Claude Juncker at his official swearing-in ceremony yesterday that “The European Commission is more than ever a political body…You are taking up office during the worst financial and economic crisis that Europe has suffered at a time when the European ideal is beset by criticism from Eurosceptic circles. Thus your key task is to prevent the fruits of European integration being trampled in the dust.”

The Guardian reports that pressure is mounting on European Commission President Jean-Claude Juncker over his alleged role in securing favourable tax deals for multinationals during his time as Luxembourg’s Prime Minister. Bob Comfort, the former head of tax for Amazon, claimed Juncker had fiercely courted the company, behaving as a “business partner” and “helping solve problems”.

Greek Prime Minister Antonis Samaras has accused the opposition SYRIZA party of causing “terror” in the financial markets, adding, “Citizens do not want elections and markets do not want elections”. Separately, German Finance Minister Wolfgang Schäuble said that any precautionary credit line for Greece will not be agreed until the current bailout has been completed.
Kathimerini Kathimerini 2 WSJ EurActiv

Politiken reports that Danish Prime Minister Helle Thorning-Schmidt has reached an agreement with the leaders of Venstre, the Social Liberals (Radikale), the Socialist People’s Party, and the Conservatives regarding the referendum on whether to keep Denmark's opt-out of the EU's Justice and Home affairs policies, or whether to move to a case-by-case opt-in system similar to the UK’s arrangement. The referendum will be held no later than March 2016 regardless of who is in power.
Politiken Joint statement Copenhagen Post

European Voice reports that the European Council is scrambling to find a common position on Juncker’s €315bn investment plan ahead of next week’s EU leader’s summit. Meanwhile, the FT reports on a leaked text of the EU summit’s conclusions which show that further discussion of “stronger economic policy coordination, convergence and solidarity” in the Eurozone will now be put off until February.
European Voice FT FT: EU draft summit conclusions

Interfax reports that many Russian firms have lost billions on foreign exchange derivatives due to the sharp fall in the value of the Rouble. Bloomberg reports that Russian Prime Minister Dmitry Medvedev said yesterday that, “A sizeable weakening of the ruble isn’t advantageous for the economy in the long term,” and that it was detrimental in a “strategic sense”.
Bloomberg Bloomberg 2 Reuters

The Independent reports that a group of MEPs have been dealt a blow in their bid to reduce the number of expert advisors – drawn from business, consumer groups, trade unions and others – in the European Commission policymaking process. The European Parliament tried to freeze €4m of the EU’s budget for the expert groups pending negotiations on greater transparency, but the Commission removed the freeze from the 2015 budget.

Internet companies including Cisco and Google have protested against the European Commission’s proposed Network and Information Security Directive, which would make the reporting of cybercrime mandatory, due to concerns over heavy compliance costs.
Telegraaf Computer Weekly

Euractiv reports that a new EU law designed to modify ‘brick-shaped’ truck cabs to improve drivers' visibility and prevent cyclist and pedestrian deaths has been agreed but will be delayed by around five years, after Sweden's Volvo and France's Renault said they needed more time not to be disadvantaged.

The Netherlands has dropped its opposition to the new Institutions for Occupational Retirement Provision Directive. State secretary for pensions Jetta Klijnsma has claimed that Dutch concerns that the EU would get too much influence over pension funds, and would impose too much detailed rules with regards to how pension funds decide governance, remuneration policy and risk assessment, have been addressed.

Karl Otto Pöhl, President of Germany’s Bundesbank at the time of the country’s reunification passed away earlier this week. Pöhl has been credited with defeating the high inflation that plagued Germany in the 1970s and 1980s.

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