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sabato 8 settembre 2012

Mario Draghi strikes again

In Europe we play as leaders and we have seen it Yesterday. The intervention of Mario Draghi, the ECB to buy unlimited bonds in Europe, made me feel so much its enormous weight on the financial markets in the European political landscape. The decision was in the air, despite the veto of Germany, leaving politically defeated by a grueling battle, in which, in the end, she found herself alone.
We analyze in detail the decision and its effects. The strategy of Mario Draghi is to create a financial line of defense against the threat of European higher spreads.
In the beginning it was thought that a high cost of debt financing, must be clear, no work of financial recovery is possible. This, in a nutshell, the premise from which the heads of the ECB are gone. In particular, the higher spreads that have been created in the last year in Italy and Spain have made it as the values? which the spread had reached lately, financially unsustainable, they were destined to remain in the long term and undermine the stability of the Euro.
And then there was the fear justified of a structural increase in the cost of debt financing, with the risk of future bailouts and continue through the fund-saving states that should have been paid by the financially stronger countries (for example - Germany). A scenario untenable for everyone, both for the countries under constant threat of high spreads, as well as for those who should pay for the rescue. In summary, a systemic cost for the entire European Union, where would all lose.
Mario Draghi has realized that only the ECB could do Europe out of this downward spiral. Did not understand the German, who has continued to support a policy of absolute rigor of the accounts, without understanding how they could no longer be tax policies to bring spreads to sustainable levels. Locked in their stupidity, German politicians have not been able to hear the voices not only from Rome but also from Paris, Madrid and international institutions such as the OECD.
As for the effects, the decision provoked suffered devastating consequences on spreads. The relationship between BTP Bund and fell to 345 basis points, over 100 points less than the value recorded only a week ago, a result that has not been seen since last April. It 'also collapsed the spread between government bonds Spanish and German, now at 408 basis points (only on July 23 the value was equal to some 623 points).
In summary, the cost of debt financing in Europe is suddenly being dropped, with beneficial effects on future budget balances. At this point, with this component of the potential drop in interest, to think of balancing the budget in the coming months is not really a utopia. Draghi, a man who, in contrast to Merkel, he never spoke out against markets, realized as operators expecting this as manna from heaven. And the markets have rewarded with a wave of purchases in the market, where the streets of Milan and Madrid toasted with high yields. Also trade on the currency market have rewarded the Euro, again on the threshold of 1.26 against the dollar. A hard lesson in economics taught from Italian in Berlin. And if, in the coming months, the purchases should further lower spreads and the cost of debt financing, Germany will be singled out as the main cause of the crisis spreads.
If the move had been shared Draghi months ago, Europe would have saved billions of euro of interest and some point drop in GDP. A dullness, and the German, Merkel's throwing a further shadow on the ability to Berlin to be able to think globally to the interests of the entire union and not just national ones.
The German press was thrown against Italy, accusing the Italian Draghi had "Italianized" the Euro, as if for years the Germans they had not created and managed tailored to their needs with bad choices and anachronistic. The results of the growth spread a few days ago by the OECD member states are the best proof of the bad choices of a Europe Germany format.
Italy has finally hit a shot, it sign the beautiful country that is present and is able to know how to think in optical-European. From this point of view, I think part of the credit is to recognize that part of Italian economists who yesterday supported the decision and proposed that Draghi took.
In economics, as usual, are always the data and the time to prove whether a policy is right or wrong. Despite yesterday's decision has yielded positive economic effects immediately (and even this, however, is already an indisputable fact), you will need to wait a few months to see clearly the impact of this decision on interest, inflation and growth. One thing, from a political perspective, it is revealed very clearly: Italy proves to believe it and when he wants, proves that you can make choices incisive for the future of Europe.

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