Speech by Antonio Maria Rinaldi to the ECON commission, present the President of the European Central Bank, Christine Lagarde.
Appreciating the decision of the ECB, as part of its mandate and its statutory autonomy, to increase the PEPP program (Pandemic Emergency Purchase Program) by 600 billion bringing it to 1350 billion usable until June 2021, it is however possible to draw these logical considerations:
-The PEPP program is in fact essentially "zero cost" for the participating countries as, as a practice, the ECB, in order to ensure proportionality, makes purchases in securities with the capital key criterion and the interest accrued is transferred to the respective national Central Banks which in turn are demoted to their Treasury coffers and all in the absence of inflationary risk that could break the 2% target upwards despite the massive injection of liquidity into the system and reducing spreads;
-The ECB Board has assessed, more than all the other European institutions, the seriousness of the macroeconomic situation in the eurozone and that the "Next Generation" proposal, as stated by President Ursula von der Leyen in the European Parliament on 27 May, it will hardly be implemented in its original form. The Commission proposal also follows the industrial policy lines already conceived years ago in another economic scenario and has now only been mechanically transposed without taking into account the supervening economic crisis situation caused by the pandemic which instead essentially affects employment levels and the maintenance of life of productive realities. This analysis, also supported by the authoritative Voxeu.org, identifies that if these industrial policies were put in place they would cause a significant drop in the employment rate, exactly the opposite of what is needed today to revive the continental economies.
-The Board of the ECB will also surely have sensed that the Commission's proposal will hardly reach unanimity if not at the cost of profound downward revisions that will upset it considerably expanding the implementation times right at the moment instead of greater need and therefore has done well in the make the decision to significantly increase the PEPP program to bring in liquidity immediately. In addition, the "Next Generation" package provides for unspecified reforms and investments to make the economies more digital and greener for those who want to have access to finance, as declared by the Vice-President of the Commission Valdis Dombrovskis, making the available resources hardly usable with the same intensity from all economic actors.
-In the final analysis, in a few minutes of the press conference on Thursday 4 June, the ECB announced an excellent alternative to that of the Commission, providing the entire eurozone with effective and immediate tools to face the devastating economic crisis related to the pandemic instead of venturing into programs that are difficult to implement in practice and dilated over time, neutralizing and effectively making tools such as the Recovery Fund, the use of the ESM, the SURE and the EIB's action obsolete and instead directly responsible for the free action of governments on the use liquidity introduced into the system to support employment.
The European Central Bank has therefore approached what all the other Central Banks in the world have always done despite the fact that someone in the eurozone would still like to ban it and will do everything in the future to ban it! Thanks.
Here is the related video
La Lagarde did not answer …
This is a machine translation of a post published on Scenari Economici at the URL https://scenarieconomici.it/rinaldi-di-fronte-alla-lagarde-smonta-il-mes-e-il-recovery-fund/ on Mon, 08 Jun 2020 14:48:29 +0000.