In addition, in 2022, despite scaling back its emergency purchase program in the event of a pandemic, the ECB launched a new “anti-fragmentation tool”, a transfer protection tool, expressly aimed at keeping spreads under control by allowing the central bank to buy government bonds of countries whose interest rates rates vary excessively due to speculation. What is currently happening in the French bond market fits this scenario perfectly. The ECB could have closed the spread and ended the panic at the push of a button. In fact, one could argue that it would be particularly justified: with all the talk of election meddling, it’s hard to see why financial markets should be allowed to manipulate elections by spreading unwarranted panic.
However, the ECB has so far refused to take any action. “What we’re seeing is an overvaluation, but that’s not in a world of chaotic market dynamics right now,” said Philip Lane, the ECB’s chief economist. His statement was supported by ECB President Christine Lagarde. “We remain vigilant, but limited to that,” she said, suggesting the bank saw no reason to activate its bond-buying facility.
Such comments would lead us to believe that the ECB took a technical decision based on arcane economic parameters. In reality, however, the ECB’s decision not to intervene has nothing to do with economics – and everything to do with politics. Looking the other way, the ECB is using “bond vigilantes” as proxies through which to scare voters – and send a message to Le Pen. Adam Tooze likened this “deal” between bond markets and the ECB to “state-sanctioned paramilitaries doling out beatings while the police look on[s] na”. But look behind the smokescreen and it’s clear that the markets are not meddling in the French election; it’s the ECB.
This is not the first time the ECB has engaged in financial and monetary blackmail to force governments to comply with the EU’s political-economic agenda. Former ECB president Jean-Claude Trichet has made no secret of the fact that he effectively set up Europe’s “sovereign debt crisis” in 2009-2012 by refusing to support bond markets to force governments to consolidate their budgets and implement “structural reforms”. . Over the years, however, the ECB has gone further than turning a blind eye to market speculation. On several occasions, it has engaged itself in speculation, engineering sell-offs of certain countries’ bonds, or other comparable actions to plunge opposing governments into fiscal crises. Recently, Giorgia Meloni and Lagarde have clashed on various occasions, with the latter often using the smear to anger the Italian government.
So what is happening in France today is nothing new. And yet there is something unprecedentedly brazen about the ECB’s latest attempt at electoral manipulation. What we are witnessing is a virtually unholy alliance between an increasingly discredited national elite and the EU’s transnational institutions against a common “populist” threat. The strategy should be clear by now: the EU creates an artificial financial panic, and national elites then use this to scare voters away from the “wrong” candidate. As an MP from Macron’s party said Le Figaro: “First of all, we have to scare people… show the consequences and the financial risks of it [National Rally’s] proposed measures.”
“The EU creates an artificial financial panic, and national elites then use it to scare voters away from the ‘wrong’ candidate.
So Macron was quick to seize on the market turmoil, portraying Le Pen as an economic threat and urging voters to rally against the National Assembly. Meanwhile, his finance minister, Bruno Le Maire, has made the specter of financial disaster his main campaign argument. “I would like to know who will foot the bill for Marine Le Pen’s Marxist agenda,” he said in an interview. (The news that Le Pen is a Marxist will, of course, come as a surprise to many on the French left.)