TraderTalk- "SmartTrade Group" - Will ECB Exceed Mandate...

Online, May 10, 2010 (Newswire.com) - "SmartTrade Group" strategists say that the European Central Bank would be unwise to go beyond its purview by launching a program of quantitative easing to help PIIGS nations plug their fiscal budget holes.

The bank has come under increasing pressure to begin buying the debt of the so-called Club Med nations on the secondary market in order to keep them from defaulting on their obligations to investors. Jean-Claude Trichet, the ECB's governor, has so far resisted calls for emergency action but as speculators continue to hammer the euro on the foreign exchange markets, the clamor is growing in volume.

"SmartTrade Group" pointed out that the ECB simply does not have the flexibility of other central banks because its mandate is to manage monetary policy for the Eurozone and although it would be possible to secure the authority to step into the bond markets, it is likely the bank would face legal and political challenges to such a course of action.

Germany would be the country most likely to object to such emergency measures because of its experiences with hyperinflation during the days of the Weimar Republic.

"SmartTrade Group" said that it is folly to believe that more debt is capable of resolving an issue that has its roots in debt.