ROME. Draghi and the ECB board have launched a maneuver with a bang, far beyond the expectations of the markets and economists. The tightening of negative rates on the funds that banks deposited in Frankfurt, the increase in market purchases of securities, essentially pay the banks because they do business loans are the chapters of an offensive in the name of the expansion that does not He has reflected in the young history of the European central bank. For businesses, households and banks open up new perspectives, but not always appealing. For this to work, however, this monetary policy ultraaccomodante must meet the objectives of weakening the euro to boost exports and stop deflation to revive investment. If it fails to convince markets of the firmness of his intentions and the effectiveness of its instruments, very little of what was decided yesterday in Frankfurt, in a field day in the history of the central bank, it will have effects on households and businesses. And, in fact, the bulk of the decisions taken yesterday will run out, as has happened several times in recent years, in the rooms and offices of credit institutions.
Here’s what will change for companies, banks and families.
cOMPANIES – More loans to small charges down production and work
the recovery can not take off if companies do not begin to invest and hire. And Frankfurt is prepared to meet them by buying the larger bonds (which will come under the portfolio of securities purchased under QE) and, above all, stimulating lending to medium and small. The package launched yesterday, the tightening of negative rates on the funds that banks leave unused at the ECB aims to push banks to use the money, lending them. Credit, Draghi noted, is no longer in the asphyxia of the past years, has started to grow, but still insufficient to the prospects of recovery. In addition to the negative rates, Frankfurt added, therefore, one more tool to its arsenal. Banks will be awarded loans to negative rates if they prove to bring in money to businesses. The institutes will then paid to do credit. Next to these specific measures, the plan Draghi, however, general effects are particularly significant for the world of Italian companies. If you really could restore a little ‘inflation, the ECB would restore businesses with an operating margin, linked to the perspective of turnover, albeit modestly, growing. At the moment, it is still a hypothesis remote. But even stop the deflation, which today is driving lower prices in Italy, it would be important. For highly leveraged companies, in general, the Italian, in fact, deflation, reducing prices and, therefore, the expected cash, increases the real burden of debt and obscure investment prospects.
BANKS – A shock to credit to keep money on hand is no longer convenient
the basic idea of negative rates is to stimulate banks to not immobilize the funds and increase lending. But it is a cost that are most unlikely to make up, upside down on their depositors. In Japan, facing even the risk that banks refer back of negative rates, turning on deposits, there is a growing demand for large bills. Better spend for a safe that pay the bank for the privilege of guarding the money. According to calculations by Morgan Stanley, the further descent – from less than 0.30 to less than 0.40 percent – the rate on deposits with the ECB would lead to an average reduction of 5 percent of the income of institutions in the coming year. ECB to contest these calculations: overall, the European banking system would not have suffered from the negative rates. But individual banks yes. In principle, the measure penalizes to a greater extent the institutions that base their business mainly on the intermediation between deposits of deposits and loans: increases the cost of deposits, while low rates on loans reduce profit margins. Less affected banks that link more on financial transactions and market operations.
FAMILIES – advantageous loans but for zero yields savings
The offensive launched by the ECB to put on the driving path the European economy has different impacts on families, depending on their specific situation: workers, the unemployed, young people have some perspective more. Pensioners and savers do not have much to smile about.
The assumption
not said (sentence on charges of wanting to wage a war of currencies) of the operation of the ECB is to weaken the euro to promote the exports. The explicit, however, is a loosening of credit and low interest rates that will bring businesses to invest. More sales and more investment abroad should have beneficial effects on employment and, ultimately, also on wage trends, finally giving breath to a recovery, so far, anemic. Easier credit and lower rates should also encourage the signing of loans for house purchase, normally a problem especially for young people. The Euribor, the reference rate of almost all real estate loans is in fact to a minimum and the variable to watch is the fixed mark-up – the spread – that applies the bank. More generally, the moves of Dragons should help debtors. The enemy to be killed, the ECB plans, is, in fact, deflation, whose most negative effect is to increase the cost, in real terms, that is considered to move prices, debt (inflation, however, it lightens ).
But the fall in prices resulting deflation is by no means a disaster for those on a fixed income and guaranteed, such as pensioners. At the same time, investors see narrowing the possibilities to employ their money. Your checkbook nothing fruit.
In fact, there is a danger that the bank think you make up for the negative rates that the ECB applies them in Frankfurt. Meanwhile, the titles always give lower yields and can be a temptation to move towards riskier lending.
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