The era of magic money is ending

The president of the European Central Bank, Christine Lagarde.REUTERS

The good results released this week should not overshadow the vital role of one of the main architects of the recovery: the ECB. Almost all of the 129,000 million euros of public debt issued since the beginning of the pandemic to sustain the economy and prepare for its rebound has been bought by the central bank (with data from the Public Treasury until May). This means that the markets have not shown interest in increasing their participation: foreign operators have sold titles for a total of 12,000 million, offset by the greater presence of resident entities.

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If unemployment barely rose during the pandemic and entire sectors did not collapse, it is thanks to the support of public budgets, financed by the issuance of a debt that has ended up on the balance sheet of the ECB. This generosity has been maintained during the most recent stage marked by the end of the crisis, evidenced by the main economic indicators (the PMIs chain five months at clearly expansive, if not historical, levels). Affiliation to Social Security has increased by 1.2 million people since March (in effective terms, discounting the effect of ERTEs and the self-employed with benefits), which shows the importance of employment mechanisms financed comfortably thanks to the powerful monetary stimuli. Some stimuli that have also served to lighten the financial burdens of the States. Thanks to the cheapness of money, interest payments have evolved in the opposite direction to the accumulation of debt. With the interest rates that prevailed in the financial crisis, that is to say without the help of the ECB, the interest charges would reach 50,000 million, double what we have fortunately borne last year.