The European Central Bank has announced that it is accelerating the creation of a tool to control the debt of the southern countries (Spain, Italy and Greece). In addition, he announced, as before, the weakening of the reinvestment of the Emergency Procurement Program (PEPP), created for the pandemic, by 1.7 billion euros, that is, investing money owed from the debt of Germany and France in countries with the most stressful debt.

The monetary organization does not want the stabilization of prices in the euro area with rate hikes to affect debt and thereby create fragmentation between countries. Thus begins the impossible mission of Christine Lagarde, President of the ECB, and her team.: reduce inflation and contain the already soaring debt of peripheral countries. Notificationwhich took place after the emergency meeting of the Governing Council, nor was it “by all means” Mario Draghi a decade ago with the euro crisis, but it calmed the markets. In addition, the brief statement does not specify what the instrument will be.

Spain’s risk premium fell to 124 points, while the 10-year bond yield remained at 2.88% (still very close to the alarming 3%.) It also lowered Italy’s risk premium, which stood at 225 points, and its 10-year bond yield dropped to 3.86% (below an alarming 4%).

The decision of the ECB has a variety of opinions. Tressis chief economist Daniel Lacalle says the body’s job is to stabilize prices, not that Spain and Italy “finance themselves cheaply.” For this reason, he believes that the ECB should accelerate its rate hike this year. The Economist points out that he cannot “normalize monetary policy and not normalize it at the same time.”

Investors they missed more information about the tool that is not yet known how it will be. Azad Zangana, Senior European Economist and Strategist at Schroders, believes that new political instrument “is key”because high indebtedness triggered the debt crisis, “and the ECB is trying to avoid it.” However, he sees a problem as the ECB does not share exactly what assets are held and as a result there is no indication of how much of the fund will be available to the ECB for use in the short term. “PEPP is too limited to be an effective tool to stop the loss of market confidence,” says Zangana.

This statement was not “by all means” Mario Draghi, but it calmed the markets.

A statement agreed by François Rimet, chief strategist at La Française AM, explaining that the ECB should explain these new anti-crisis tools, which strongly doubts that this is a new quantitative easing (QE) program intended for peripheral countries. Rimeu notes that the most likely instrument would be a new plan similar to the direct cash program but with more flexibility and fewer conditions. “The results will not be visible until inflation falls,” the expert says.

Gergely Maioros, a member of the Carmignac investment committee, also did not provide more details about the new tool and assures that the only information available is the flexibility of PEPP reinvestment, but “It doesn’t address the fragmentation problem effectively enough.” Majoros believes that the ECB’s more aggressive monetary policy will continue to put pressure on the eurozone’s most vulnerable countries.

For his part, Andrew Mulliner, director of global aggregate strategies at Janus Henderson, explains that the announcement highlights the paradox facing the ECB. “setting a single political interest rate to accommodate a group of highly heterogeneous countries.” Mulliner believes the anti-fragmentation tool should be put in place relatively quickly, which he says is “much less suited to tougher policies than softer ones,” so he assures the market will put the agency to the test later.

Finally, Victor Alvargonzalez, chief strategy officer and founding partner of independent consulting firm Nextep Finance, believes that Wednesday’s announcement was made to keep premiums from spiraling out of control as a reassuring warning to the market. “Essentially, they are showing their teeth to investors who are betting that risk premiums will skyrocket,” Alvargonzalez says.