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"The Governing Council decided to raise the three key ECB interest rates by 50 basis points. Accordingly, the interest rate on the main refinancing operations a

"The Governing Council decided to raise the three key ECB interest rates by 50 basis points. Accordingly, the interest rate on the main refinancing operations and the interest rates on the marginal lending facility and the deposit facility will be increased to 0.50%, 0.75% and 0.00% respectively, with effect from 27 July 2022." The Asset purchase programme (APP) and pandemic emergency purchase programme (PEPP) will continue for now though, the latter is planned until 2024.

miohtama 4y ago
Does buying more bonds while raising interest rates means that the wealth is transferred somewhere? - Countries with broken economy like Italy win - Countries that kept their economy more viable lose - Zombie companies will keep going? - Mortage owners lose (some European countries have floating rate mortages)
- IfOnlyYouKnew 4y ago
  Italy doesn't have a "broken economy". It's a stereotype that just won't die no matter what, I guess. Their politics and everything connected to it are arguably a bit more haphazardly than what's common in countries further north. But they have a solid industrial base and have been economically stable for 30+ years.
  - toyg 4y ago
    If anything, Italy is practically the most trustworthy treasury in the world: despite the highest debt/GDP ratio in the world after Japan, they have never defaulted on debt and even resorted to effectively expropriating their own citizens overnight rather than missing payments.
    - tlamponi 4y ago
      > even resorted to effectively expropriating their own citizens overnight rather than missing payments. source on that one?
      - toyg 4y ago
        Google "Tassa patrimoniale Amato 1992". The government directly fetched 0.6% of all current account balances overnight.
        tlamponi 4y ago
        Thanks for that! The speculation against the pound and lira I heard of, but that was before my time and the retroactive tax wasn't ever thought in school, at least I'd like to think that I had remembered such things. Not sure how that would play out on todays (well, current as today Italy's last gov is no more) landscape...
      - Phurist 4y ago
        You would not be able to understand it, it's domestic.
        tlamponi 4y ago
        What do you mean by that comment? I _am_ Italian.
  - kgwgk 4y ago
    Stable is not as good as growing: https://i.redd.it/puoyn3g0fb311.jpg https://i.redd.it/puoyn3g0fb311.jpg
  - qwytw 4y ago
    > have been economically stable for 30+ years Assuming 'stable' is a synonim for stagnationg and slow decline then yes. The 90's were pretty good but there has been been almost no real growth after the Euro was introduced in 1999. It's even worse in relative terms. Back in 1995-2000 Italy's GDP per capita was around 130% of the EU average, now it's less than 100% and not that far from the more succesful Eastern European countries which joined in 2004 (around 80-85%). And these numbers only tell a part of the story since the average GDP per capita went down significancly after most ex-communist countries joined the EU between 2004 and 2007. France, Germany, UK & Italy had almost equal GDP per capita in 2000, Italy was even ahead of France and Britain during most of the 1990's and look what happened later: https://data.worldbank.org/indicator/NY.GDP.PCAP.PP.CD?locations=IT-FR-DE-GB-EE https://data.worldbank.org/indicator/NY.GDP.PCAP.PP.CD?locat... Obiouviously Italy is still a rich country with a "strong" economy but if it stays on the same trajectory for the next few decades it will likely become one of the poorest countries in the EU.
    - petre 4y ago
