THE EUROPEAN CENTRAL BANK
Milan , January 22, 2015 – 7:54
The great day of the markets has arrived. Today, at 14:30, Frankfurt will be the center of the financial world: Mario Draghi will start the press conference to announce the amount, method and timing of the purchase of securities of eurozone countries, on the basis of what will decided by the governing council of the ECB just before. The opposition open operation by Germany has not materialized: Angela Merkel is contrary but says that the European Central Bank is independent and that the important thing is that governments do not take advantage of the liquidity created by Draghi to stop doing structural reform promises. Nevertheless, it will be important to understand the consequences and scope of the choices made today: move the markets immediately and will have important consequences in the future.
The focus is especially on three elements. First, the magnitude of the operation so-called Quantitative Easing (QE) sovereign. Yesterday, rumors indicated that Draghi could announce monthly purchases to 50 billion to carry on for at least a year: at a minimum, therefore, 600 billion. It is a figure higher than the 500 billion of which has been discussed in recent days, a sign of willingness to get serious in the fight against deflation and stimulating economies. Not all observers, however, were impressed yesterday. In Germany – the country most seriously contrary to the QE – was noticed with some satisfaction that the place does not have a fixed number of total purchases but one month means that, potentially, the operation will be interrupted even before the expiry of a year, if the situation changes; among other things, the word of the central banks is a few days less sacred than in the past, after the Swiss franc the euro dropped despite a mon th before had assured to the contrary.
This 50 billion monthly seems to be the proposal that the Executive Council of the six members of the ECB will make to the Board of Governors, other 19 people, 15 of them with the right to vote ( four are excluded in rotation). If passed, then, how it will be interpreted? With a certain uncertainty. Eventually purchases could be massive. But it is said, we hope – says an economist determinedly opposed to QE, Michael Heise of the German financial giant Allianz – “that the ECB maintains the necessary degree of flexibility in the structure of the program of purchases so that it can get out quickly if necessary.” According
sensing element, the comparison of who has to take the risk (and profits) inherent in the bond that you buy, if the ECB or national banks. Who is very favorable to the QE would like everything to be shared, to avoid fragmentation of the financial market. The Germans and representatives of other countries in the N orth prefer that each national bank buy the titles of their country (in quantities decided in Frankfurt), registers them in its books and to bear the risk. A compromise is possible: 50 and 50, has said in recent days. We Will See. Finally, the composition of the purchases. Stocks chosen on the basis of the shares with which each country participates in the ECB or on the basis of the size of the public debt of each state? In the second scenario, Italy, which has the largest public debt, would be the most benefits from QE. In a few hours we will see how much there is firmness in the plunge.
January 22, 2015 | 07:54
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