Lagarde’s Brutal Statement on Italy Causes Financial and Political Storm
March 13, 2020 (EIRNS)—Answering a journalist during the European Central Bank press conference March 12, on whether the ECB is going to support Italian bonds in the current coronavirus emergency, ECB President Christine Lagarde said, “We are not here to close spreads.” The spread between the Italian and German bonds immediately jumped by 49%, to 262 basis points, and the Milan stock market plunged 16%.
If it remains so, it means that Italy will pay €10 billion more on its debt at the end of the day. This is all the more remarkable as the Italian government just announced a major increase in indebtedness in order to provide financing for the coronavirus emergency.
The Italian government was forced to respond to Lagarde’s statement, and even Italy’s President Sergio Mattarella remarked that
“Italy expects solidarity, not obstacles” from EU institutions. Senate Finance Committee Chairman Sen. Alberto Bagnai remarked in a release that “Lagarde’s statement is probably the most unfortunate statement ever spoken by a central banker. European citizens are sick and tired of institutions that harass them in normal times and cause injury in times of crisis. The European Union has missed the umpteenth opportunity to demonstrate its usefulness.”
Here are some headlines by media critical of the EU: “Europe Helps Us ... To sink!” (La Verità); “Coronavirus: Europe Stabs Italy” (Il Tempo); “Coronavirus: Italy Has Already Been Isolated by the EU. Truly, We Are Already Out of Europe” (Libero); “A Tsunami on Schengen: Coronavirus Splits Europe” (Il Giornale), referring to Austria and Slovenia implementing border controls.
If the EU pulls the rope too much, even a comprador government such as Giuseppe Conte’s second one might find a soupçon of dignity and walk out. Eyes are now cast on the March 16 Eurogroup meeting of euro area finance ministers, in which the EU wants to enforce the European Stability Mechanism (ESM) reform. Prime Minister Conte yesterday phoned German Chancellor Angela Merkel, apparently in the attempt to change the agenda. According to reports, Conte asked Merkel to put the coronavirus emergency on top and not at the bottom of the agenda. What is needed, however, is a rejection of the ESM reform tout court.