DRAPED Male Figure was held by the Cleveland Museum of Art since 1986, but it was seized by Manhattan District Attorney Alvin Bragg’s office in August as part of an investigation into more than a dozen pieces of artwork and antiquities looted from an archaeological site in Bubon in Turkey in the 1960s. — CLEVELANDART.ORG
A HEADLESS bronze statue that is more than 2,000 years old and worth $20 million is at the center of a legal fight between the Cleveland Museum of Art and Manhattan District Attorney Alvin Bragg, who has led a crackdown in New York on stolen antiquities he wants returned to their countries of origin.
The piece, titled Draped Male Figure, was held by the Cleveland museum since 1986, but it was seized by Mr. Bragg’s office in August as part of an investigation into more than a dozen pieces of artwork and antiquities looted from an archaeological site in Bubon in Turkey in the 1960s.
The museum, which says it acquired the statue from an art gallery in New York in 1986 for $1.85 million, sued Mr. Bragg on Thursday last week in federal court in Ohio to regain possession, arguing that available evidence was insufficient to connect the sculpture to Turkey. Bragg wants it repatriated.
In its complaint, the museum said it “does not question that the New York District Attorney sometimes gets it right and returns true stolen property to foreign nations. Based on the evidence adduced thus far and the opinions of experts available to the Museum, this is not one of those times.”
The dispute comes more than a decade since the government of Turkey asked museums in the US to return dozens of artifacts and works of art it claims were stolen from archaeological sites. Since Bragg took office last year, his office’s Antiquities Trafficking Unit says it has recovered and returned more than 1,000 items valued at more than $217 million to 27 countries.
“We are reviewing the museum’s filing in this matter and will respond in court papers,” said Doug Cohen, a spokesman for the district attorney.
Todd Mesek, a spokesman for the Cleveland museum, said it “takes provenance issues very seriously,” but declined further comment on the litigation.
Draped Male Figure is believed to depict Roman emperor and philosopher Marcus Aurelius, and was probably sculpted between 150 BCE and 200 CE. The statue is a male figure wearing flowing robes, with one arm in front of his body and the other tucked behind his back.
The piece was seized “in place” in August, meaning the physical statue remains at the museum — but not on display. In the lawsuit, lawyers for the museum asked a federal judge to declare the museum to be the lawful owner of the piece.
The case is Cleveland Museum of Art v. Alvin Bragg, 23-cv-02048, US District Court, Northern District of Ohio (Eastern Division). — Bloomberg
Manila inched up two spots to 112th out of 150 cities in the 2023 Global 150 Cities Index released by the human resources consulting firm Associates for International Research, Inc. (AIRINC). The index ranks countries that have the ideal combination of high salaries, low taxes, cost, and quality of life to settle in. The Philippines’ capital city ranked higher in the financial rank (97th overall) while placing 117th in the lifestyle rank. Manila remained the second lowest in the East and Southeast Asian region after Jakarta.
ASK ANY PARENT about the time their kids spend on mobile devices, and you’ll likely hear the same refrain: It’s too much. Excessive use of smartphones and social media is linked to rising rates of teenage depression and self-harm, while also damaging students’ academic performance and exacerbating achievement gaps. At this point, the question isn’t whether phones should be banned from classrooms, but why more schools haven’t done so already.
Evidence about the negative effects of mobile devices on learning is overwhelming. Large-scale international assessments have shown that anything beyond limited use of technology in the classroom harms academic performance. A 14-country study cited in a UN report this year found that merely being in proximity to smartphones disrupted learning for all ages, from preschool to college, with poorly performing students suffering the most.
Prompted by findings like these — and common sense — the British government announced this month that it will instruct schools to prohibit the use of mobile phones during the school day. Other European countries, including the Netherlands and France, have imposed similar bans. Such policies can be challenging to enforce, but in places that have followed through the gains have been striking. Bans on phones in two regions in Spain improved math test scores by the equivalent of more than half a year’s learning. A 2022 analysis of more than 100 Norwegian middle schools found that banning phones boosted students’ grades and test scores and increased their likelihood of attending an advanced high school. It also yielded bigger academic improvements than far more expensive policies, such as reducing class sizes or putting more computers in schools.
