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Friday, December 11, 2020, 00:02
Christine Lagarde did what was expected yesterday, keeping interest rates unchanged, announcing an extension of the bond purchase program until March 2022, while increasing her total budget by 1.85 trillion. euros from 1,350 billion. which is today and updating the TLTRO.
The central banker may have justified his decisions as necessary, as immunity to the coronavirus is expected to be secured by the end of 2021, necessitating financial support, but many prominent economists and organizations in Germany have spoken out once again. directly in front of them.
Deutsche Welle yesterday highlighted the harsh remarks by chief economist Alexander Krueger, who more or less accused the ECB of continuing undercover government funding despite the fact that “Covid-19 and structurally low inflation cannot be addressed with monetary measures.” politics “.
He even expressed doubts that the ECB can secure favorable medium-term interest rates at the end of the day, but also his concern that government over-indebtedness will continue to rise in 2021, leaving the ECB trapped in a cycle of repetitive interventions. from which there will be no easy escape route.
Alexander Krueger is not the only one who does not agree with the decisions of the ECB.
The Center for European Economic Studies (ZEW) has been heavily criticized for days. In a recent study, he directly accused the ECB of buying a disproportionately large amount of bonds from eurozone countries with high government deficits, clearly “photographing” southern Europe and directly targeting Italy, as well as Spain and France. The investigation concludes with Krueger that, in fact, the ECB has long since crossed the fine line of direct public funding.
Yesterday’s decisions by the ECB were also harshly commented on by Friedrich Heinemann, an economist and ZEW associate, who directly stated that the ECB is one step closer to losing “the measure.”
Greek bond yields also did not remain intact, and Heinemann characterized the 0.6% yield for the Greek ten-year period as an overstatement, given the country’s rising debt.
As I used to argue, the ECB may be used to intervening in times of crisis, but near-zero bond yields in the eurozone are starting to get out of the ordinary.
Fortunately, the ECB is currently “closing its ears” to the whining of the Germans, at least as long as it stays in a specific and manageable circle. Until then, investors will be able to enjoy the important safety net of Greek bonds, since according to yesterday’s announcements, the ECB will buy in 2021 Greek bonds worth between 15 and 22 billion euros. We remind you that this year the ECB bought Greek bonds worth 16.3 billion euros, while by the end of the year the markets will have reached 18 billion euros.
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