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ECB accounts: dovish headlines (economic projections were already outdated) and full flexibility stressed on PEPP once again, but also a couple of strange "concerns". (1/3)
ecb.europa.eu/press/accounts…
"The concern was voiced that large-scale interventions in sovereign bond markets could give rise to the risk of “fiscal dominance” and that the programme had to be executed carefully in order not to encourage irresponsible behaviour on the part of governments". 👋@BVerfG (2/3)
"A concern was expressed that lowering the TLTRO III minimum rate 50bp below the DFR could open up the possibility for banks to obtain funds and deposit them at the deposit facility rate instead of increasing their lending to the private sector". Well, that's the goal! (3/3)
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Frederik Ducrozet
@fwred
ECB QE is not “proportionate”. It should be much larger.
A thread featuring @WielandVolker. (1/n)
Some early indicators suggest that the ECB should at least double the size of its Pandemic Emergency Purchase Programme (PEPP), and that is before we get any clarity in terms of the longer term effects of the crisis on economic growth and inflation. (2/n)
We are well aware that the German Court ruling was against PSPP, not PEPP, but the point is still relevant in forward-looking terms including if new complaints against PEPP are brought to the court. (3/n)
Read 12 tweets
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Frederik Ducrozet
@fwred
German Constitutional Court versus ECB: I'm no lawyer, but... I wrote a few things about tomorrow's ruling.
A thread including a few side notes. (1/n)
I've read a lot from experts, and lawyers are worse than economists! They can't agree on anything. To be sure, this case is a complex one, touching upon the supremacy of EU law versus national courts. Whatever the outcome, we'll see more legal disputes in the future. (2/n)
This thread by @RafaelMentges is one of the most helpful I've seen, linking to legal texts as well as excellent threads by @lucasguttenberg and @GrundSebastian. (3/n)
Read 12 tweets
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Frederik Ducrozet
@fwred
ECB preview: waiting is an option.
While the most important decisions have been made outside regular meetings recently, the pressure remains on the ECB to do more eventually. (1/n)
The ECB would have hoped to be safe for much longer after launching several bazookas since mid-March, but pending a more ambitious economic/fiscal response, the central bank remains the only credible bulwark against tighter/fragmented financial conditions. (2/n)
On balance, it might be too early for the ECB to take another bold step at the 30 April meeting, ahead of two important deadlines – the European Recovery Fund proposal (within two weeks), and the German constitutional court ruling on the APP (5 May). (3/n)
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