Despite these clear benefits, US schools seem to be moving in the wrong direction. As of 2020, 76% of public schools said that they prohibited the “non-academic” use of phones during school hours, down from more than 90% a decade earlier. By all indications, those restrictions are widely flouted. In response to a surge in smartphone use during the pandemic — fueled partly by misguided school closures — some districts appear to have abandoned even token efforts to keep devices out of kids’ hands. A survey released last month found that 97% of US adolescents say they use their devices during the school day, for a median of 43 minutes — with most of that time spent on social media, YouTube, and video games.
Arresting this trend is critical to helping students recover lost ground and avoid permanent blight to their careers and life prospects. European-style national bans would be unworkable in the US, where schools are controlled locally. But policy makers should emphasize the urgency of the issue. State legislatures should press schools to ban the use of phones for the duration of the school day, including during passing periods and recesses — and to confiscate them, if necessary. They should provide incentives to districts that demonstrate academic gains after imposing school-wide bans. They should also help schools pay for things like electronics-storage pouches and phone lockers.
Schools will no doubt get an earful from parents who oppose such bans. While acknowledging legitimate anxieties — such as how to reach a student during a crisis — they should hold firm and explain that emergency-contact protocols are more than sufficient.
It’s by now incontrovertible that, however essential to modern life, smartphones have no place in the classroom. The sooner schools remove them, the better off students will be.
LISTED Boulevard Holdings, Inc. (BHI) said its Boracay Beach Resort is expected to welcome guests by 2026 as a company’s subsidiary signed a license agreement to market the development as a property under the Radisson Collection brand.
In a regulatory filing on Tuesday, BHI said its subsidiary Friday’s Holdings, Inc. forged an agreement with Radisson Hotels Asia Pacific Investments Pte. Ltd. on Oct. 20 to market the Boracay resort as part of its lifestyle luxury brand.
“Friday’s Boracay Beach Resort is expected to welcome our new and returning guests by 2026,” BHI said, adding that demolition is currently going on.
The resort stopped operations in March 2020 due to the coronavirus disease 2019 (COVID-19) pandemic.
Once built, BHI expects the resort to be one of the first five-star hotels to be aided by an international hotel brand on Boracay’s white beach.
According to BHI, Friday’s Holdings is set to build a new hotel that features about 110 room keys, two to four restaurants and bars, a jungle gym, an infinity pool with a lap pool, and a beach wedding pavilion.
BHI said Friday’s Boracay is well-known “as it is perfectly positioned on Boracay’s eye-catching white beach and offers modern amenities with a natural charm” of a beachfront setting to make it one of the country’s most sought-after vacation spots.
Radisson Hotels Asia Pacific is an international hotel group with 10 brands and more than 1,160 hotels in operation and under development in Europe, the Middle East, Africa, and Asia-Pacific. — Revin Mikhael D. Ochave
MADRID -— Spain has seized ancient gold artefacts valued at €60 million ($63.6 million) stolen from Ukraine after thieves were caught trying to sell them in Madrid, Spanish police said on Monday.
The 11 pieces, primarily jewelry including intricate necklaces, bracelets and earrings, are dated from the Greco-Scythian period between the 8th and 4th centuries BC, police said.
The items were exhibited in a Kyiv museum between 2009-2013, and were smuggled out of Ukraine in 2016, Madrid National Police said in a statement, without identifying the museum.
The artefacts had forged documents to make it look as if they belonged to the Ukrainian Orthodox Church, police said.
Three Spanish and two Ukrainian nationals were arrested as part of the investigation, which began in 2021, after one of the pieces — a gold belt with rams heads — was sold in a private sale in Madrid. — Reuters
AN AFFORDABLE internet provider, a job placement hub, and a dark warehouse — these are the other possibilities for a technology-enabled sari-sari store, according to entrepreneur Ibrahim R. Bernardo.
Driven by a vision of a high-tech future for Philippine small retailers, Mr. Bernardo and his team transformed their enterprise solutions startup to offer complete tech support for sari-sari store owners.
Mr. Bernardo, co-founder and chief marketing officer of Packworks, said the company has adjusted its offerings to meet the tech demands of sari-sari stores, much like those of large firms.