      > not that far from the more succesful Eastern European countries which joined in 2004 Most of those countries aren't in the Eurozone, with the notable exceptions of Slovakia and Lithuania.
      - qwytw 4y ago
        Also Estonia, Latvia, Slovenia so the majority of countries which joined in 2004 have the Euro. If you also count Romania and Bulgaria which joined a couple of years later exactly 1/2 of the new member are in the eurozone.
- closewith 4y ago
  That famously broken 12th-largest economy and 10th-largest exporter in the world.
  - cloutchaser 4y ago
    They can be a large economy but not be able to pay their debts without German help. Which is exactly what will happen now
- tlamponi 4y ago
  > - Countries with broken economy like Italy win Check out this Twitter thread from an Austrian Economist PhD for some data points against that old and outdated stereotype: https://twitter.com/heimbergecon/status/1539486969977360384 https://twitter.com/heimbergecon/status/1539486969977360384
  - skippyboxedhero 4y ago
    That isn't news. The reason why Italy runs a trade surplus is because they are forced into running a primary surplus by deflationist policies from the German bloc. The reason private debt is relatively low is because their banks largely do not function and have turned into bailout mechanisms (and Italy had to take the step of bailing in private investors because they were unable to finance their debt, given the relatively large size of the banking sector, this basically froze their financial markets). Correct, Italy has run primary surpluses since the 90s...their debt is 150% of GDP, the conclusion is what? The other stuff is largely false...but assume it isn't, what is the explanation for Draghi's reforms? Youth unemployment is 35% (for reference, this is higher than many places in Africa). People confuse the policies that have been forced on Italy due to Germany's ordo-liberalism, and actual economic strength. Also, there is massive regional inequality within Italy. Some regions in the North are basically Germany. The companies are run by Germans, the investors are German, the population largely speak German. Those areas, it is true, do well. But if you are looking at Southern Italy, there are huge problems (and btw, anyone who is trying to tell you the opposite has an agenda, I have never seen this outside the context of "...so ordo-liberalism works, it must continue, deflationism works"...because if it is true that Italy is a basketcase, which it is then people start asking whether a fixed exchange rate is a good idea...which it isn't).
    - emanuele232 4y ago
      I agree with 3/4 of this comment, but the only region run by germans is Trentino, there are a couple regions that run on their own (Lombardia, Veneto and Piemonte). Said that, the more south you go the worse things get, and if you pass Rome the situation is tragic
- mellavora 4y ago
  > (some European countries have floating rate mortages) s/some/most/
  - FartyMcFarter 4y ago
    I thought it's common to fix rates for a few years at least (although this won't necessarily protect people in this case).
jesuslop 4y ago
BCE anounced net asset purchases in PEPP ending in march, though. What remains is to manage how to dump the balance out. https://www.ecb.europa.eu/press/pr/date/2022/html/ecb.mp220203~90fbe94662.en.html https://www.ecb.europa.eu/press/pr/date/2022/html/ecb.mp2202...
nabla9 4y ago
They do different things. (1) interest rate hike cuts interests. (2) asset purchase programme cuts interest rate differences between countries. Euroarea as it is now is very non-optimal currency region (by the Mundell's definition) To fix it, Euroarea needs fiscal transfers. The US has automatic federal level stabilizers that smooth differences between states. Euroarea needs something similar in the long term. Common EU level unemployment would work well.

