It has gone down, ended the Draghi era in Europe. The former president of the central bank, today moved to Palazzo Chigi, had imposed a monetary policy of easy money. Which, in a nutshell, means printing money by making central banks buy public debt securities and lowering interest rates below zero. It was then said that, thanks to this policy, Draghi saved the single currency.
His successor, the lady Lagarde, changed course. And she did it with a spin. Not only did you say that interest rates, given price hikes, have to rise, which was largely predictable. He did more: has not announced any safety net for the single currency, should speculation resume. This “unspoken” is scaring the markets.
Yesterday at the auction of the Bots, our one-year debt securities, interest rates jumped from 0.1 percent to 0.9. The differential (the spread) between our ten-year bonds and the German ones reached 230 basis points: in the sense that ours yield 2.3 per cent more. The Italian stock exchange recorded the worst collapse in Europe, of about 5 percent: not only the banks, full of government bonds that are losing value, drown it, but also blue chips like Eni, which should instead benefit from the highs of oil.
There is only one moral: after Lagarde’s words, the prejudice on the reliability of Italian public accounts has returned to blow in Europe and on our ability to still make debt. In short, the Draghi effect and its “whatever it takes” are over.
The paradox is that today Mario Draghi is in Palazzo Chigi. And according to many it should have been a guarantee. The markets did not think so yesterday.
A little bit our fault. In recent years, even with SuperMario, we have increased our public spending. In a few days the Draghi government will donate a bonus of 200 euros to millions of Italians, for 6.5 billionwho could also have invented a First Republic spendthrift.
On the other hand, the ECB has changed majority: the hawks rule. And they have no intention of adopting a soft landing from the old management policies. They hinted that they are more interested in inflation (which is obviously not unreasonable, since this is the most unfair of taxes) than in the stability of the so-called peripheral countries (Italy in particular).
Much could be said about the drugs put on the market, from Draghi onwards, by printing money as if there was no tomorrow. What is certain is that removing toxic goods from drug addicts all at once and moreover in the middle of a war is not the most correct attitude: unless you want the addict to die.
Nicola Porro, The newspaper June 11, 2022
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