“Pre-pandemic, it was our CSR [corporate social responsibility], and we were helping around 5,000 sari-sari stores with our app,” he told BusinessWorld on how the company started.
Sari-sari stores are small retail shops commonly found in residential areas in the Philippines, selling a wide range of consumer goods, from food and beverages to household items.
There are about 1.3 million sari-sari stores in the Philippines, which 94% of consumers depend on for daily needs, according to the Asian Preparedness Partnership.
Excluding those without paid employees, there are 40,549 sari-sari stores in the country, according to the Philippine Statistics Authority (PSA).
Packworks provides these small entrepreneurs with an ecosystem of solutions tailored to their market, Mr. Bernardo said. “We cater to the agri sector, carinderias, small businesses, and professional or ‘super’ sari-sari stores,” Mr. Bernardo said.
He said that super sari-sari stores can avail of an almost full enterprise resource planning solution, which includes inventory management and insights dashboards.
“We have a CRM [customer relationship management system] where they implement their own loyalty promo system because there are sukis — individuals or small sari-sari stores that go to them,” he added.
“The successful sari-sari stores even have local delivery, so they will have their husband, maybe, delivering and taking orders from the community on a motorcycle or pedicab,” he said, noting that 75% of sari-sari store owners are women.
Mr. Bernardo also noted the integral role of technology in recognizing sari-sari store owners as key opinion leaders in their respective communities.
“We amplify and put those super sari-sari stores on a podium and give them tools so that the smaller stores are inspired and emulated,” he said on directing efforts to maximize the potential of small community retailers.
“There are so many [possibilities] once you get them connected and provide value.”
MARKET DATA However, creating work in the social enterprise is similar to running a marathon and shooting oneself in both feet, Mr. Bernardo said.
“You got two bottom lines: your KPIs [key performance indicators] for social impact, and keeping the lights on and scaling,” he said.
Providing tech and data systems to small retailers happened to yield actionable, real-time sales insights for brands of fast-moving consumer goods, he noted, which became a revenue generator for Packworks.
“For the big brands, they’ve never seen this data before,” he said on Sari IQ, a business intelligence by-product of the value Packworks adds.
“We were one of the few people that were able to provide data on how well their products were doing versus their competition, whether it was in-stock or out-of-stock in these stores,” he added.
“And that’s how we make money,” he said on precision marketing insights by category at a sari-sari store level being the company’s main profit source.
The data was also used to track prices for certain categories, which is where the company saw discrepancies in the reported inflation rate of the national statistics agency versus the actual cost of goods in sari-sari stores, where most Filipinos buy from, Mr. Bernardo noted.
Packworks said the average price of food items purchased from small retailers in the Philippines rose 15.62% in January, while the official food inflation rate reported by the PSA was at 11.2% in the same month, BusinessWorld reported in February.
“You’re looking at a 4.4% impact earlier this year on the cost of goods, and that’s painful,” Mr. Bernardo said. “The other challenge sari-sari stores faced was the fact that prices were fluctuating so much.”
“Can you image a small store with 200 SKUs [stock keeping units] and almost every week or twice a week, the prices are changing?” he said. “It is so incredibly difficult for them to know if they’re making money, how much should they add, and they’re doing this analog.”
“Access to brands, helping their businesses with the tools specific to them, margin protection — there are many ways we’re helping the stores, but the challenges are still there.”
He noted majority of stores aided by Packworks have increased sales, “doing better with the app than without it.”
“That is outpacing inflation, and I guess that’s the most we can do at this point in time.”
GROWTH Mr. Bernardo said that the company’s next stage is rolling out radical, data-driven financial products that help sari-sari stores grow on a micro-level.
“Our goal is to lower the cost money,” he said on providing credit assistance to small sari-sari store owners, especially those who go back and forth from super sari-sari stores for stock. “They’ve been doing this for years, day in and day out.”
“What if I gave this person four grand through the superstore, and it’s not cash? It’s through the products that I know they sell,” he said. “They save time and money, and I know, because of the history of their transactions with us, that they’re professional and good for it.”
“These are little tactical things that we can do to make transactions more frictionless and allow them to grow their business more.”
Packworks is targeting to onboard 300,000 sari-sari stores in the Philippines to its ecosystem by the end of the year and another 200,000 in the next six to eight months, from the current 270,000 it has.
