Moreover, in 2022, despite the tapering of its pandemic emergency purchase programme, the ECB launched a new “anti-fragmentation tool”, the Transmission Protection Instrument, explicitly aimed at keeping spreads under control by allowing the central bank to purchase the government bonds of countries whose interest rates diverge excessively due to speculation. What is currently happening on the French bond market perfectly fits this scenario. The ECB could close the spread and put an end to the panic with the press of a button. In fact, one could argue this would be particularly justified: with all the talk of electoral interference, it’s hard to see why financial markets should be allowed to manipulate elections by spreading unwarranted panic.
Yet the ECB has so far refused to take any action. “What we are seeing is a repricing but it is not in the world of disorderly market dynamics right now,” said Philip Lane, chief economist of the ECB. His comments were backed by ECB president Christine Lagarde. “We’re continuing to be attentive, but it’s limited to that,” she disclosed, signalling that the bank sees no reason for activating its bond-purchasing instrument.
Taken at face value, such comments would have us believe that the ECB has taken 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. By looking the other way, the ECB is using the “bond vigilantes” as proxies through which to scare voters — and send a message to Le Pen. Adam Tooze has likened this “agreement” between bond markets and the ECB to that of “state-sanctioned paramilitaries delivering a punishment beating whilst the police look[s] on”. But look beyond the smokescreen, and it becomes apparent that it’s not the markets interfering in the French elections; it’s the ECB.
This isn’t the first time the ECB has engaged in financial and monetary blackmail to coerce governments into complying with the EU’s political-economic agenda. Former ECB president Jean-Claude Trichet made no secret of the fact that he effectively engineered the European “sovereign debt crisis” of 2009-2012, by refusing to support bond markets in order to pressure governments into consolidating their budgets and implementing “structural reforms”. But over the years, the ECB has gone even further than simply turning a blind eye to market speculation. On several occasions, it has engaged in speculation itself, engineering sell-offs of the bonds of certain countries, or other comparable actions, in order to plunge hostile governments into fiscal crises. Most recently, Giorgia Meloni and Lagarde have clashed on various occasions, with the latter often using the spread to turn the heat up on the Italian government.
What is playing out today in France, then, is nothing new. And yet, there is something unprecedentedly brazen about the ECB’s latest attempt at electoral manipulation. What we are witnessing is effectively an unholy alliance between an increasingly discredited national elite and the supranational institutions of the EU against the common “populist” threat. The strategy should be clear by now: the EU creates an artificial financial panic and national elites then use that to scare voters away from the “wrong” candidate. As an MP from Macron’s party told Le Figaro: “First and foremost, we need to scare people… to show the consequences and financial risks of the [National Rally’s] proposed measures.”
“The EU creates an artificial financial panic and national elites then use that to scare voters away from the ‘wrong’ candidate.”
Thus, Macron was quick to seize onto the turbulence in the markets to paint Le Pen as an economic menace and invite voters to rally against the National Rally. Meanwhile, his finance minister, Bruno Le Maire, has made the spectre of a financial disaster his main campaign argument. “I would like to know who is going to pay the bill of the Marxist programme of Marine Le Pen,” 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.)