Anfa is not as bad as thought but still bad

A bit more than two months ago in early December, there was much fuss about the ECB’s secret Anfa (Agreement on Net Financial Assets) and how the Central Banks of France and Italy allegedly misused it for additional monetary easing to the tune of roughly half a trillion euros, by buying sovereign debt. The public outrage over a secret agreement and using it to circumvent the prohibition of monetary financing, prompted the ECB to first release an explainer, that Anfa was quite the opposite of what was speculated in the media – but nobody believed it and politicians and economists (including myself) demanded the agreement to be made public. And on February 5th, the ECB did publish the text, along with the signatures of the NCB governors, the technical appendix and an extended explainer. Unfortunately, the agreement is a rather unreadable document, but nevertheless, I read through it and came to the conclusion that Anfa is actually bad, but not as bad as we may have thought. Anfa actually does what the ECB claims, namely to limit the amount of assets the NCBs may hold for non-monetary policy purposes. But there are several catches. Continue reading Anfa is not as bad as thought but still bad