The ECB will renew all the securities bought during QE, and moreover, quarterly refinancing operations will be carried out on a longer term basis.
The ECB's latest decisions are interesting for various reasons, not least the fact that, as Draghi pointed out, they have been taken unanimously. First of all, the Central Bank has established that interest rates will remain unchanged throughout the current year and beyond "as long as it is necessary to ensure that inflation continues to converge at lower levels but close to 2% in the medium term" .The ECB will renew all the securities bought during QE, and moreover, quarterly refinancing operations will be carried out on a longer term basis (TLTROs III), starting from September 2019 until March 2021, each with a maturity of two years; the purpose is "to preserve favorable conditions of bank credit and the orderly transmission of monetary policy".
It should be noted that the refinancing operations will begin on the eve of Draghi's expiry. Even if the decisions have been officially adopted "in order to ensure that a stable inflation path continues towards levels lower but close to 2% in the medium term", in fact the real purpose is to counteract the downturn in production with its epicenter in Germany, downturn quickly worsened growth and forecasts. ECB reaction has been immediate, in a period in which, for various reasons, including the European elections, the only game in town is that of monetary policy (when instead massive investments would be needed at European level). On the other hand, the decline in production is accompanied by a slowdown in inflation, for which Draghi had no particular difficulties with the Board.
The next European elections, and the settlement of the new Parliament and the new Commission, will take place in a depressed economic climate, which, at least for Italy, means stagnation if not recession. What are the prospects? For the moment only Macron has formulated, in his open letter to Europeans, a series of indications of some interest, which could be defined as "European sovereignty". The French president starts from the consideration, certainly not new, that in the face of battleships like the US and China no isolated European ship can have the possibility of confronting each other. Therefore European countries must remain united and be able to protect themselves.
Protection is one of the most emphasized themes: “Founded on internal reconciliation, the European Union has forgotten to look at the realities of the world. Yet no community can create a sense of belonging if it does not have bounds that it protects. The boundary is freedom in security. We therefore need to rethink the Schengen area: all those who want to be part of it should comply with obligations of responsibility (stringent border controls) and solidarity (one asylum policy with the same acceptance and refusal rules). We will need a common border force and a European asylum office, strict control obligations and European solidarity to which each country will contribute under the authority of a European Council for Internal Security. On the issue of migration, I believe in a Europe that protects both its values and its borders”.
The European Union must therefore equip itself with common rules on the subject of immigration, and manage related politics in the first person. The idea is that beyond the reception for those fleeing from war situations, we must focus above all on the rejection of all so called economic migrants. Not a policy that establishes the legal channels through which economic migrants can reach Europe and be distributed according to rational criteria, but agreed ways to avoid their arrival. The Italian Catholic Church newspaper (CEI Italian Episcopal Conference) noted how incongruous it is to speak of Africa without speaking of Mediterranean.
The same type of discourse also applies to economic relations with other countries. “Our borders also need to guarantee fair competition. What power in the world would accept continued trade with those who respect none of their rules? We cannot suffer in silence. We need to reform our competition policy and reshape our trade policy with penalties or a ban in Europe on businesses that compromise our strategic interests and fundamental values such as environmental standards, data protection and fair payment of taxes; and the adoption of European preference in strategic industries and our public procurement, as our American and Chinese competitors do”.
The theme had already been mentioned during Macron's electoral campaign and in the general lines of the French government; there is instead a new proposal to change the antitrust rules (which are rules included in the European treaties). The reason is due to Commissioner Vestager's decision to stop the Siemens-Alstrom merger, a decision approved by the whole European Commission because without a shadow of a doubt it would have created a dominant position in the European market. It was noted that the French government had recently requested an opinion from Vestager on the merger between the Italian Fincantieri and the Stx (now Chantiers de l'Atlantique), after the French government had placed various obstacles to the merger. This decision could be explained by political tensions between the two governments.
But lately the purchase of Airfrance-KLM shares by the Dutch government (to balance shareholding) has been called "incomprehensible and unexpected". The suspicion then arises that when Macron speaks of a European union, he thinks rather to a close relationship between France and Germany to which other countries can be added; in economy we talk of oligopoly with leader and follower. The recent Treaty of Aachen seems to be the first step in this direction. It is not at all certain that the project of the French president has a following. Precisely on the subjects of commerce and competition, it has already received criticism from the French and German newspapers close to the business world. In the European institutional system most of the changes require the agreement of all governments, and the political climate does not seem very favorable for the present version of "European sovereignty" advocated by President Macron.