ECB Watch

The downfall was formally brought about by former Prime Minister Giuseppe Conte – whose personal grudge against Prime Minister Mario Draghi prevailed over his political judgement – and his rump Five Star movement. It was, however, engineered by Matteo Salvini’s Lega Nord party with support from Giorgia Meloni’s far right Brothers of Italy group. A crucial role was played – behind the scenes – by former Prime Minister Silvio Berlusconi, who once more confounded those who thought his decline irreversible to emerge as the mediating point in a deeply divided centre-right coalition.

ECB President Christine Lagarde said a clear deterioration of the inflation outlook and unanimous backing for the anti-fragmentation instrument justified the bigger move.

Unveiled alongside its first interest rate hike in 11 years, under the Transmission Protection Instrument (TPI) (the new backstop), the ECB will buy bonds from countries whose borrowing costs relative to Germany it sees as soaring through no fault of their own.

Sources told Reuters after the ECB’s announcement that all euro zone countries were eligible based on the conditions.

But Christiansen noted that may not be the case in the future, depending on what a new Italian government looks like.

Transmission Protection Mechanism

This sounds like real dangerous shit. They are essentially creating a two tier Europe with cheaper borrowing rates for the countries that are actually the worst credit risk.

The whole thing is going to go up in flames, eventually. Ireland needs to get out now while it can.

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Sanctions working well

The Euro is plunging because that man is rapidly driving Germany into the ditch. Winter is fast coming, and Germany industry is going to face energy shortages. Meanwhile thousands of poor Germans will die of cold as they won’t be able to heat their homes. A total clusterfuck.

We seem to have got an effective devaluation of the Euro, without official announcement, probably to appease German and French and Italian exporters to help them weather the storm elsewhere.

Certainly it’ll keep some Irish from those exuberant New York Shopping trips that were so popular last time house prices reached the peak.

Why go there when it’s coming here?

Is the Euro in a death spiral? Hitting new lows today, likely in the realisation that European governments are going to have to print trillions to deal with the cost of living crisis, that they themselves have manufactured.

"8 September 2022

The Governing Council today decided to raise the three key ECB interest rates by 75 basis points."

Euro is back up to 1.01 against the dollar, now that the ECB has made some sort of move to increase interest rates. We are told not to expect more 75bp moves though.

The Euro back above parity with the dollar and oil less than $100 should see diesel, petrol and home heating oil drop back a bit from current levels.

US 10y bond back above 3.5%

Fed to go 75 bps at least tonight

Bank of England at least 50bps tomorrow

Swiss raising rates

Meanwhile € remains at 99 cents in the dollar. Importing inflation

Tick tock