A rebellious young man. A lover of peace Berta canyon. A traveler to all vermeer that you don’t know. A supporter of listening more than speaking. A guy who was honored on Thursday by his solemn colleagues from the ECB, when saying goodbye to Frankfurt, with a shirt from his club (Atletico de Madrid) signed by everyone. Someone like that has a soul. Pablo Hernández de Cos is not just any technocrat.
He knew numbers and arrived at the research service of the Bank of Spain, an intellectual jewel created under the dictatorship by the wise republican Joan Sardà. He hatched real monetary policy. And he had to serve as governor of the Bank of Spain due to the skillful decision of a solvent, although brief, PP minister, Román Escolano.
In his six-year plenary session in Frankfurt—and in the previous years—Cos has consecrated the international prestige of his entity. Considered Mario Draghi’s dolphin, he was his discreet battering ram in favor of expansive monetary policy (liquidity risk, purchase of bonds against the crisis), convincing more than one person with technical mastery. hawk.
And he has displayed great activism, supporting the initially hesitant Christine Lagarde and modulating her subsequent restrictive desire. Many times, in complicity with others moderate pigeons, the Irish and chief economist Philip Lane, the French governor François Villeroy, the Portuguese Carlos Costa and Mário Centeno. Morally close, but in a version of unassailable technical rigor, of the Greeks and Italians, those impetuous pigeons.
The trace of Cos, and his team at the BdE, headed by Óscar Arce, has permeated key moments of the ECB in whole or in part. On March 20, 2020, she helped the newly minted boss amend her unhappy phrase at the beginning of the pandemic — “we are not here to reduce risk premiums” — which caused a storm, resolved with her clarifications and those of Lane and Villeroy.
With an exemplary outcome: Pandemic purchasing program (PEPP, for its acronym in English) multiplied in one week from 120,000 million to 750,000 million, and was later expanded by another 600,000. A total of 1.35 trillion euros, which added to the Next Generation fiscal plan, saved the EU from economic paralysis.
And the North-South gap: the introduction of the principle of “flexibility” between “jurisdictions” helped the national ones based on their needs (more support for vulnerable than for solid ones) instead of distributing them according to the well-known key of their share of capital. The principle of solidarity cohesion in monetary policy! But conveyed by appealing to the necessary financial stability that would avoid turbulence for everyone. The BdE contributed with several papers, showing that this was more efficient. Spending only the essentials drop by drop is cheaper than watering in bulk.
The next key milestone was the new Monetary strategy (7/8/2021), less restrictive: it set the inflation target at 2% “in the medium term” (instead of the rigid “below 2%”), but in a “symmetrical” way, tolerating deviations both by above (what was never assumed) and below (the usual orthodox) and inaugurating its involvement in the fight against climate change. Unfortunately, some ignore it.
And then, the decisive condition sine qua non to accept on July 21, 2022 the beginning of the sequence of interest rate increases: the creation of the Instrument for the Protection of the Transmission of monetary policy. It would give a free pass, if appropriate, to national public debts besieged by the markets. Promoted by Fabio Panetta and supported by Cos, it has been as effective in avoiding the fragmentation of the euro that remains virgin, like the OMT of 2012 that concretized Draghi’s magic phrase: “The ECB will do everything necessary, and believe me, it will be enough”.
Afterwards, Cos has fought to soften the restrictive pace and bring forward interest rate reductions. He says goodbye, completing the first of them.
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