ECB urges to revise rate hike plans amid turmoil in financial markets

Good morning. The EU imposes restrictions on the import of Chinese “green” technologies, in accordance with the Commission’s Clean Zero Industry Bill to be presented today and seen by my brilliant colleagues.

And Dutch Prime Minister Mark Rutte was defeated in a provincial election yesterday by an upstart farmer protest movement. His ruling coalition lost a quarter of their seats in the Dutch Senate, according to an exit poll.

Today our ECB informant analyzes the dilemma in Frankfurt as the bank struggles to make an interest rate decision in the midst of a market crash. And our head of the Paris bureau delves into the garbage accumulated on the sidewalks in the run-up to the parliamentary showdown over pension reform.

Glue or twist?

Who will be the central banker? Having made clear its plans to raise interest rates by half a percentage point, the European Central Bank is now being spurred on by former leaders to do less due to financial market turmoil following the failure of a US bank. writes Martin Arnold.

Context: The ECB’s Governing Council met today to decide how much to raise borrowing costs to fight high inflation. Financial markets are spinning wildly after Silicon Valley bank collapsed in the US and shares Credit Suisse and other European banks fell into fear that the crisis could spread, complicating the task of the ECB.

Two former board members said policymakers should cut the planned rate hike to a quarter of a point or postpone it altogether until the scale of the problems in the banking system becomes clearer.

“I think what happened today is a bit of a game changer,” former ECB vice president Vitor Constancio told the FT. share price of European banks falls yesterday. “Infection of other European banks is a concern and they should be careful.”

“I think going a quarter point and saying they will probably do more is justified,” said Constancio, now a professor of economics at the University of Navarra. “What is already in the public domain is enough to explain such a move, and they do not need other reasons.”

The ECB worries that raising borrowing costs, as planned, may not be wise if the banking system fluctuates this week. become a full blown crisisespecially since rising rates were a major factor in the collapse of the SVB.

“Financial contagion is equivalent to some form of monetary tightening,” said Lorenzo Bini Smaghi, another former head of the ECB who now heads French bank Société Générale.

“Staying on the 50-point increase as if nothing had happened means sticking to a tougher stance than previously thought,” he told the German newspaper. Borsen-Zeitung. “It could be risky and add even more instability. Postponing for one month or doing just 25 points won’t be a problem.”

Chart du jour: Territorial dispute

In Germany, Spain, Italy, Portugal and Romania, more people believe that the war in Ukraine should end as soon as possible – even if it means ceding territory to Russia – than they believe that Kiev should fight for as long as necessary to free all its land. , according to to the European Council on Foreign Relations survey.

Reformed, crushed

Emmanuel Macron’s plan to raise the retirement age by two years to 64 will never be popular, but the French president may have underestimated how stinky things are about to get. writes Leila Abboud.

More than 7,000 tons of rubbish filled the sidewalks of Paris last week due to a garbage pickers strike. Protesters threw garbage bags on the doorstep of Macron’s Renaissance party headquarters.

We hope they don’t do the same in parliament today when legislators a vote on the pension reform bill is expected.

No one really knows if Macron has enough backing to push through his flagship reform. It’s another sign that his political strength has waned since his party lost last June’s legislative election, leaving the centrist alliance about 40 votes short of legislation.

Aides were counting and recounting potential votes at the Élysée yesterday, but veteran politicians concede that scheming legislators will always find a way to mysteriously be absent from the half-cycle if necessary. To abstain or miss a vote on raising pension reform, which is opposed by three-quarters of the population, is a much more convenient position for an MP than to be responsible for it in his constituency.

If he has no votes, Macron can resort to enacting the law by decree, effectively overturning the legislators’ decision under Article 49.3 of the French constitution. But using 49.3 comes at a price: it allows opposition lawmakers to call a vote of no confidence and potentially topple the government.

The launch of 49.3 is also sure to prompt Macron’s critics to say that something is as rotten in the French Republic as all these piles of rubbish.

What to see today

1. EU Environment Ministers meeting in Brussels.

2. EU chief diplomat Josep Borrell arrived in Albania for accession negotiations.

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