September 23, 2014
We thought that Andrea Bonanni of La Republicca best described the nature of Mario Draghi’s statement at the European Parliament. There was nothing new really – after the Jackson Hole speech and his remarks after the September meeting of the governing council – but the tone has changed. It sounded more urgent, and more exasperated.
Draghi had three clear messages: the first is the recovery is weak. The second is that the ECB will do whatever it takes. The third is that none of this will work unless governments do their bit. He said the latter was not a negotiation. If governments don’t do their bit, then the ECB won’t either. Draghi was also tough on Germany. He said that countries with fiscal leeway should use it, and he denied the Bundesbank’s claim that the measures taken by the GC would encourage excessive speculation. There is no sign of that happening, he said. He was also tough on countries who in his view had failed to use the savings resulting from lower bond yields. Some have used them well, others have used them to blow up their public expenditures.
The newspapers contrasted Draghi’s statement with that of Angela Merkel (see also below on her bilateral summit with Manuel Valls), who explicitly ruled out an investment stimulus programme.
On the LTRO, Draghi said – like Peter Praet before – that one has to evaluate the impact together with the December tranche. After the disappointing uptake of €82.5bn of the first TLTRO tranche last week, a Reuters poll says the average expectation is for €175bn in December. Together, the two tranches would fall below the 2014 target of €400bn by about one third.
In its coverage, Corriere della Sera picked up on one comment by Draghi, according to which the forecast error on inflation was caused by high unemployment (which was now exerting its own dynamics).
There was more evidence that the economic weakness has lasted through the summer. The European Commission’s consumer confidence index fell by 1.4 points mom to 11.4, undershooting market expectations, as Reuters points out.
We also have stories on Manuel Valls’ visit to Berlin – and what Merkel and he have in common; on the impact of deferred tax assets on Greek banks; on a cut in property taxes in Ireland; on pressure by Catalan municipalities in favour of a referendum; on a proposal by the Bundesbank to overhaul the entire German tax system, on Peter Praet’s idea of a single eurozone zone on the IMF’s board; on Italy’s revision of GDP; and on how Luis Zingales changed his mind on the eurozone.