The ECB goes into hawkish mode: a new tightening of rates, the promise that they will increase again “at a rate of 50 basis points at a time for a certain period”, and from March the bonds bought in the last eight years will begin to be unloaded on the market. And so – also thanks to a reminder from Christine Lagarde on the exposed nerve of the Mes – in a few minutes the balance that had marked the first weeks of the Meloni government wavers: the spread rears up, the Stock Exchange goes down and the majority – after a executive debut in the name of prudence on economic issues – clashes openly with a European institution. Both the decisive tightening that brings the rate on deposits to 2% and that on refinancing to 2.50%, as well as the start of the ‘quantitative tightening’ that puts an end to the Draghi era were more or less expected.
ECB rate hike
The Fed and Bank of England just did the same. However, the ECB’s commitment to keep going was not obvious: “Anyone who thinks there is a pivot is wrong”, warns the president Christine Lagarde in the press conference, freezing the expectations of an ECB that has reached the ‘half point’. And so, after months of sober tones with the EU, Defense Minister Guido Crosetto is not holding back. very close to the premier: on Twitter he posted a graph with the free fall of the price of BTPs, alongside “decisions taken and communicated lightly and detachedly”. And then: “I did not understand the Christmas present that President Lagarde wanted to give to Italy”. It will be the impact on the Stock Exchanges that amplified the ECB effect: Milan closes at -3.45%, worst in Europe, Frankfurt and Paris lose more than 3%. It will be that, after weeks of respite, for the first time under the Meloni government the spread flashes red: it closes at 206 after a peak at 208, from just over 180 a few days ago. The yield of the ten-year BTP jumps by more than 30 basis points as not seen since 2020 up to a peak of 4.18%. The perceived Italy-risk exceeds that of Greece and all other euro partners. In addition, there is Lagarde’s exit on stomach aches in ratifying the Mes of the “outlier” Italian government, the only “exception” among the European partners after the yes of the German Constitutional Court. “We hope that Italy will quickly ratify the reform of the Mes” to complete the banking union, Lagarde limits himself to replying. That is enough to raise the clash on the state-saving mechanism, the raw nerve of sovereignists for years. “
Parliament has given an address, it’s not that I can go against Parliament”, reasons Economy Minister Giancarlo Giorgetti. “The wishes are legitimate, the choices, even more legitimate, will be made by the Italian Parliament”, says the group leader of FdI in the Chamber, Tommaso Foti. For the opposition, it is the side to press on the Mes, which has always seen Prime Minister Giorgia Meloni against it and on which the Pd, in the absence of an initiative from the executive, intends to schedule a bill “I heard Giorgetti say that he is not popular but those who only do popular things are not called politicians, they are called something else…”, says Luigi Marattin of Italia Viva. In the background, the nervousness revolves around a 2023 in which the ECB will step aside as a debt buyer after having accumulated something like 733 billion BTPs together with Bank of Italy over the years. A ‘heavy’ 2023: 330 billion gross issues are estimated in Italy alone, and a record of 539 billion for Germany. The effects on the markets are likely to be seen from January, when auctions will resume, and the farewell of the ECB, and also the retreating banks, explains the appeals for a ‘patriotic BTP’ by drawing on household savings. The ECB, on the other hand, makes aid to politics fade on the horizon. He forecasts a ‘soft’ recession (-0.2% in the fourth quarter and -0.1% in January-March), not the bloodbath feared a few months ago. While the real problem remains inflation, at 6.4% in 2023 and still above the 2% target in 2025. A figure that forces the ECB to show itself hawkish. To avoid an inflation of expectations that would become self-fulfilling. And to manage the ‘hawks’ in the Governing Council: the reconstructions say that more than one in three would have liked a third consecutive hike by three quarters of a point. They would have been satisfied with the ‘half a point’ only in exchange for the commitment on future increases, and on the ‘quantitative tightening’ that rewinds the tape of the Draghi years.
“It is incredible, disconcerting and worrying that while there is a government that is doing everything to increase salaries and pensions and cut taxes, the ECB, on an afternoon in mid-December, approves a law that burns billions of euros of savings in Italy and throughout Europe by making the spread jump”. Thus the leader of the League and Minister of Infrastructure, Matteo Salvini. “Certain choices-she added-should be pondered and explained”. The ECB’s approach “is at least a questionable approach. It’s not done like this, it doesn’t work like that”.