miohtama 4y ago

Does buying more bonds while raising interest rates means that the wealth is transferred somewhere? - Countries with broken economy like Italy win - Countries that kept their economy more viable lose - Zombie companies will keep going? - Mortage owners lose (some European countries have floating rate mortages)

IfOnlyYouKnew 4y ago
Italy doesn't have a "broken economy". It's a stereotype that just won't die no matter what, I guess. Their politics and everything connected to it are arguably a bit more haphazardly than what's common in countries further north. But they have a solid industrial base and have been economically stable for 30+ years.
- toyg 4y ago
  If anything, Italy is practically the most trustworthy treasury in the world: despite the highest debt/GDP ratio in the world after Japan, they have never defaulted on debt and even resorted to effectively expropriating their own citizens overnight rather than missing payments.
  - tlamponi 4y ago
    > even resorted to effectively expropriating their own citizens overnight rather than missing payments. source on that one?
    - toyg 4y ago
      Google "Tassa patrimoniale Amato 1992". The government directly fetched 0.6% of all current account balances overnight.
      - tlamponi 4y ago
        Thanks for that! The speculation against the pound and lira I heard of, but that was before my time and the retroactive tax wasn't ever thought in school, at least I'd like to think that I had remembered such things. Not sure how that would play out on todays (well, current as today Italy's last gov is no more) landscape...
    - Phurist 4y ago
      You would not be able to understand it, it's domestic.
      - tlamponi 4y ago
        What do you mean by that comment? I _am_ Italian.
- kgwgk 4y ago
  Stable is not as good as growing: https://i.redd.it/puoyn3g0fb311.jpg https://i.redd.it/puoyn3g0fb311.jpg
- qwytw 4y ago
  > have been economically stable for 30+ years Assuming 'stable' is a synonim for stagnationg and slow decline then yes. The 90's were pretty good but there has been been almost no real growth after the Euro was introduced in 1999. It's even worse in relative terms. Back in 1995-2000 Italy's GDP per capita was around 130% of the EU average, now it's less than 100% and not that far from the more succesful Eastern European countries which joined in 2004 (around 80-85%). And these numbers only tell a part of the story since the average GDP per capita went down significancly after most ex-communist countries joined the EU between 2004 and 2007. France, Germany, UK & Italy had almost equal GDP per capita in 2000, Italy was even ahead of France and Britain during most of the 1990's and look what happened later: https://data.worldbank.org/indicator/NY.GDP.PCAP.PP.CD?locations=IT-FR-DE-GB-EE https://data.worldbank.org/indicator/NY.GDP.PCAP.PP.CD?locat... Obiouviously Italy is still a rich country with a "strong" economy but if it stays on the same trajectory for the next few decades it will likely become one of the poorest countries in the EU.
  - petre 4y ago
    > not that far from the more succesful Eastern European countries which joined in 2004 Most of those countries aren't in the Eurozone, with the notable exceptions of Slovakia and Lithuania.
    - qwytw 4y ago
      Also Estonia, Latvia, Slovenia so the majority of countries which joined in 2004 have the Euro. If you also count Romania and Bulgaria which joined a couple of years later exactly 1/2 of the new member are in the eurozone.
closewith 4y ago
That famously broken 12th-largest economy and 10th-largest exporter in the world.
- cloutchaser 4y ago
  They can be a large economy but not be able to pay their debts without German help. Which is exactly what will happen now
tlamponi 4y ago
> - Countries with broken economy like Italy win Check out this Twitter thread from an Austrian Economist PhD for some data points against that old and outdated stereotype: https://twitter.com/heimbergecon/status/1539486969977360384 https://twitter.com/heimbergecon/status/1539486969977360384
- skippyboxedhero 4y ago
  That isn't news. The reason why Italy runs a trade surplus is because they are forced into running a primary surplus by deflationist policies from the German bloc. The reason private debt is relatively low is because their banks largely do not function and have turned into bailout mechanisms (and Italy had to take the step of bailing in private investors because they were unable to finance their debt, given the relatively large size of the banking sector, this basically froze their financial markets). Correct, Italy has run primary surpluses since the 90s...their debt is 150% of GDP, the conclusion is what? The other stuff is largely false...but assume it isn't, what is the explanation for Draghi's reforms? Youth unemployment is 35% (for reference, this is higher than many places in Africa). People confuse the policies that have been forced on Italy due to Germany's ordo-liberalism, and actual economic strength. Also, there is massive regional inequality within Italy. Some regions in the North are basically Germany. The companies are run by Germans, the investors are German, the population largely speak German. Those areas, it is true, do well. But if you are looking at Southern Italy, there are huge problems (and btw, anyone who is trying to tell you the opposite has an agenda, I have never seen this outside the context of "...so ordo-liberalism works, it must continue, deflationism works"...because if it is true that Italy is a basketcase, which it is then people start asking whether a fixed exchange rate is a good idea...which it isn't).
  - emanuele232 4y ago
    I agree with 3/4 of this comment, but the only region run by germans is Trentino, there are a couple regions that run on their own (Lombardia, Veneto and Piemonte). Said that, the more south you go the worse things get, and if you pass Rome the situation is tragic
mellavora 4y ago
> (some European countries have floating rate mortages) s/some/most/
- FartyMcFarter 4y ago
  I thought it's common to fix rates for a few years at least (although this won't necessarily protect people in this case).

jesuslop 4y ago

BCE anounced net asset purchases in PEPP ending in march, though. What remains is to manage how to dump the balance out. https://www.ecb.europa.eu/press/pr/date/2022/html/ecb.mp220203~90fbe94662.en.html https://www.ecb.europa.eu/press/pr/date/2022/html/ecb.mp2202...

nabla9 4y ago

They do different things. (1) interest rate hike cuts interests. (2) asset purchase programme cuts interest rate differences between countries. Euroarea as it is now is very non-optimal currency region (by the Mundell's definition) To fix it, Euroarea needs fiscal transfers. The US has automatic federal level stabilizers that smooth differences between states. Euroarea needs something similar in the long term. Common EU level unemployment would work well.