“It’s not just dreaming that this is something we could bring to other countries and help sari-sari stores and nanays there,” Mr. Bernardo said on the company currently working with multinational companies for expansion abroad.
“We’re looking at countries in the region. Africa isn’t out of the picture,” he added on the company’s plans to expand in countries that have a per capita income of $3,000 and below.
THE GOVERNMENT fully awarded the reissued Treasury bonds (T-bonds) it offered on Tuesday at a higher average yield amid rising US rates due to the ongoing war between Israel and Palestine.
The Bureau of the Treasury (BTr) raised P30 billion as planned via the reissued 10-year bonds it auctioned off on Tuesday as total bids reached P48.872 billion, higher than the offered volume.
The bonds, which have a remaining life of nine years and 10 months, were awarded at an average rate of 6.954%, with accepted yields ranging from 6.8% to 6.999%.
The average rate of the reissued bonds was 27.9 basis points (bps) higher than the 6.675% quoted for the papers when they were last offered on Oct. 17. It was also 32.9 bps above the 6.625% coupon for the series.
The average yield was also 32.2 bps above the 6.632% quoted for the 10-year bond and 42.7 bps higher than 6.527% seen for same bond series at the secondary market before Tuesday’s auction, based on PHP Bloomberg Valuation Service (BVAL) Reference Rates data provided by the Treasury.
“The Auction Committee fully awarded the reissued 10-year Treasury Bonds at today’s auction. With a remaining term of nine years and 10 months, the reissued bond series 10-71 fetched an average rate of 6.954%,” the BTr said in a statement on Tuesday.
“The auction attracted P48.9 billion in total tenders, 1.6 times the P30-billion offer. With its decision, the committee raised the full program of P30 billion, bringing the total outstanding volume for the series to P90 billion,” it added.
The Treasury made a full award of its offer even as the bonds fetched an average yield that is “much higher” than secondary market levels, Rizal Commercial Banking Corp. Chief Economist Michael L. Ricafort in a Viber message.
Rates rose after US Treasury yields reached fresh highs, he said, as investors sought safe havens due to the war in the Middle East.
“The average auction yield was also higher amid the lingering geopolitical risks due to the Israel-Hamas war for more than two weeks already, with a potential risk of volatility in global oil prices that could lead to higher inflation and policy rates if the war escalates in the Middle East,” Mr. Ricafort added.
The yield on the benchmark 10-year US Treasury note was up 0.8 basis point at 4.846% in Asian hours on Tuesday, following the previous day’s quick decline after a brief rise above 5.0%, Reuters reported.
The run-up in yields on the 10-year Treasury note, seen as a safe haven in times of economic uncertainty and a benchmark for global borrowing costs, has been driven in part by investors pricing in stronger US growth.
Israel’s military intensified its assault on Hamas militants in Gaza, as the United States and other global powers called for aid to continue flowing into the besieged strip to prevent an already grave humanitarian crisis from worsening.
Israel’s military said it had hit more than 400 militant targets in Gaza overnight and killed dozens of Hamas fighters, including three deputy battalion commanders.
Demand for the T-bond offer was also weak, causing yields to rise, Mr. Ricafort added.
The BTr wants to raise P150 billion from the domestic market this month, or P60 billion via Treasury bills and P90 billion via T-bonds.
The government borrows from local and foreign sources to help fund its budget deficit, which is capped at 6.1% of gross domestic product this year. — M.J.B. Poliarco with Reuters
ALTERNERGY Holdings Corp. said on Tuesday that it had secured approval from the provincial government of Quezon for its 55-megawatt (MW) Alabat wind power project.
“We will be long-term partners for the development of not just the Alabat Island but the entire province. Our Alabat Wind Power Project is committed to delivering sustainable energy and growth to our community,” Alternergy President Gerry P. Magbanua said in a media release.
According to the company, the Quezon Provincial Development Council (PDC) described the wind project to be beneficial to the socioeconomic development of the province and its constituents.
The project aligns with the province’s vision and mission of optimized utilization of resources and provision of infrastructure and support services, it added.
Earlier this month, the company said it had tapped BPI Capital Corp., RCBC Capital Corp., and SB Capital Investment Corp. to lead in raising the P12-billion project financing for its two wind projects.
