“He also suggested that there was room to offer state aid thus offering some confidence that a deal in Italy can be done.
Back to Draghi, in terms of further monetary policy he certainly left the door ajar without pre committing. Our economists' expectations remain unchanged. They feel that post the Brexit vote there are new downside risks to the economic recovery and the normalization of inflation. They don't think a deposit rate cut is appropriate given the pressures on banks. Instead they expect a 9-12 month extension of the timeframe of the QE programme at the next meeting in September as well as complementary measures to ensure this is credible by making sufficient assets eligible for the programme.”
As well as complementary measures to ensure this is credible by making sufficient assets eligible for the programme? What do they mean by complementary measures to ensure this is credible?
The article below explains the problem but not what the complementary measures are. There are not enough German bonds available and the EU rules restrict the ECB from buying bonds that are already on the market or bonds that have a lower rate of interest than bank deposits. This sounds like there are more problems in Europe than just the banks. It seems to me from reading this article that the problem of how they can deliver more stimulus (QE) and the crisis in Italian and European banks are intertwined and the EU will have to bend more than just the bail-in rules. Eshmun