Skip to main content

ECB's OMT PROGRAMME 2013

To: The Right Honourable Bundesbank President Dr. Jens Weidmann

From: Athinarayanan Sanjeevraja

Date: October 18, 2013

RE: ECB’s OMT Programme

Suggestion:
Good Morning Mr. President. Let me start by paying my respects to you and through you to.

First up all, I would like to congratulate you carry out your duty best as a Bundesbank President. As a Bundesbank President you are correct, the causes of the euro crisis lie in the high level of indebtedness and the lack of competitiveness of some member states. Now, eurozone government spending is being reduced and reforms are being introduced across southern Europe but the European financial markets don’t seem to recognise this progress and are pushing up the interest rates on sovereign bonds to elevate.

Mr. President, you argued that the OMT programme of the ECB is illegal due to the fact that it would make German tax payers liable for paying taxes to cover potential losses made by the ECB. In my opinion, German tax payers are the main beneficiaries of   the OMT programme. The objective of the ECB’s OMT programme is safeguarding an appropriate monetary policy transmission. As you knew that the situation in the eurozone was most terrible – banks access to finance was severely hampered, nominal interest rate has hugely diverged and eurozone financial system was deeply fragmented. How to fix these untenable situations? As a result, ECB implemented OMT programme and has lead to a dramatic improvement in the monetary policy transmission. From my perspective, OMT programme probably the most successful monetary measures to bring down the sovereign spreads.


Mr. President, you argued that ECB lost confidence the architecture of the monetary union. This is an erroneous to say that because OMT programme addressed a fundamental problem of monetary union as countries in the eurozone do not have direct influence on monetary policy but issue debt in euros. In my opinion, OMT programme have been the right policy for that point in time. It is erroneous to say that German tax payers may have to cover losses made by the ECB. Even the central bank could put those government bonds into the shredding machine, nothing would be lost. Indeed, it leads to losses for private holders of these bonds but not the public holders. These bonds are valued at zero but are still on the books of the central banks. In case debtor’s member state default, the ECB would stop receiving interest revenue from debtor’s countries and would stop paying out to the creditor’s government every year. I arrive at an important conclusion that nothing would be lost for public holders and has no fiscal implications. In fact your colleague at the ECB Jörg Asmussen argued that if the ECB didn’t act the eurozone risked “uncontrolled decomposition”.  

Mr. President, all member states have adhered to Maastricht Treaty which has to prevent the consequence of poor budgetary policy and have to make a concerted effort to improve Maastricht framework to ensure that member states remain in the eurozone and ensure that euro remains a strong currency forever. As a Bundesbank President and the member of European Governing Council your cooperation is must for smooth functioning of European Central Bank.    

Sincere Regards,
Athinarayanan Sanjeevraja.   
Athinarayanan Advisory Authority

Athinarayanan Twitter   

Comments

Post a Comment

Popular posts from this blog

Nagorno-Karabakh conflict

To put things into perspective, Nagorno-Karabakh is not an independent entity but an occupied territory of the Azerbaijan Republic and is recognised by the international community and the UN. The fact that the Armenian Prime Minister's son is doing his military service in the Armenian army located in Azerbaijan's Nagorno-Karabakh and started an undeclared war against Azerbaijan, occupied Nagorno-Karabakh and 7 adjacent regions of Azerbaijan, and massacred and forcefully deported Azerbaijani aborigines was the main reason for the lack of peace in the region. The laws of armed conflict failed to protect the Nagorno-Karabakh civilian population, individual civilians, and civilian property. The laws of armed conflict failed to discriminate between those taking parts in the fighting in Nagorno-Karabakh. The laws of armed conflict failed to protect the environment as war causes severe or long term damage to the environment. The fact here is that there is a number of international doc...
Post a Comment
Read more

SUGGESTION TO THE FEDERAL CONSTITUTIONAL COURT, GERMANY

SUGGESTION TO THE FEDERAL CONSTITUTIONAL COURT, GERMANY  To:               The Right Honorable Federal Constitutional Court Vice President  From:           Athinarayanan Sanjeevraja Date:            05.10.2011 RE:               Issuance of Eurobond   Suggestion:    Approval of Issuing Eurobond Good Morning Prof. Dr. Kirchhof. I am writing to express that Federal constitutional court explicitly rules out Eurobonds a few weeks ago. In addition you had warned, Ms. Angela Merkel, a Chancellor of the Federal Republic of Germany, never again to propose Eurobond. This is certainly not good news for me as well as Europe. German brothers and sisters in the Euroland must help in this difficult moment with iss...
Post a Comment
Read more

SUGGESTION TO THE PRIME MINISTER OF JAPAN YOSHIHIKO NODA

SUGGESTION TO THE PRIME MINISTER OF JAPAN YOSHIHIKO NODA To: The Right Honorable Japanese Prime Minister Yoshihiko Noda From: Athinarayanan Sanjeevraja Date: 30.09.2011 RE: Japan Energy Policy Suggestion: Changing Industrial Policy Good Morning Prime Minister. BBC World broadcasted your speech regarding alternate energy sources. I agree with your approach to reduce nuclear power in the medium term because having the nuclear reactors in an earthquake prone zone is not safe for the environment or the communities that live near them. Japan is struck in a difficult situation concerning energy. If you want to eventually move away from the nuclear energy, you’ll have to invest more alternative energy sources. If you can’t invest, then it may have to say with a nuclear power for a while. You need make the right decision because source of energy is dwindling. You have one more option which is Japanese people depend on nuclear power with only 1% but 9% including hydroe...
Post a Comment
Read more