(Bloomberg) -- The European Central Bank must guide investors that policymakers won’t easily come to the rescue of France in the event of financial-market...
-- The European Central Bank must guide investors that policymakers won’t easily come to the rescue of France in the event of financial-market stress, according to former Chief Economist Peter Praet .
“I think it’s totally true,” Praet said, referencing her remarks. “At the same time, one should also say that markets should not expect interventions of the central bank so easily. So they should keep a lot of ambiguity, at least for the time being.
“People would love to get 70 basis points of extra spreads compared to the bund without tail risks, with the expectation that if really things go wrong, the central banks would intervene,” he said. “This sort of moral hazard is I would say unacceptable and I personally think that markets are a bit too optimistic about the situation in the transition to the presidential elections.”“Christine Lagarde should finish the job,” he said.
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