Before leaving, he remains to criticize the usual short arm of the ECB, we need to make some considerations. The first is that until two months ago we would have all jumped for joy at the idea of a rate cut and at that of a extension of quantitative easing by six months. It is true that inflation was low and has remained so, but it is also true that the impression was then that the ECB, somehow, was fine with it.
Even two weeks ago, until Draghi's emphatic speech on the willingness to do whatever it takes to bring inflation back up, we would all have been satisfied with the measures taken today.
The second consideration is that the real event of this monetary December, without taking anything away from the ECB, is the US rate hike which is increasingly clear for the 16th, when the Fed will put an end to a historic phase, which lasted seven years, of zero rates. While for Europe it is simply a question of continuing on a path, for America we are facing a 180-degree turn in which what is in question is not only a 0.25 percent increase, in itself quite negligible, but the start of a long cycle that will keep us busy for the next two-three years.
Today the markets show disappointment because the cake promised and delivered by Draghi is missing a cherry or two. Theeuro exchange, due to this lack, is returning towards 1.10, while some analysts, even very authoritative, had gone too far in forecasting a big step towards parity between the euro and the dollar.
Let's look into each other's eyes though. What is preferable, in the grand scheme of things? It is better to keep the euro in its 1.05-1.10 range and give up stealing some growth from America, but in return guarantee balanced and orderly conditions around the American rise of 16, or it is better to go straight to parity with the dollar instead , have a short-lived rise in the European stock markets and then pay for it all from the 16th onwards, with a Wall Street unable to bear the double weight of a too strong dollar and rising rates?
The most decoupling the world has ever seen between Europe and America is when the former rises and the latter stands still. If the US stock falls, we can be sure that Europe will follow it by falling even more, given its greater volatility and underlying fragility.
Saving America, to save the world, therefore, and therefore also Europe. Draghi's caution may ultimately mean a quieter Christmas for everyone.
A third consideration that can explain the ECB's attitude is that European growth, without being astonishing, is in any case good and set to improve further next year. The effect of the devaluation of the euro, like that of any devaluation, does not unfold at its maximum in the first year, but in the second and therefore in 2016.
Faced with potentially significant geopolitical unknowns, it is also important to keep some ammunition in reserve and not spend everything immediately, especially at a time when Europe seems to have come out of the recession. Incidentally, these unknowns are already producing a non-negligible expansionary effect in the fiscal policy of some countries, including France, which will spend more on defense and security, and Germany, which will give up a balanced budget to welcome refugees .
And speaking of Germany (fourth consideration) we must remember the difficult moment Merkel was going through, exposed on her right flank towards an Alliance for Germany which could see a significant increase in her electoral consents in the next regional consultations. Again, let's look into each other's eyes. Do we prefer a Merkel who is the maximum of Europeanism that Germany can express today or do we want Schaeuble in her place with a still pro-European line, but much more rigid? Sometimes we all tend to forget that what the world and we Mediterraneans like, an ultra-expansive ECB, is exactly what many German voters don't like at all.
That said, the mystery remains of an ECB that raised expectations in the run-up to today's meeting and then left a bitter aftertaste in what it finally decided. The explanation can perhaps be sought in an America that just in the last few days seems to have given up on a rate hike (made unavoidable by the strength shown by employment and the rapid depletion of unused resources) just as some sentiment data among consumers and businesses show some loss of momentum.
We repeat, the world pivots on America, it cannot in any way allow the American engine to stall or shut down. Parity between the euro and the dollar can wait, it can come in handy in the future in the event that Europe gets entangled again in one of its political crises or in which the geopolitical arrangements continue to destabilize.
For now it is sufficient that the euro remains in its range and does not go back above 1.10. To those with dollars in their wallets, we tell them not to worry too much. Diversification is a good in itself, America is more sheltered from the geopolitical crisis and does not have to increase military spending because it is already high enough. Staying in dollars instead of euros also means having a positive yield, which will continue to rise over time, and avoiding the negative rates that the banks, sooner or later, will try to pass on to depositors throughout the European continent.
Today's partial disappointment also postpones the bond bear market on European long bonds. A super-aggressive ECB, and therefore fully credible with respect to its desire to raise inflation, would have created some problems for German or Italian ten-year-olds. Why lock me at 0.50 for ten years if the central bank can really get inflation back to 2 in a few months? Now, however, some doubts remain, confirmed moreover by the forecasts of the ECB itself, which assume a slow and very gradual rise in consumer prices. At this point, the European stock exchanges will stand still for a while, but let us remember that the increases since the beginning of the year are and will remain in full compliance with the final balance. Europe still remains the most interesting stock market area with the most potential for 2016.