The endorsement from the PDC is one of the remaining preconstruction clearances for the Alabat wind power project, which expects its notice to proceed with construction by the second quarter of 2024.
The other project up for debt financing is the 86-MW Tanay wind power project in Rizal province, which is expected to be completed by 2025.
Alternergy won the bid for the projects through its project company Alternergy Tanay Wind Corp., under the second round of the green energy auction program of the Department of Energy.
The program is a competitive process of procuring renewable energy supply by offering capacities to qualified bidders at a set maximum or ceiling price.
For the second half, the listed energy company managed to swing to profitability with a consolidated net income of P38 million from the P145.2-million net loss in the same period last year.
The energy company aims to develop up to 1,370 MW of renewable sources such as onshore and offshore wind, solar, and run-of-river hydropower projects.
At the local bourse on Tuesday, Alternergy shares closed unchanged at P0.86 apiece. — Sheldeen Joy Talavera
During a Sept. 26, 2023, inquiry, the Philippine Senate cited in contempt four officers and members of an organization in Visayas who were allegedly involved in human right abuses and criminal activities disguised under the veil of cult-like practices. The contempt citation was issued by the Senate after the members and officers of the said organization allegedly refused to admit their roles in the cult-like activities. The inquiry stemmed from a Senate Resolution dated Sept. 13, 2023, where Senator Bato dela Rosa directed the Senate’s Committee on Public Order and Dangerous Drugs to conduct an inquiry in aid of legislation regarding the activities of “heavily armed private army of extremist groups” in Socorro, Surigao, Del Norte.
The power to cite a person in contempt, exercised by both the Senate and House of Representatives, is a constitutional prerogative granted to Congress to ensure obedience and respect for its proceedings. Such authority allows Congress to ensure that witnesses, resource persons, and individuals summoned for inquiry will abide by the rules set by our constitutional legislative bodies. As held by the Supreme Court in the landmark case of Arnault v. Nazareno1, a legislative body cannot legislate effective laws without having the necessary information on the issues sought to be addressed by such laws.
Congress’ contempt power indeed has legal and historical underpinnings, going as far back as 1796 when the United States House of Representatives exercised this power against those attempting to unduly influence its members.2 In McGrain v. Daugherty3, the United States Supreme Court also affirmed Congress’ exercise of its contempt power, ruling that some form of compulsion is necessary for Congress to obtain information necessary for effective legislation.
In the Philippines, the 1987 Philippine Constitution admittedly does not explicitly grant Congress the power of contempt. Instead, Congress’ power of contempt is commonly referred to as an “implied power,” often regarded as a necessary consequence of Congress’ power to conduct inquiries in aid of legislation. Article VI, Section 21 of the 1987 Philippine Constitution deals with Congress’ power to conduct inquiries in aid of legislation and provides that “[t]he Senate or the House of Representatives or any of its respective committees may conduct inquiries in aid of legislation in accordance with its duly published rules of procedure. The rights of persons appearing in or are affected by such inquiries shall be respected.”
The nature of Congress’ implied contempt power was clearly defined and explained by the Supreme Court in Negros Occidental II Electric Cooperative, Inc. v. Sangguniang Panlungsod of Dumaguete.4 In that case, the Supreme Court described Congress’ contempt power as “sui generis” considering that it is a unique authority exercised by Congress for its own self-preservation. This is because Congress, being that branch of government entrusted with legislative power, has the right to assert its power and penalize acts of contempt directed towards its exercise of legislative functions. Hence, the implied power of Congress to cite persons in contempt primarily stems from its status as one of the three great branches of government, rather than solely from its exercise of legislative power. Congress may, therefore, exercise its contempt powers and cite persons who act contemptuously during inquiries in aid of legislation, which undoubtedly form part of Congress’ legislative powers under the Constitution.
Notably, Congress’ contempt power is not confined solely to the Senate or the House of Representatives. It may also be exercised by the respective committees established within each house of Congress. In Sabio v. Gordon5, Chairman Camilo L. Sabio of the Presidential Commission on Good Government argued that the Senate’s committees have no power to punish and cite him for contempt of Senate. In ruling that the Senate’s committees also exercise contempt powers, the Supreme Court emphasized that Article VI, Section 21 of the Constitution directly confers the power of inquiry to the respective committees within each house of Congress. Necessarily, any committee of Congress also has the authority to exercise all essential powers to fulfill its power of inquiry, including the power to cite a person in contempt.
