Moreover, in 2022, despite scaling back its pandemic-related emergency asset purchase program, the ECB has introduced a new “anti-fragmentation tool,” the Transmission Protection Instrument, which explicitly aims to keep spreads under control by allowing the central bank to buy government bonds of countries whose interest rates diverge excessively due to speculation. What is currently happening in the French bond market fits this scenario perfectly. The ECB could close the spread and put an end to the panic at the push of a button. In fact, one could argue that this would be particularly justified: with all the talk of election interference, it is difficult to understand why financial markets should be allowed to manipulate elections by spreading unjustified panic.
But the ECB has so far refused to take action. “What we are seeing is a repricing, but not currently in a world of disorderly market dynamics,” said Philip Lane, chief economist at the ECB. His comments were supported by ECB President Christine Lagarde. “We remain vigilant, but that is not all,” she said, indicating that the bank sees no reason to activate its bond-buying instrument.
At first glance, such comments would lead us to believe that the ECB made a technical decision based on obscure economic parameters. In reality, however, the ECB’s decision not to intervene has nothing to do with economics – it has everything to do with politics. By looking the other way, the ECB is using the “bond vigilantes” as proxies to scare voters – and send a message to Le Pen. Adam Tooze has compared this “arrangement” between the bond markets and the ECB to that of “state-sanctioned paramilitaries administering a beating while the police look on”.[s] “We have to move on.” But if you look behind the fog, it becomes clear that it is not the markets that are intervening in the French elections, but the ECB.
This is not the first time that the ECB has used financial and monetary blackmail to force governments to comply with the EU’s political-economic agenda. Former ECB President Jean-Claude Trichet made no secret of the fact that he effectively created the European “sovereign debt crisis” of 2009-2012 by refusing to support bond markets in order to push governments to consolidate their budgets and implement “structural reforms”. But over the years the ECB has gone further than simply turning a blind eye to market speculation. On several occasions it has itself engaged in speculation, staged sell-offs of certain countries’ bonds or other similar measures to plunge hostile governments into fiscal crises. Recently Giorgia Meloni and Lagarde have clashed on several occasions, with the latter often using the difference to put pressure on the Italian government.
So what is happening in France today is nothing new. And yet the ECB’s latest attempt to rig elections is unprecedentedly brazen. 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 the national elites then use it to scare voters away from the “wrong” candidate. As one MP from Macron’s party said The Figaro: “First of all, we have to scare people … to make them aware of the consequences and financial risks of [National Rally’s] proposed measures.”
“The EU creates an artificial financial panic and the national elites then use this to scare voters away from the ‘wrong’ candidate.”
Macron was quick to take advantage of the turmoil in the markets to portray Le Pen as an economic threat and call on voters to demonstrate against the Rassemblement National. His finance minister, Bruno Le Maire, has made fear of financial disaster his main campaign argument. “I would like to know who will foot the bill for Marine Le Pen’s Marxist program,” he said in an interview. (The news that Le Pen is a Marxist will, of course, surprise many on the French left.)