Faced with the surge in bond rates and the risk of a new crisis in the euro zone, the Frankfurt Institute has announced a new intervention tool. But without giving details.
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A decade after the euro zone crisis, is this the return of the emergency for the single currency? At the end of five days of strong tensions on the financial markets, with interest rates that have soared, the European Central Bank (ECB) decided to intervene on Wednesday, June 15. In a very unusual way, she urgently brought together her governors’ council. Such an appointment at the raised foot had not arrived since the financial panic of the beginning of the Cavid-19 pandemic in March 2020. Without giving details, the ECB announced the immediate study of a new “anti-fragmentation instrument”.
The “fragmentation” in question, in the jargon of monetary policy, is the growing gap between the borrowing rates of Germany, countries deemed the safest financially, and those of the peripheral countries, at the forefront of which is Italy. The risk is to see the monetary union fragmented.
The tension, which started at low noise in December 2021, suddenly strengthened in recent weeks. The Italian bond rate at ten years old, which was 3 % in early June, increased to 4.3 %, Tuesday, June 14. Its gap with the German rate leaps from 0.9 points in December 2021 to 2.5 points on Tuesday. In France, the borrowing rate increased from 0 % six months ago to 2.4 % Tuesday.
This flight was exacerbated when the ECB announced, Thursday, June 9, that it would increase its deposit rate, currently by 0.5 %, twice, in July and September, before probably continued this Raised by the end of 2022. At the same time, Christine Lagarde, its president, disappointed the expectations of the markets: she said that the Council of Governors had barely debated the question of fragmentation.
market attacks
This “victory of the hawks”, nickname given to the supporters of a stricter monetary policy, opened the door to speculation against the euro zone. “We are not at all in the situation of 2012 [during the crisis in the euro zone]. We know that the ECB will eventually act, but I am surprised that it lets do things for so long,” said Andrew Tuesday Kenningham, of Capital Economics.
The objective of Wednesday’s meeting was therefore to cut short these market attacks. In its press release, the ECB begins by repeating its commitment to defend the euro zone: “Since the start of the gradual standardization process of [monetary] policy, in December 2021, the Council of Governors has committed to act against resurgence Risks of fragmentation. “
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