Week in Review (23 August)

ECB Minutes confirm likelihood of additional stimulus measures at the September Governing Council meeting

ECB minutes underlined that “the relevant Eurosystem Committees were being tasked with examining options, including ways to reinforce the Governing Council’s forward guidance on policy rates, mitigating measures, such as the design of a tiered system for reserve remuneration, and options for the size and composition of potential new net asset purchases.”

Given the continued weakness in inflation, and the risks posed to the Eurozone economy by the volatile global situation, the minutes strengthen our view that it is highly likely (80% probability) that additional stimulus measures will be adopted in September, which will involve, at a minimum, further deposit rate cuts plus a potential relaunch of quantitative easing programme (70% probability) in September.

EU financial regulators to oversee crypto assets

On 20 August, the heads of the European Securities Markets Authority (ESMA) and the European Banking Authority (EBA) wrote to the European Commission announcing that they will shortly launch a new stocktaking exercise of how EU countries regulate crypto-assets.

The exercise “will include a specific block of questions relating to the regulatory treatment of stablecoins in light of their increasing prominence and is being prepared in coordination with Commission staff.”

The moves comes largely in response to calls from MEPs in particular for an EU approach to the regulation of cryptocurrencies. ESMA and EBA will work with a view towards teeing up the new Commission to issue regulatory guidance after it takes office on 1 November.

Oireachtas committee votes to explore alternative providers for Ireland’s broadband plan

At Tuesday’s in camera meeting of the Oireachtas committee on communications, climate action and environment, a non-binding report on the national broadband plan was approved. The report calls for the project to be delayed pending an independent review and expressed numerous other concerns with the project as formulated.

The Irish government, which plans to have contracts signed for the rollout of the NBP by September, with work to begin in Q4 2019, faces a tough choice in deciding how to respond. It has already ignored the findings of the top civil servant in the Department of Public Expenditure & Reform, Robert Watt, who warned that the proposal did not present value for money. A series of experts’ warnings have also been ignored. While the government could also ignore the findings of the committee, which are non-binding, it will add further pressure at a time when the government is coming under fire for economic mismanagement of large infrastructure projects.