Vogon Today

Selected News from the Galaxy

Economic Scenarios

The growth of the PEPP is now around the corner. Speech from «Blow to the circle and blow to the barrel» of the a-economic Lagarde

We recall that Christine Lagarde, president of the ECB, is not an economist, she is not a banking expert, but she came to her position for a series of pressures, for fortunes and because no one wants a German at the helm of the ECB, but no one wanted anymore an Italian.

in his position he made discreet gaffe and then began, rather slavishly, to follow what the representative of the Buundesbank says, correcting him with some suggestions from Paris.

Yesterday Lagarde revealed her nature as a non-economist by uncovering the cards of what the ECB sees and anticipating its measures quite clearly. Let's see some key phrases:

  • "The eurozone is losing momentum faster than expected, the resumption of Covid infections has caused a clear deterioration in the economic outlook in the short term"
  • on 10 December, the ECB "will recalibrate" its tools to meet the new challenges, and this means not only an increasing revision of the PEPP, the emergency bond purchase program, but also of other measures, also with a view to 'interaction with each other (TLTRO, interests etc);
  • “Clearly we had to deviate from the ECB's capital keys, especially at the beginning” and we bought many Italian and Spanish (and Portuguese and French…) bonds, then we corrected, but if necessary we will do it again in the future;
  • Inflation is slowing down, we expect it to be negative, but it is not deflation (????), and then in any case, once the epidemic is over, prices will start to rise again.

In short, Lagarde discovered the cards more than a month in advance. The EPP will be enlarged, and the most likely figure is that the enlargement is 500 billion, taking it from 1350 billion euros to 1850 billion. It is not certain that there are no other moves, such as a greater push on the TLTRO, the bank refinancing operations. Inflation will be minimal, if not even negative, but let's pretend it won't always be like this, otherwise the Germans get angry.

With this perspective, the use of the ESM or the Recovery Fund loans becomes really of little use: if the ECB buys another 500 billion of securities with the prospect of adding at least another hundred Italians, given that the Capital Key, the proportion with the participation in the capital of the ECB, it will no longer be worth, what is the point of paying minimum interest in MES loans or recovery plans? Nobody. Discovering Lagarde has definitively cut the legs of the various Brunetta and assorted euro-prones. Too bad that the MEF does not seem able to take advantage of it.


Telegram
Thanks to our Telegram channel you can stay updated on the publication of new articles of Economic Scenarios.

⇒ Register now


The article Growth of the PEPP is around the corner now. Speech from "Shot in the circle and blow to the barrel" of a-economic Lagarde comes from ScenariEconomici.it .


This is a machine translation of a post published on Scenari Economici at the URL https://scenarieconomici.it/ormai-la-cescita-del-pepp-e-dietro-langolo-discorso-d-colpo-al-cerchio-e-colpo-alla-botte-della-a-economica-lagarde/ on Fri, 30 Oct 2020 07:10:58 +0000.