The interest rates of the debt of the countries of southern Europe, including Portugal, rise this Thursday, after it was reported that the new mechanism that the ECB promised to introduce on July 21date of the next Council meeting, it already has a (preliminary) name but might not be ready on time. This is the mechanism with which the ECB will try to avoid the excessive expansion of the risk premiums of the debt of some countries, that is, to avoid excessively large differences in the financing costs of the different countries.
According to the sources contacted by Bloomberg, there was another meeting on Wednesday to proceed with the planning of the measure, but that meeting showed that there is still a lot of work to be done and consensus to be formed. ECB officials in Frankfurt remain somewhat confident that major points of contention can still be resolved before July 21, but sources interviewed by Bloomberg don’t see that as a certainty.
The meeting on July 21 is the one in which the ECB is expected to announce the first increase in interest rates since 2011. Related to this, it is one of the main points of contention within the ECB, as some officials fear that is a measure that cancels the effect of the rise in interest rates on the control of inflation.
On the other hand, those responsible are also trying to align positions on what conditions and commitments must be assumed by the countries that benefit from possible debt purchases. There are also concerns about the legal problems that could arise if the ECB intervenes in the market to lower the financing costs of one or several countries.
Even so, the program already seems to have a preliminary name -which, it should be noted, may change until the time of the announcement-. The program must be called Transmission Protection Mechanism (TPM)that is to say, Transmission Protection Mechanism, a name that is justified by the fact that the ECB claims that the purchases of bonds that can be made serve to ensure a transmission monetary policy, that is, trying to prevent the policies decided on in Frankfurt from producing too disparate effects in the different countries of the eurozone.
Whether or not this is the name chosen for the show, financial markets are, unsurprisingly, placing more value on the component of the Bloomberg news about the possible delay in the launch of the show. Portuguese debt interest rates are rising 10 basis points over 10 years to almost 2.4%, while interest rates in Italy are up 14 basis points to 3.38% over the same period.
Source: Observadora
