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Deutsche Bundesbank Taka adapts his strategy

Good morning. Welcome to the final version of Europe Express before summer vacation.

Officials in Brussels and other capitals have already begun to strip off for vacations, but it will be a busy day in Frankfurt, where the European Central Bank’s final governing council will take place before the summer vacation.I thought it was timely to create a profile Jens Weidmann, Deutsche Bundesbank Governor, and his somewhat unexpected changes over the past few years.

In another batch of National reconstruction plan We will also look at the status of EU funding in Poland and Hungary, as it was approved by Brock’s Finance Minister through a video conference on Monday.

Then, I hope you enjoy summer. You will be returned to your inbox on September 6th. Bisdan!

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From No to Yes, but. .. ..

Jens Weidmann, head of the German central bank, was once fired by Mario Draghi. Neinzu Alem — German for “no to all” — After opposing many of the European Central Bank’s unconventional policies over the last decade, he wrote: Martin Arnold In Frankfurt.

But under Draghi’s successor Christine Lagarde, the boss of the Deutsche Bundesbank is more likely to say. Ja, Aber, Or “yes, but” when discussing the ECB’s plans to provide more financial stimulus.

Weidman’s newly discovered reconciliation approach is highlighted by the fact that he, along with 24 other members of the ECB Governance Council, agreed on a new strategy. Announcement Two weeks ago, Frankfurt-based institutions shifted to a more dovish direction.

Today is the ECB, which has abandoned its commitment to raise its inflation target to just 2% and keep prices below that level, and admits that it could temporarily exceed it. Set to embed These policies are incorporated into guidance on future paths for interest rates and bond purchases.

This strategy also means that policies such as negative interest rates and bond purchases, previously considered unconventional and often criticized by Weidmann, will be firmly counted by the ECB as part of the regular toolbox. I will.

What in many ways Lagarde dubbed The ECB’s new “basic document” marks a major break with the conservative and inflation-fighting doctrine of the Deutsche Bundesbank, which formed the basis for the creation of the euro. Combined with financial stability analysis, the ECB has diluted financial analysis, a pillar of Deutsche Bundesbank’s legitimacy.

As if this wasn’t hard enough to swallow Weidmann, he also needed to change his position significantly on the question of how far the ECB would have to go to tackle climate change.

Two years ago, Weidman said He “very critically” saw the move to shift bond purchases and collateral policies towards a more environmentally friendly direction, which was “market-neutral” that banks’ purchases of corporate assets should reflect the entire market. Warned that it would violate the principle.

Now the ECB Climate Action Plan It aims to review corporate bond purchase and collateral programs to address climate risk and seek alternatives to the principle of market neutrality.

However, this does not mean that Weidmann has become softer. Instead, he is moving with the times. His red line may be off, but they are still there, as shown in his recent “hawkish” speech.

he caveat Last month, I compared it to “inflation isn’t dead” and to the Galapagos tortoise. The Galapagos tortoise was misclassified as extinct for 100 years and only reappeared. He could be even louder as the economy recovers from the pandemic.

The Deutsche Bundesbank boss also has a more pigeon-like stance than the one adopted by the Eurozone Central Bank, successfully opposed the ECB’s request to mimic the Federal Reserve Board’s average inflation target. It can also be said that it resisted pressure to sell all bonds. Published by a fossil fuel company.

Angela Merkel’s 53-year-old former economic adviser became the youngest person in history to lead the Deutsche Bundesbank in 2011. He will be the longest president if he takes office next year. (((Read the full profile).

He is already preparing for the next battle. The ECB’s € 1.85 trillion pandemic emergency purchase program ends as soon as the Covid crisis ends, to prevent much of its flexibility and potency from simply being transferred to future bond purchases.

Chart du jour: Semiconductor superpower?

The EU has set an ambitious goal of doubling its share of the global semiconductor market by 2030, and US chip maker Intel is actively participating in that effort. However, some people in the industry are asking if push is worth it, given the enormous cost. Proponents argue that it is important for Brock to bet its claim on strategically important industries dominated by Asian companies. (((Click here for details).

Polish-Hungarian

Yesterday celebrated its 1st anniversary Summit contract concluded The Brussels bureau chief says EU leaders have set up a coronavirus recovery fund fueled by general borrowing. Sam Fleming..

