Space porn: These images are (quite literally) out of this world
FRANKFURT, Germany (AP) — The head of the European Central Bank has vowed to “do whatever it takes” to save the euro. Markets want to hear more about what exactly Mario Draghi meant by that.
It’s not clear how much Draghi will be able to add to his remarks last week during his news conference on Thursday, which is held after the bank’s monthly meeting to set interest rates.
He will certainly get questions about what the ECB could do to intervene in bond markets and push down the high borrowing costs that are threatening heavily indebted governments such as Spain and Italy with financial collapse.
Draghi sent expectations soaring last week that the central bank of the 17 countries that use the euro might resume its purchases of government bonds after he said that high borrowing rates were “within our mandate” under certain circumstances.
High borrowing rates drove Greece, Ireland and Portugal to take bailout loans from the other eurozone countries so that they could keep paying their debts, and Greece had to ask creditors to forgo €107 billion ($131.59 billion) in repayments. Italy and Spain, both of which have to constantly sell new bonds to pay off old ones that are coming due, are now under similar pressure. But if these countries — the third- and fourth-largest governments in the eurozone respectively— find themselves locked out the bond markets by high borrowing costs, there are real concerns that the eurozone’s resources would be put under considerable strain if they asked for a bailout.
Analysts think the ECB will probably leave its key interest rate — the rate it charges banks for loans, which influences other rates throughout the economy — unchanged at 0.75 percent. Most of the focus is expected instead to be on the government bond market.
“Amid the high expectations Draghi is hardly likely to want to appear empty-handed before the public,” analyst Christoph Balz at Commerzbank wrote in a note to investors.
“Draghi is therefore more likely to stress the readiness of the ECB to take action rather than announce more concrete steps.”
But he added: “Perhaps Draghi will pull a new rabbit out of the hat.”
Draghi raised expectations when he said the bank could address high bond market rates if they were preventing the low interest rates set by the ECB from spreading through the economy. If the bank was to move to help reduce interest rates, the economic uncertainty surrounding a country would ease off, helping it to get its finances under control.
However, Draghi has not said what the bank might do.
There are several possibilities but each has problems. One of the obstacles is that legally the bank cannot intervene in bond markets simply to make it easier for governments to borrow. Its founding treaty forbids it from using its monetary powers to finance the 17 governments in the eurozone.
It has bought bonds before — more than €210 billion worth — in a bond market intervention that started in May, 2010 but that was stopped in March. The purchases were in an attempt to lower rates on the bonds of financially troubled countries, under the reasoning the ECB was seeking to spread its low interest rate policy throughout the eurozone, not simply to bail out governments.
Buying government bonds in the open market drives their price up and interest yields down, since price and yield move in opposite direction. But the ECB’s bond purchase program didn’t consistently drive down interest rates. That was because it was limited and because criticism from German officials led markets to believe the ECB might not be unanimously behind it.
Here’s a look at some other possible plans:
— Buying bonds along with the eurozone’s bailout fund, which could set tough terms for governments to get support, such as progress on cutting their debt and deficits.
— Letting the eurozone bailout fund borrow from the ECB, giving it more financial heft
— Buying bonds so that they reach a fixed yield in the market. This would draw a line in the sand that could deter market selloffs of bonds.
— Giving up the ECB’s status as a preferred creditor when it buys bonds. That status could scare off countries’ other creditors, who might think there would not be any money left for them in case of a bond default.
There are downsides to all those ideas. For instance, the ECB has said it can’t legally lend to the bailout fund.
Many analysts think the politics and legalities are so complicated that Draghi may not be ready to announce anything on Thursday.
NASA astronaut Mike Hopkins
On December 28, 2013, Expedition 38 crew member Mike Hopkins participating in the second of two space walks to replace a degraded pump module on the International Space Station. (NASA astronaut Rick Mastracchio is reflected in his helmet!)
The Soyuz TMA-10M
The Soyuz TMA-10M headed towards the International Space Station with crew members from Expedition 37 onboard.
40 years ago the Apollo 8 mission flew up to the moon, orbited it ten times and then returned to Earth. This picture was taken from that flight and shows the Earth as it seemingly rises in similar fashion to a sunrise.
Sunrise from Expedition 36
NASA Flight Engineer Karen L. Nyberg of Expedition 36 took this photo of the sun rising -- a sight they saw nearly 16 times per day due to the speed of the International Space Station's orbit around the earth.
A pair of NanoRacks CubeSats -- nanosattelite spacecrafts carrying experiments -- were launched by Expedition 38.