According to A. Beattie from the FT (July 27), the TPI is an iteration instrument.
The TPI is more a diversion than an “iteration”. There is an existing instrument at the disposition of the ECB, the OMT. Why did it not used it? Because it allows the ECB to buy bonds from countries under attack by the market under strong conditionalities and Italy (and France) refuse conditionalities.
The TPI is targeted QE for fragile countries to maintain artificially low interest rates on their debt with no conditionality attached. Conditionality means that a country receiving financial aid must first make the necessary reforms to reduce its debt ratio.
TPI is not a monetary instrument it is a quasi-fiscal instrument invented by the ECB (fiscal dominance). The independence of the ECB is crumbling.
This is not by adding instrument over instrument that the “euro’s governance become slightly more calibrated and precision-designed and slightly less existential…” what else?
All this soup masks the fundamental, countries in a monetary zone cannot have debt ratio spanning from 200% (Greece) to 18%. Italy, Portugal, Spain, and France have all a debt ratio above 100%, against Germany (70%) and Netherlands (57%). The growing spread of interest rates is not due to speculative behaviour but to divergent debt ratios, this will not disappear through fancy instruments.