The instrument with which the ECB would like to contain the spread by canceling sovereignty and democracy

The ECB will start by printing money for 750 billion to save the Euro (not us) It will create them out of thin air with a computer, but which pockets will they end up in?

The ECB will start by printing money for 750 billion to save the Euro (not us) It will create them out of thin air with a computer, but which pockets will they end up in?

Here is the famous ECB "Anti-Fractionation Tool", and you must be afraid. The European Central Bank will buy bonds from Italy, Spain, Portugal and Greece with part of the proceeds from the maturity of German, French and Dutch debt, in an effort to reduce spreads between their borrowing costs, sources told Reuters.

The ECB will kick off this rebalancing on Friday to prevent financial fragmentation among eurozone countries from hindering its interest rate hike – with a further plan to be unveiled next month. Keep reading

The central bank has divided the 19 eurozone countries into three groups – donors, beneficiaries and neutrals – based on the size and speed of their bond spreads in recent weeks, according to conversations with half a dozen. people present at the ECB's annual forum in Sintra, Portugal. Spreads are measured with respect to German bonds, which act as a de-facto benchmark for the single currency area, which in itself is a stretch because it links all the financial calculations of the EU to a single country.

The ECB will channel part of the liquidity from maturing bonds purchased by donor countries to recipients under its Emergency Pandemic Purchase Program, while neutrals will act as a buffer, the sources said. It will practically gradually abandon the capital key criterion.

The lists, which will be revised monthly, reflect the division between peripheral and core countries that emerged at the time of the eurozone's first debt crisis a decade ago. Recipients include a handful of countries perceived by investors as riskier due to high public debt or low growth, such as Italy, Greece, Spain and Portugal, the sources said. The donor group is made up of about half a dozen so-called “core” countries, considered safer, and includes Germany, France and the Netherlands.

So far so good, even if the mechanism is forced, complex and makes the usual division between "Good" and "Bad". But the positive news, so to speak, ends here, because, with the usual political mess, the ECB's intervention will not be general and "sterile", but will only take place if certain conditions written in collaboration with the European Commission are respected. , or on the basis of “Debt sustainability assessments”, as happened for Greece a few years ago. You can understand what kind of a threat this is to any democratic government which, in an institutional way, would be deprived of any power in favor of supranational and unelected entities.

The ECB could then drain liquidity from the banking system to offset bond purchases, likely through special auctions where banks can get more favorable interest rates if they park their funds at the central bank. Read everything

So the tool would still be the usual mess of economic authoritarianism. Something to absolutely avoid and an invitation to leave the Euro area as soon as possible!


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The article The instrument with which the ECB would like to contain the Spread by canceling sovereignty and democracy comes from ScenariEconomici.it .


This is a machine translation of a post published on Scenari Economici at the URL https://scenarieconomici.it/lo-strumento-con-cui-la-bce-vorrebbe-contenere-lo-spread-cancellando-la-nostra-sovranita/ on Fri, 01 Jul 2022 07:00:02 +0000.