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Originally posted by no1marauderYes, no1, it clearly is a mystery to you.
Your third grade insults aside, what part of this didn't you understand?
European Union rules preclude the 27-member bloc from lending money to member states to plug holes in their budgets or bridge deficits.
How that "encourages" governments to increase spending in a recession is a mystery to me. Of course, you co rate and I'll address your questions. A simple concession that I and they can't will do.
Governments are responsible for their own budgets. It's that simple, this mystery of yours. So being in the EU does not discourage a government from running a deficit anymore than being outside. In fact, those governments in the Euro get extra leeway, because they face much less currency risk. Moreover, in the current crisis spending was specifically encouraged by the Commission. But this is different from recommending that countries put themselves in a situation where they cannot pay.
(interesting now that, regarding EU's provisions/rules you change your wording "does not encourage" when before you were talking about discouraging. More squirming.)
Please again tell me where I or the average Euro can borrow money at a 1-2 interest rate and I'll address your questions. A simple concession that I and they can't will do.
Because banks and other MFI are subject to many regulations, like minimum reserve requirements, that individuals are not. Here's the words from the ECB:
The monetary policy framework strives to ensure the participation of a broad range of counterparties. Only institutions subject to minimum reserves may have access to the standing facilities and participate in open market operations based on standard tenders. For outright transactions, no restrictions are placed a priori on the range of counterparties.
So, for the ECB, only minimum reserve requirements are necessary to have access to its standing facilities. Why do we need minimum reserve requirements? Can you figure that out yourself or do I have to keep filling the gaps of your ignorance?
Now, answer the questions:
1. Optimal non-partisan rate?
2. Why is demand for these bonds so low if it's such a sweet deal?