The president of the European Central Bank (ECB), Christine Lagarde, assured, on Monday 26 September. that the ‘anti-fragmentation’ instrument (TPI) developed in July to avoid any new sovereign debt crisis in the euro area (see EUROPE 12998/13) had not been created with any particular country in mind.
“I don’t have a specific country in mind”, said Ms Lagarde, in response to a question from Caroline Nagtegaal (Renew Europe, Dutch), who asked her during a monetary dialogue in the European Parliament about the possible use of this new monetary policy tool in the context of the Italian parliamentary elections, in which Giorgia Meloni’s anti-European far right Fratelli d’Italia party emerged victorious on Sunday 25 September.
Noting the variety of monetary policy instruments available to the ECB in addition to the TPI, Ms Lagarde recalled the conditions under which the TPI could be activated if a state with sound macroeconomic policies is attacked on the markets through higher public debt servicing costs.
The ECB: - will carry out a detailed analysis of the risk of fragmentation in the euro area; - will assess compliance with four cumulative eligibility criteria: the country concerned complies with the European economic governance framework, does not have severe macroeconomic imbalances, its public debt is sustainable and its fiscal policies are in line with the commitments made under the national recovery plan supported by Next Generation EU; - will ensure that the measures it adopts are proportionate.
Jonás Fernández (S&D, Spanish) said the TPI tool, as designed, could be counterproductive by fuelling inflation through the massive purchase of public debt in a country where inflation is already above the euro area average. We will also take into account the macroeconomic situation in the currency zone and “the duration and volumes” of sovereign purchases via the TPI will address the issue you have raised, Ms Lagarde said.
The President of the ECB explained the decisions of the monetary institute to raise twice - 0.5% in July and 0.75% in September (see EUROPE 13017/13) - its main key rates. She reiterated the ECB’s plan to raise rates again “several times” at future Governing Council meetings.
She described the macroeconomic environment as “darkening” in the short term, due to soaring energy prices, the slowdown in the services sector and in international demand, and the loss of confidence among economic operators. (Original version in French by Mathieu Bion)