And who would have thought that, less than a month before the elections, German inflation touched the ceiling of 4% on an annual basis, even above the Eurozone average of 3%, the highest in ten years? Faced with these numbers (+1,6% the volatile components as has not happened since December 2012) the furious anger with which today Jens Weidmann, the president of the Bundesbank, one week after the directorate of the ECB, he will attack the "soft" policy of the European Central Bank. As, unheard, it has been doing for a long time. But today, at the Bundesbank symposium, the German hawk will have on his side, in addition to the allies of all time (Belgium in the lead), other ears sensitive to the concerns of the German Central Bank. Even the vice-president of the ECB, Luiz de Guindos, old fox of Spanish politics, has shown himself willing to listen the criticisms of the Falcons, including those of Weidmann relegated since the time of Mario Draghi, in opposition to the bank's choices.
“In 2021 the economy is doing better than we expected, – he told El Confidential – and this will be reflected in the projections that will be published in the coming days”. “If inflation and the economy recover – added De Guindos – then there will logically be a gradual normalization of monetary policy and also of budgetary policy”. That is, as the governors of Austria and Germany have already requested, to slow down or even suspend the purchases envisaged by the Pepp programme, which also still has around 500 billion available to be placed on the markets by March. In short, it is increasingly probable that the commitment to keep the pace of purchases very high will fail.
Will it go like this? Certainly, for the first time, the hypothesis of a mini-tightening in Frankfurt (not ruled out by the governor of the Banque de France) was taken seriously by the markets. Since Tuesday evening one flurry of government bond sales on the long part of the curve. The yield on the 0,71-year BTP rose to 108,6%, the highest level since mid-July, confirmed in this morning's trading. It is the most significant deviation in the Eurozone with the result of widening the gap with respect to the German Bund traded to -0,39% from -0,44% the day before to 5 points. Under pressure, albeit in a more moderate form, the yields of French Oats (+6 basis points). In short, the markets believe in it. And it will not be easy for Fabio Panetta, an Italian member of the central bank, to defend the need for purchases at the current pace: Italy, which is experiencing a growth rate of GDP close to 2019%, is approaching autumn in full acceleration, although it is still far from 2009 levels (themselves lagging behind XNUMX).
But it's a lot difficult for the line of hawks to pass, thanks to the rigidity of the bank's structures. If the Pepp program were suspended or even canceled (as requested by Austria), the ECB would find itself practically without ammunition to deal with the pandemic emergency. The only weapon would be the APP program (20 billion a month) with quite a few drawbacks: Greek bonds are not contemplated; several countries, including Germany, have already reached the maximum intervention ceiling. Hence the feeling that next week's meeting in Frankfurt will end with a stalemate or, at most, with a slight cut. A sop for those who, like Wolfgang Schauble, the soul of German rigor, consider the policy inaugurated by Mario Draghi as the real cause of the decline of the moderates across the Rhine.
