This is happening best from time to time: Mario Draghi was on Tuesday at the last end of the last president of Trump
missiles. Mr Trump has accused the head of the European Central Bank of leading a new currency war, and both of them are mistaken for Tvtp. The last detuning of Trump's monetary policy came after Mr Draghi promised in his speech that the ECB could continue to stimulate the eurozone economy if needed. The confirmation that the ECB plans to address the last days of Mr Draghi's mandate sent the value of one euro 0.5% lower, under $ 1.12. European stocks jumped when bond yields fell. Mr. Trump claims that this rapid currency devaluation "makes it unjustly easier to compete with the US".
Mr. Dearly, he must understand that Mr Trump's real goal is President Faye Powell of the Federal Reserve, whose Open Market Commission is meeting this week. He wants Mr. Powell to cut interest rates in the US. The President's appeal is also quite rich given that one of the main economic threats Mr Draghi is reacting to is Mr Trump's multilateral tariff offensive.
The ECB is also tied to signals that the Fed could cut this week or later this year. All modern central bankers are trying to manage unconventional monetary policies without a road map and without international co-ordination. Apologize to Mr. Draghi for a hint of desire not to deviate more than synchronization with the Fed than he is already.
But it is also true that the depreciation of the euro is a clear, albeit incomplete, goal of Draghi's policies years. Starting at about $ 1
n. Dear, so far, has played back on what additional facilities the ECB can offer, partly because the menu is short. It could further reduce ECB interest rates, although the bank's reserve ratio is now negative at 0.4%. Subsidies for unpaid borrowing through various TLTRO programs (do not ask what it means) have failed to provide the desired economic stimulus.
Investors are pushing for a resumption of the ECB's purchases or a quantitative easing, which halted in December. But this will lead the ECB to a new political mining field, as it is now approaching its self-imposed limitation of owning no more than 33% of the debt issued by any country. Removing this cap will trigger new objections by longtime KE critics, especially in Germany, and potentially will induce the ECB to stir up political and legal battles as a significant minority owner of various debt securities.
This leaves Mr Draghi for the time being doing what he did on Tuesday – try to talk to the markets, discuss the euro and talk about the practical constraints faced by the ECB. But this strategy has limits, as Mr. Draghi has always been the first to warn. Internal reforms to revive labor and product markets and stimulate business investment have been the missing component of the European economy for decades. Without them Europe is struggling to achieve sustainable growth at any exchange rate
Mr. Trump is right that the eurozone has attempted a competitive devaluation as a substitute for rigid reforms, but he is not right to think he is working for Europe. He is also not right to think he will work for the United States.