On the other hand of the spectrum, recent cases have also underscored the importance of protecting the constitutional rights of persons appearing before congressional inquiries as mandated under Article VI, Section 21 of the Constitution. In the landmark case of Neri v. Senate6, the Supreme Court ruled that a valid exercise of Congress’ contempt power requires, a.) publication of its rules of procedure, and b.) respect for the rights of persons appearing before its committees. In Balag v. Senate7, the constitutional mandate that the rights of persons appearing before congressional committees must be respected was also used as basis to restrict the period of imprisonment of a person cited in contempt by the Senate. This is because the constitutional right to liberty can be violated when a person cited in contempt may be detained for an indefinite period without due process of law.
In the end, Congress’ exercise of this potent power carries with it an obligation to navigate the fine line between protecting the integrity of its proceedings and ensuring that the rights of persons appearing before its committees are respected. Congress’ power to cite a person in contempt remains an essential tool for the effective discharge of its legislative prerogatives. Be that as it may, it is important to remember that contempt of Congress is always subject to legal and constitutional limitations, lest we forget the Constitution’s mandate to protect the democratic ideals of the nation.
1 G.R. No. L-3820, July 18, 1950.
2 The Case of Robert Randall and Charles Whitney, Dec. 28, 1795 – Jan. 13, 1796 (Editorial Note),” Founders Online, National Archives, https://founders.archives.gov/documents/Madison/01-16-02-0092.
3 273 U.S. 135, 47 S. Ct. 319, 71 L. Ed. 580, 50 A.L.R. 1 (1927).
4 G.R. No. 72492, Nov. 5, 1987.
5 G.R. No. 174340, Oct. 17, 2006.
6 G.R. No. 180643, March 25, 2008.
7 G.R. No. 234608, July 3, 2018.
This article is for informational and educational purposes only. It is not offered and does not constitute legal advice or legal opinion.
Jaims Gabriel L. Orencia is an associate of the Litigation and Dispute Resolution department of the Angara Abello Concepcion Regala & Cruz Law Offices (ACCRALAW).
THE Philippine halal market has the potential to grow with current efforts from both the government and the private sector, the Philippine Exporters Confederation, Inc. (Philexport) said.
There is a “big chance” that the halal market in the Philippines will grow, and “we have hardly scratched the surface,” said George T. Barcelon, chairman and trustee of Philexport, in a phone interview with BusinessWorld on Monday.
Halal food follows the strict guidelines of Islamic dietary laws. The global halal market now covers sectors like clothing, pharmaceuticals, cosmetics, tourism, media, and more, beyond just food and beverages, the Department of Trade and Industry (DTI) said in a statement on Oct. 16.
Mr. Barcelon, who also chairs the Philippine Chamber of Commerce and Industry (PCCI), also expressed his hope that the Philippines could emulate countries involved in halal products, such as Thailand and Malaysia.
The DTI has partnered with global halal stakeholders, including regional powerhouses like Malaysia, Indonesia, and Brunei Darussalam. The department aims to learn from these countries to improve the Philippine halal industry’s credibility and integrity, it said.
Adroit Market Research expects the global halal market size to approach $3 trillion by 2029, growing at an annualized rate of 5.6% through the projected period.
Halal food has gained popularity among both Muslim and non-Muslim consumers. It is now seen not just as a religious mark but also as a sign of safe, hygienic, and reliable food, the research firm said on its website.
“I know we’re trying to work hard on this but I don’t know when… We’re still far from it… because first of all, we do have a Muslim population and they’re eating halal food, but you need to be competitive,” Mr. Barcelon said.
Philexport, PCCI, and the DTI have been working to expand the halal market in the Philippines, hoping to grow the country’s food and agriculture industry, he noted.
The DTI expects the Philippine halal industry to bring in P230 billion and create over 120,000 jobs for Filipinos in the next five years.
Such goals are achievable, said Mr. Barcelon. “But we must be competitive.”