Admired not only within the EU but also outside the EU was the groundbreaking joint response to the economic crisis. Including recent From US Treasury Secretary Janet Yellen (although she added that the EU’s fiscal response needs to be further strengthened).

Of course, a leader-level agreement is one thing, and turning the summit communiqué into strict legislation and heavy borrowing is another. But as EU ministers prepare to disappear for the summer vacation, it’s not too far from the point when billions of euros begin to be poured into member state bank accounts, or at least some of them.

To date, 25 recovery and resilience plans have been submitted to the European Commission for approval. This includes plans for all the largest member states of Germany, France, Italy and Spain. Only Bulgaria and the Netherlands have not landed yet, which has been hampered by the formation of a long government.

In the plans of 12 member countries Already received a green light Second half steps at last week’s Finance Ministers’ meeting, from both the Commission and the EU Council of Ministers. The other four should be approved at the Finance Ministers’ meeting on Monday.

This means that cash should begin to flow from the end of the month to August when the pre-financing component of the € 800 billion recovery package becomes available. The Commission has already raised € 45 billion for these early payments and will be available when Member States sign a loan agreement and, where appropriate, a loan agreement with the EU.

However, there are many plans that have not yet been approved by the Commission. In most cases it looks like a matter of time, but two of them, especially those submitted by Poland and Hungary, have heavy clouds. As economic commissioner Paolo Gentiloni submitted to the FT, when it comes to Warsaw and Budapest plans, “unfortunately, it’s not there yet.”

There is no formal sign from Brussels on how quickly these plans will get Commission approval, but given the difficulty of negotiations, it is likely that neither will be fully revealed until the end of the summer vacation. I am.

As her Announcement The Commission’s latest rule of law report on Tuesday, Vice-Chairman Bella Yorober, said it was unpredictable how long negotiations would last with either capital. She warned that the Commission was “very strict” regarding the auditing and management systems required of Member States to ensure that cash distributions were “legally sound.”

At the same time, Poland Deepen standoffs The Commission on Judiciary Independence has complicated negotiations, as well as disagreements on the environmental aspects of its recovery plan.

The Hungarian debate is also stalled due to disagreements over commitments and anti-corruption measures related to the rule of law. The situation is further clouded by the controversy over national legislation that limits LGBTI + discussions in schools and the media.

Both countries cost a huge amount of money. With grants of around € 24 billion in Poland and over € 7 billion in Hungary. The later the first payment, the more painful the standoffs will be for them.

What to see

  1. European Central Bank Governance Council meets today in Frankfurt

  2. EU Treasury Minister is set to approve another batch of national recovery plans on Monday

Notable, quoteable

  • No (re) negotiations: In Brussels Snub A British attempt to renegotiate the Northern Ireland Protocol. If the EU disagrees with Ireland’s new trading rules, London threatens to suspend some Brexit transactions.

  • Pipe trading: The United States and Germany reportedly Agreed Through the Nord Stream 2 pipeline. Washington opposed the condition that Berlin would invest in Ukraine’s renewable energy industry, Kiev would receive an annual shipping fee from Russia and would lose if Node Stream 2 came online.

  • Hungarian Referendum: Hungarian Prime Minister Victor Oban raises his controversial anti-LGBT + bill that has offended the EU Referendum.. Citizens are asked five questions, including whether they support holding a sexually oriented workshop at school without the consent of their parents.

Smart (summer) reading

  • Brexit Statistical Gap: Asking Brussels and London officials how trade has changed can give you two very different answers.John Springford of the European Reform Center malfunction Why is there such a difference between imported and exported data after Brexit?

  • Where to place Turkey: Turkey Solve the ghost town On the island of Cyprus, I soon met a chorus of condemnation by the EU.But according to paper It is up to Washington and Brussels to better coordinate policies by the Heinrich Böll Foundation to promote democracy in the country and avoid more difficult relations with Ankara.

  • Smart Listen: FT Tech Tonic Podcast The second season of exploring the use of artificial intelligence in health care, trading and more is back. Episodes will drop on Monday.

We may be closed until September 6, but please let us know your opinions and impressions. europe.express@ft.com..

Today’s Europe Express Team: martin.arnold@ft.com, sam.fleming@ft.com, david.hindley@ft.com, valentina.pop@ft.com.. Follow us on Twitter: @MAmdorsky, @ Sam1Fleming, @valentinapop..



Deutsche Bundesbank Taka adapts his strategy

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