Draghi closes the umbrella of Quantitative Easing. The risks for Italy

Mario Draghi announced yesterday in Riga, during a meeting of the board of directors, that the "bazooka" is about to end the liquidity issue, referring to the quantitative easing procedure. This news has further annoyed the markets already stressed by the unknowns on the duties. To balance the bad news, however, he said that he will leave interest rates unchanged for a further year.

Even the number one of the Bundesbank, Jens Weidmann, defined the expectations on the elimination of Qe purchases by 2018 as "plausible", adding that it will be "a first step on the long road towards a normalization of monetary policy". Weidamann also stressed: "Inflation is expected to gradually return to compatible levels for gradual price stability."

At this point there will be unexpected reflections also for our country. Italy will have to deal with international investors who will make our country's public debt weigh further on the balance of auctions, during which government bonds are placed. It will also have to contend with the start of the rise in interest rates, even if they should remain low for a long time because inflation is struggling to get close but still below 2%. The beginning of mortgage interest rate hikes will also be adjusted to reflect a Euribor that will not be as mitigated as it has been in recent years.

Many are wondering what the Quantitative Easing wanted by Mario Draghi really was for. It was actually a sort of external umbrella that reduced the differences between interest rates between Italian and German bonds, which caused inflation to rise, even if only slightly, which, in theory, increases. the propensity to consume and the burden of public debt decreases, which partially cleaned up the balance sheets of our local banks, which were chock full of Italian treasury bills and which made any speculative attack on the countries most in difficulty impossible.

The final objective of Quantitative Easing was to provide sufficient oxygen for a serious review of Italian public spending and to initiate the measures necessary to implement a significant relaunch of the productivity of our companies and of our economic growth. The real test will therefore be the next budget law, the first of the yellow-green government. Budget law that without the ECB umbrella will be difficult to make ends meet in the light of election promises.

The country expects the counter-reform of pensions, a drastic reduction in the tax burden, a general measure of income support, free nurseries, hiring in the public administration, all to be done in deficit. The danger, however, is that the interest rate differential between Italian and German government bonds will rise again at its natural pace that refinancing our debt will cost more and more, especially if it is used for measures that do not stimulate growth. economic. The other specter is the likely "downgrade" of rating agencies that would downgrade our government bonds to "junk".

 

 

Draghi closes the umbrella of Quantitative Easing. The risks for Italy