Reuters ran with an interesting article on Tuesday ahead of the ECB rate decision meeting on Thursday. Apparently National central bankers in the euro area are planning to challenge the European Central Bank chief Mario Draghi. Collectively they feel, according to Reuters, that his management style is secretive and his communication skills erratic. The recent disclosure by Mr Draghi that the ECB's balance sheet was to be expanded by 1 trillion euros has caused friction. Seemingly it was agreed by the members not to make the figure public.
The faith in the ECB to follow through on their commitment to "do what it takes" has been recently called into question; any sense that there is dissention in the ranks will only increase that concern. Mario Draghi has been credited with almost single handily restoring confidence in the euro over the past two years. The idea that the ECB could continue to wave vague ideas into the market place about possible extra measures was beginning to stretch the markets faith, some more concrete commitments were required, and that is what the chairman understood.
The sense that Germany continues to be at loggerheads with the rest of Europe was reinvigorated as Germany’s Bundesbank Chief Jens Weidman and Mario Draghi’s relationship hit a low point in October after he publically criticised ECB policy. Whether the suspected tensions between Germany and the rest of Europe are beginning to resurface one can only speculate. One thing is for certain, bond and equity investors will both be shaken if there is a growing sense of tension within the ECB about policy direction. European investors have been recently encouraged by the hope that the ECB is prepared to be more inventive in finding ways to stimulate the economy, and in turn will be disappointed if the main proposer is having his wings clipped, or worse still cut off.
The Stoxx 50 index of leading shares fell 1.5% on Tuesday, one can only imagine this story will have been in some way to blame. It will be interesting to see how much this story makes headlines in the financial press.