François Hollande’s monetary backflip
In a recent speech on the air of the radio Europe 1, the socialist candidate François Hollande advocated for statuses reforms of the ECB in order to allow Frankfort to “lend directly” to the eurozone States. His move contradicts what he said in the past.
What Hollande said:
A second option that would be to lend to the states rather than what has been chosen : supporting banks. (…) It would be better, more efficient and faster that the ECB lends in first and last resort. I have been defending this position for years, and this is what is happening in the US and in UK as well.
Further, he argues:
It is unbelievable that the ECB floods the market with liquidity (…) when banks borrow at the ECB at 1% and lend to the spanish state at 6%. (…) At some point, one cannot accept such a rental phenomena.
While his critics of the european monetary system is pretty understandable (and find some echo here in France), it is untrue that Hollande has been defending this position “for years“.
In a video dated of february 2011, he argued that it was ok for banks to charge an interest when buying government bonds, while recognizing that we should give more slack on the monetary policy (ie. lowering interest rates). “The ECB would only buy directly sovereign debt if we are in a very bad situation” he said, referring to its Securities Markets Program. Later in his intervention, he advocates for the implementation of eurobonds, as a solidarity tool for European countries in the context of a greater integration of the member states.
Later today, Hollande’s advisor Jerome Cahuzac told Reuters that the ECB mandate was not on the agenda of the Socialist Party. “That has never been suggested“, he said.
In other words, Hollande is in no way an heterodox on his monetary stance. Quite the contrary: he is ok with the current system and just want some patches on the treaties in order to give more time for the EU to continue its harmonisation process.
The Germans should not worry too much about him…