Lagarde Virus

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Lagarde Virus

Thanks to yesterday’s ECB press conference led by Christine Lagarde, European bond markets crashed, bringing about mass volatility and scathing criticisms to the ECB President. 

 

The fly in the ointment? Lagarde said the ECB is “not here to close the spread” (banker talk for ‘we’re not here to back up your unreliable governments). Goes to show what damage you can do if you don’t pay attention during orientation week at work. 

 

So, what exactly happened? Yesterday, the ECB was meant to announce measures to help EU governments deal with the coronavirus. The Italian government was particularly anxious, as it is the most affected country in the EU so far and because whenever the ECB holds a press conference these days it tends to be about Italy anyway. 

 

But instead of helping, Lagarde gave out more of a “COVID won’t hit us here on the 16th floor in Frankfurt, best of luck, arrivederci.” vibe. – which then tanked the market. 

 

Confused? Here an of explanation of things ECB and bonds:

 

{Boring Bit}

 

A bond spread measures how a government performs and how solvent it is. Think of it as a review on Amazon, but for how well a country’s economy is performing. The better the rating, the more people will buy into the government, the more the government will have to spend.

 

What Lagarde failed to realise during her speech, is that unlike the world of private banking, where you can say things like ‘socialism will destroy the world’ a year after you get bailed out by a government, central banking is a different kettle of fish. 

 

In fact, it is a well-known fact that central banking is the only place where the precision of words matters more than trying to hold a talk on transgender issues at a university.

 

{End of boring bit} 

 

Lagarde’s vote of no confidence, quickly reduced Italy’s bonds to a 1-star review, thereby making sure Italy will struggle to deal with the virus. Nice one. 

 

This quickly triggered many angry Italian tweets, even labelling the phenomenon as the “Lagarde virus”. 

 

Luckily, Lagarde and her virus were quickly quarantined while everyone else at the ECB went out to say ‘don’t mind the French lady’. Even Ursula von Der Leyen intervened using the words of Lagarde’s predecessor Mario Draghi (now Super Mario on Twitter) that they’ll do “whatever it takes”.

 

Sounds harsh. But if it weren’t for all the cancelled flights to the US, they’d probably found a way to ship Lagarde back to the US where she could go back to giving Ivanka Trump death stares or running the IMF where an exotic French accent makes for a sufficient skillset. 

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