The DTI said that the development of the halal industry aligns with its four primary objectives: fostering regional growth, achieving food security, enhancing and expanding micro- to medium-sized enterprises, and enabling job skills matching and skills upgrading. — Aaron Michael C. Sy
THERE’S a growing need for the European Central Bank (ECB) to rethink how soon it starts shrinking the €1.7-trillion ($1.8-trillion) stash of bonds it bought during the pandemic — or risk disorienting markets down the line.
At a meeting this week in Athens, the ECB is set to begin discussing ending reinvestments under the pandemic emergency purchase program (PEPP) before the current end-2024 cutoff. That would fully align quantitative-tightening (QT) efforts with interest rate policy, which has delivered an unprecedented 10 straight hikes to drag inflation back toward 2%.
Some officials see PEPP purchases, which can currently act as a first defense should the bond yields of euro-zone governments jump unreasonably, as a key instrument amid budgetary jitters in countries like Italy.
But there are compelling grounds to halt reinvestments more quickly: Doing so too far into next year, or to match the existing deadline, risks the move happening alongside rate cuts to buoy Europe’s struggling economy, sending mixed signals to investors.
“We wouldn’t be surprised if the ECB brings forward the end to PEPP reinvestments by several quarters,” said Reinhard Cluse, chief economist for Europe at UBS. “What’s important is that they have to make an announcement before they start cutting interest rates. Otherwise, communication will be very difficult.”
With borrowing costs to be left on hold this week for the first time since the ECB began lifting them more than a year ago, officials are increasingly focusing on other parts of their toolkit.
Bonds from a larger portfolio — amassed from 2015 during fears of deflation — are already being allowed to roll off. But with the key policy rate at 4% to try to constrain economic activity and tame prices, PEPP reinvestments have become an outlier.
There’s a “strong argument in favor of stopping PEPP reinvestments sooner than the end of next year” because that would be “consistent with our interest-rate policy,” Governing Council member Madis Muller said last month.
The ECB hasn’t updated the program’s guidelines since December 2021 — well before rate hikes started. Back then, it promised future roll-offs “will be managed to avoid interference with the appropriate monetary stance.”
Barclays economists reckon an average of about €18 billion a month comes due under PEPP, though there are no official disclosures.
With the option to invest the proceeds of maturing securities across the currency bloc’s 20 members, some policy makers are wary to forgo such sums should debt markets take fright at the growing impact of the ECB’s hikes to date.
Flexibility was used immediately after it was introduced as officials tilted reinvestments toward Italy, Spain and Portugal and away from Germany and France.
While markets have since been steadier, the latest rout in Italian bonds is a reminder of how quickly investor confidence can fade. Even some ECB hawks, like Slovenia’s Bostjan Vasle, are hesitant to relinquish a tool that could restore calm if needed.
That’s especially the case as delays in overhauling European Union fiscal rules could prolong the lifespan of existing arrangements — potentially forcing governments into sharp fiscal consolidations and threatening penalties that could rattle investors.
Coronavirus is now firmly in the rear-view mirror, leaving PEPP untouched is getting harder to justify.
“There are certainly some Governing Council members who’ll be concerned,” said Ulrike Kastens, an economist at German asset manager DWS. “On the other hand, bond reinvestments are expansive to a certain extent, so they don’t really fit into the landscape any longer.”
Comments from policymakers in recent weeks show the Governing Council is far from a consensus. A Bloomberg poll showed 43% of economists expect the ECB to bring forward the end to PEPP reinvestments — up from 39% before.
Ms. Kastens at DWS and her counterparts at Morgan Stanley are among those expecting a December announcement that reinvestments will start to be lowered as early as March, though a looming review of the ECB’s operational framework may mean more time is required.
Any concerns about breaking the pledge to maintain PEPP reinvestments through 2024 — a cost Dutch central-bank chief Klaas Knot said last month that he doesn’t think the ECB should incur “at this moment” — are likely to be overcome, according to UBS’ Mr. Cluse.
“The concept of forward guidance has been badly damaged over the past two years as a number of pledges by central banks were broken,” he said. “Compared with that damage, the additional credibility loss caused by shorter PEPP QT would in my view be quite limited.” — Bloomberg
