ECB watchers join Positive Money Europe’s push for a green lending program.
The new inflation target of the ECB offers minimalistic improvements and lacks credibility. Although the ECB wants to get rid of its deflationary bias, it shies away from considering more forceful and radical instruments that could achieve that, giving itself instead more convenient justifications for missing the target in the future. The ECB will have to consider more paradigmatic changes to its monetary policy when it next reviews its strategy in 2025.
The U.S. Federal Reserve has adopted a new inflation target objective. We expect a similar change from the European Central Bank (ECB) when it concludes its Strategic Review in mid-2021. But the ECB will need to do much more than revising its inflation target if it wants to ensure speedy recovery and growth.
Several NGOs including Positive Money Europe are demanding that the central banks’ green finance forum step up their work to make sure emergency measures taken by central banks against Covid-19 do not harm long-term climate action.
The Eurogroup confirmed the highly needed suspension of fiscal constraints on Eurozone governments. But allowing countries to spend more does not mean all of them can afford to spend more.
By refusing to affirm the ECB’s willingness to “close spreads” on the Italian bonds market, Christine Lagarde’s mistakenly caused major indignation among citizens, politicians, and financial markets. But while Lagarde’s ambiguous comments were devastating, they mostly reveal the Eurozone’s flawed architecture.