I am reading the irritated reactions of the Italian press (in particular those of the financiers newspaper, Corriere), regarding the decision of the judges of the German constitutional court. (Yes, Germany also has a constitution, it is not a beehive with Merkel as queen bee, who makes decisions).
The first problem I notice is, as usual, at least a "clever" translation. The word that in Italy is translated as "disproportionate" suggests that the German court has objected about the size. But that's not the case.
The term is used when the proportions with respect to the whole are not respected, that is when drawing (for example) a man with the head between times larger than the body.
What the court is pointing out is that the proportions that were mandatory are not being respected today. In fact, the ECB is a bank that has partners, which are central banks. Each country participates in different percentages. The point is that, by statute, the purchasing measures must be proportional to this percentage.
The ECB can therefore do as much QE as it wants, but if it buys X Italian bonds, it must buy Y French bonds, K German bonds, and so on. But that's not what he did: he currently has a large amount of Italian titles in his stomach, which are more than twice the proportion that should exist with German titles.
Why did you do it? It did so because German stocks on the market have become rarer in recent years, as German debt has fallen to 68% of GDP. Buying "by force" would mean bringing the yield below zero. But bringing the yield below zero would increase the spread with the BTP.
Hence, to mitigate the spread, since Draghi's time, Germany had started to be excluded from the benefits of QE, buying too many Italian securities compared to the securities of other countries. (France, Germany, Holland and others). This has the effect of lowering the spread, and is therefore an economic, and no longer monetary, maneuver, because it impacts on the balance sheets of the states.
Today the German constitutional court has decided to put things right, saying that since the ECB has gone beyond its mandate, it has three months to clarify its position. A term that in German can also be used to indicate when you pay to return in order. For example, Steuererklärung indicates both your tax return, but the act whereby the government returns you money to repay you, or the act whereby you pay a difference due to settle your obligations.
In itself, this is not a drama: it means that the ECB will have to put its hand in the wallet and order the purchase of a large amount of German debt, both state and corporate, until it brings the proportions back to being what they should .
But the problem is different:
- If Lagarde hoped to use the ECB to stabilize the spread, she dreams. In fact, to buy Italian securities, he would have to buy even more German ones, making interest go below zero, and the spread would remain unchanged.
- If we want more, we will have to radically change the European treaties. This is something Merkel has wanted for years, but the times are long and are not compatible with the urgency of the countries of "southern Europe".
- The German government was "fucked up" by the constitutional court, which said "hey, but how come you never noticed?" and Merkel will have to go explain why they never actively protested this thing.
Ultimately, that is, the hopes of those who wanted Europe to become the new Cassa del Mezzogiorno have been disintegrated. Actually, to give 10 to Italy, the ECB has to give 12 to France and 14 to Germany.
This can certainly benefit Italy, but one has to wonder what Italy will do with 10 and what France will do with 12 and Germany with 14. If, for example, banks and industries were competitors.
No wonder Italian financiers are so angry.