Lagarde’s poor communications, gaffes, hawks and leaks: this is how the ECB arrived…

Lagarde’s poor communications, gaffes, hawks and leaks: this is how the ECB arrived…

give it underpants dated March 12, 2020 (“We are not here to close the distribution“It’s not the ECB’s job”), which felt compelled to avoid the European Central Bank’s “full engagement” a few hours later fragmentation”, To the reluctance of a week ago about the details of a new one Anti-Spread Shield to which the Eurotower was forced to dedicate one on Wednesday crisis summit to calm the wave sale bonds from weak eurozone countries. In the job of central banker, communication that’s all and Christine LagardeJudging by the reactions of markets to his interventions in the most delicate stages of the Pandemic and now the “perfect storm” caused by theRussian invasion of Ukraine, it is difficult to deal with. This is not good news for the country, which needs to refinance itself fault equals 150% of its GDP and on its fate a (new) arm wrestling between Frankfurt and investors according to analysts a not expire soon.
Spread as wide since lockdown and BTP yields at 9-year highs.  Inflation, ECB and late reforms: Because Italy is under pressure on the markets

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Spread as wide since lockdown and BTP yields at 9-year highs. Inflation, ECB and late reforms: Because Italy is under pressure on the markets

“The communiqué from last Thursday stood vague, triggering an earthquake in the markets. Wednesday tries to put it back in order, but continues to give no details and leaves many question marks,” comments the economist Angelo Baglioni. “It’s obvious that Lagarde is trying convey between the different positions has not credibility and the clear and strategic vision of the predecessor”. All too easy to notice that a Mario Draghi in July 2012, at the height of the sovereign debt crisis that came close to splitting the eurozone, enough was enough warranty that the central bank would have done”whatever is needed to the save euros“To curb speculation against Italy and reverse the course of the difference between the BTP and the Bund, which had widened to 536 basis points. There was no need to really intervene: the Direct Money Transactions presented a few months later – potentially unlimited asset purchases by countries in “serious macroeconomic difficulties” who in turn should have signed one Memorandum with the Mes – have never been used. Not only are words not enough, they tend to make the situation worse.

It certainly doesn’t help that the 25-strong board of directors is at odds over the pace at which things must move forward normalization a monetary policy for years ultra expansive and accompanied by massive Purchase of government bonds that have supported economic growth and “drugged” spreads. And that me hawks like dutch Klaas knot cheer publicly, in an anti-key inflationfor bruises on installments over 50 basis points in September (after the 25-point increase announced for July). But surely a week ago the former director of IMF couldn’t calm her down in the bud flicker inevitable after “people involved in the discussions” leaked in the Financial Times the ECB’s intention to announce a new tool to curb spreads and avoid the notorious fragmentation aspect. That’s the increase uncontrolled of some countries’ bond yields to the possible collapse of the euro zone.

At that point, the expectation had been raised: just to confirm that the proceeds of the securities purchased under the pandemic program Pep expiring bonds are flexibly reinvested – i.e. preferring bonds from “weak links” if necessary – was considered disappointing. As Baglioni pointed out in an analysis on lavoce.info, he left many doubt about what the Frankfurt institution would be like specifically be able to in case of attack on Italian debt: “Does the ECB have to wait for other countries’ bonds to expire to buy BTPs? Or it will be ready to expect to buy BTP be more timely? We don’t know”. According to estimates by Society Generale, even if the Eurotower reinvested the entire 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. Hence the Flames of Yield in Rome and Madrid, and the bad signal came from Tuesday’s BTP auction as interest rates on the 3-year and 7-year rose to their highest levels since the sovereign debt crisis years.

The new Governing Council meeting, called upon to take action, has formalized the obligation to introduce a new sign but it also took move all at a later date. “The message is that we have to wait at least until the next council meeting, sort of July, and it is not even certain that the green light will come by then, ”explains the professor at the Cattolica in Milan and former member of the Banking Stakeholder Group of the European Banking Authority. Dense darkness even conditionality that will accompany the new instrument: the era of memoranda with that provided by the Mes Direct Money Transactions developed (and never used) at the time of Draghi seems to have finally faded. But what will they replace? The obligation to respect stability pactnow exposed and checked?

The question is crucial so that the new regulation is also promoted by the “hawks” and not targeted with appeals. Isabel SchnabelGerman economist who is part of the Executive CommitteeHe apparently opened up about the new instrument on Tuesday afternoon, declaring: “We will not tolerate Changes in financial conditions that go beyond fundamentals and the monetary policy transmission“. But he also recalled that at the height of the pandemic, the Pepp purchase program “alone could not reverse the fragmentation” that only returned “when a major European Recovery Fund“. So to speak: the measures taken by the ECB alone are not enough.

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