Lagarde’s poor communication, gaffes, hawks and leaks: Thus the ECB arrived weak in the new tug-of-war with the markets

give her Slips dated March 12, 2020 (“We are not here to close Spreadit is not the job of the European Central Bank”), which after a few hours was forced to define the “full commitment” of the European Central Bank” to avoid any fragmentation‘, to a reservation a week ago on new details anti-spread shield Which Eurotower was forced on Wednesday to allocate a emergency summit to calm a wave sales of bonds from weak eurozone countries. In the profession of the central bank Telecommunications That’s it and Christine Lagardejudging by the reactions markets To his interventions in the most sensitive stages of pandemic And now from the “perfect storm” it causedRussian invasion of Ukraine, It is difficult to deal with. This is not good news for the country that has to refinance a religion Equal 150% of GDP And on the fate of a (new) hand wrestling Between Frankfurt and outbound investors according to analysts a Don’t run out thus.

Last Thursday’s statement remained in effect mysterious, which caused an earthquake in the markets. On Wednesday he is trying to get it right but he continues not to give details and leaves many question marks”, comments the economist Angelo Baglioni. “Lagarde is clearly trying to mediate Between different positions but does not have credibility and the clear and strategic vision of the predecessor.” It is very easy to remember that a file Mario Draghi In July 2012, at the height of the sovereign debt crisis that came close to splitting the eurozone, that was enough a guarantee that the central bank would have done.”All it takes for keep the euro“To stop speculation against Italy and reverse the gap between BTP and the Bund, which has widened until 536 basis points. There was no need to really interfere: it was outright cash transactions Introduced a few months later – potentially unlimited purchases of securities of countries in “serious macroeconomic difficulties”, which in turn should have signed on Memo with Miss – Never used. Now words just aren’t enough: they tend to make the situation worse.

It certainly doesn’t help that the 25 board members are divided over the pace at which the board should advance normalization monetary policy for years Too expansive And accompanied by a huge Buying government bonds That supported economic growth and the spread of “psychedelic”. and that’s me hawks like dutch knot class Cheer publicly, in key fight inflationto press the prices above 50 basis points in September (after the 25 point rise announced in July). But certainly a week ago the former director of International Monetary Fund Failed to nip them in the bud fibrillation Inevitable after the “people involved in discussions” leaked financial times The ECB’s intention to announce a new tool to contain spreads and avoid the notorious retail aspect. This is the increase It is not disciplined From the bond yields of some countries, even the possible collapse of the euro area.

The prediction was created at that point: just to confirm that the proceeds of securities purchased under the epidemic program baby which will expire will be reinvested in a flexible manner – thus, where necessary, a preference for ‘weak links’ – was considered disappointing. As Baglioni pointed out in an analysis on lavoce.infoleave a lot doubts About what the Frankfurt Foundation will look like able to do tangibly In the event of an attack on Italian debt: “Should the ECB have to wait for bonds from other countries to expire in order to buy BTPs? Or will they be willing to Expect to buy BTP To be on time? We don’t know.” According to estimates Societe Generale, even if Eurotower reinvest the full flow of German and French bonds in Italy, the amount available would be much less than the net purchases of Italian bonds made so far. and then fire back In Rome and Madrid the bad signal came from the BTP auction on Tuesday when rates for those at 3 and 7 years rose to their highest levels since the sovereign debt crisis.

The new board meeting calling for action has formalized the commitment to launch a new shield But it also took time, delay All that later. “The message is that we will have to wait at least until the next board meeting, halfway. July, and it is not even certain that the green light will reach that point, explains the professor at Cattolica in Milan and a former member of the European Banking Authority’s Banking Stakeholders Group. Even the thick darkness policewoman Which will accompany the new tool: the era of memoirs with Mes envisioned by outright cash transactions Developed (and never used) in Draghi’s time it seems definitively lackluster. But what will they replace? Commit to respect Stability PactNow pending and under review?

The question is so crucial that the new rule is promoted by the “hawks” and not targeted with appeals. Isabelle Schnabela German economist who is part of executive committeeOn Tuesday, he appeared to have opened up about the new instrument, explaining:We will not forgive Changes in financial conditions that go beyond fundamentals and threaten monetary policy transitionBut he also noted that at the height of the pandemic, Pepp’s buying program “on its own was unable to reverse the retail,” which only returned “when European Recovery FundAs if to say: the actions of the European Central Bank alone are not enough.

Leave a Comment