Markets will test the ECB’s resolve

 With inflation high, Lagarde does not have the same leeway as Draghi

Mario Draghi. On a trip to London, he uttered a now famous phrase, saying that he and the ECB would do “whatever it takes” to save the euro.

The moment became the stuff of monetary policy legend.

To tackle fragmentation she announced the creation of the Transmission Protection Instrument, or TPI, a scheme to help any euro member state (for which, read: Italy) to fend off unwarranted market instability. 

The market’s reaction: a swift thumbs-down.

 Draghi was able effectively to say ‘trust me, I will throw money and monetary easing at this problem, ask for details later’. Lagarde does not have the same leeway.

Annual inflation was running barely above 0 per cent when Draghi cast his spell a decade ago. Now it is at 8.6 per cent. 

Lagarde’s job is to get it back down to 2 per cent.

Katie Martin FT 22 July 2022

https://www.ft.com/content/a9851c45-f2bb-4e00-9a8a-000038308f0e

Draghi’s government had negotiated to receive around €200bn

from the EU’s post-pandemic recovery fund — and, in return, to make Italy more competitive and business-friendlier. 

In order to receive the next tranche of cash — worth €19bn — Italy had 55 separate targets to hit by the end of the year. 

FT Editorial 22 July 2022

https://www.ft.com/content/aed7b9f8-87d3-4da4-83af-a476a8c2b850

We have the vision, we have the plan, and we have agreed to invest together €806.9 billion

https://ec.europa.eu/info/strategy/recovery-plan-europe_en