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In 2017, Facebook said it was testing a new way of selling online advertising that would threaten Google’s control of the digital ad market. But less than two years later, Facebook did an about-face and said it was joining an alliance of companies backing a similar effort by Google.

Facebook never said why it pulled back from its project, but evidence presented in an antitrust lawsuit filed by 10 state attorneys general last month indicates that Google had extended to Facebook, its closest rival for digital advertising dollars, a sweetheart deal to be a partner.

Details of the agreement, based on documents the Texas attorney general’s office said it had uncovered as part of the multistate suit, were redacted in the complaint filed in federal court in Texas last month. But they were not hidden in a draft version of the complaint reviewed by The New York Times.

Executives at six of the more than 20 partners in the alliance told The Times that their agreements with Google did not include many of the same generous terms that Facebook received and that the search giant had handed Facebook a significant advantage over the rest of them.

The executives, all of whom spoke on condition of anonymity to avoid jeopardizing their business relationships with Google, also said they had not known that Google had afforded such advantages to Facebook. The clear disparity in how their companies were treated by Google when compared to Facebook has not been previously reported.

The disclosure of the deal between the tech giants has renewed concerns about how the biggest technology companies band together to close off competition. The deals are often consequential, defining the winners and losers in various markets for technology services and products. They are agreed upon in private with the crucial deal terms hidden through confidentiality clauses.

Google and Facebook said that such deals were common in the digital advertising industry and that they were not thwarting competition.

Julie Tarallo McAlister, a Google spokeswoman, said the complaint “misrepresents this agreement, as it does many other aspects of our ad tech business.” She added that Facebook is one of many companies that participate in the Google-led program and that Facebook is a partner in similar alliances with other companies.

Christopher Sgro, a Facebook spokesman, said deals like its agreement with Google “help increase competition in ad auctions,” which benefits advertisers and publishers. “Any suggestion that these types of agreements harm competition is baseless,” he said. Google and Facebook declined to elaborate on the specifics of their deal.

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The Wall Street Journal had reported on aspects of the draft complaint earlier.

The swell of recent antitrust cases filed against Google and Facebook has cast a spotlight on lucrative deals among Big Tech. In October, the Justice Department sued Google and homed in on an agreement with Apple to feature Google as the preselected search engine on iPhones and other devices.

“This idea that the major tech platforms are robustly competing against each other is very much overstated,” said Sally Hubbard, a former assistant attorney general in New York’s antitrust bureau who now works at Open Markets Institute, a think tank. “In many ways, they reinforce each other’s monopoly power.”

Google and Facebook accounted for more than half of all digital advertising spending in 2019. In addition to displaying advertising on their own platforms, such as Google’s search engine and Facebook’s home page, websites, app developers and publishers rely on the companies to secure advertising for their pages.

The agreement between Facebook and Google, code-named “Jedi Blue” inside Google, pertains to a growing segment of the online advertising market called programmatic advertising. Online advertising pulls in hundreds of billions of dollars in global revenue each year, and the automated buying and selling of ad space accounts for more than 60 percent of the total, according to researchers.

In the milliseconds between a user clicking on a link to a web page and the page’s ads loading, bids for available ad space are placed behind the scenes in marketplaces known as exchanges, with the winning bid passed to an ad server. Because Google’s ad exchange and ad server were both dominant, it often directed the business to its own exchange.

A method called header bidding emerged, in part as a workaround to reduce reliance on Google’s ad platforms. News outlets and other sites could solicit bids from multiple exchanges at once, helping to increase competition and leading to better prices for publishers. By 2016, more than 70 percent of publishers had adopted the technology, according to one estimate.

Seeing a potentially significant loss of business to header bidding, Google developed an alternative called Open Bidding, which supported an alliance of exchanges. While Open Bidding allows other exchanges to simultaneously compete alongside Google, the search company extracts a fee for every winning bid, and competitors say there is less transparency for publishers.

The threat of Facebook, one of the biggest ad buyers on the internet, supporting header bidding was a grave concern at Google. The draft of the complaint reviewed by The Times cited an email from a Google executive calling it an “existential threat” that required “an all hands on deck approach.”

Facebook announced in March 2017 that it was testing header bidding with publishers like The Washington Post, Forbes and The Daily Mail. Facebook also took a jab at Google, saying the digital ad industry had been handing over profits to “third-party middlemen who make the rules and obfuscate the truth.”

Before Google and Facebook signed the deal in Sept. 2018, Facebook executives outlined the company’s options to Mark Zuckerberg, its chief executive, according to the draft of the complaint: hire hundreds more engineers and spend billions of dollars to compete against Google; exit the business; or do the deal.

To many in the ad industry, Facebook joining Google’s alliance felt like a reversal on header bidding. One Open Bidding partner said it had been excited to be in discussions with Facebook about setting up an alternative to Google’s alliance only to have conversations abruptly cease in 2018.

Facebook disclosed that it had joined Google’s program in one line in a Dec. 2018 blog post. But it did not reveal that Google, according to the draft complaint, provided Facebook with special information and speed advantages to help the company succeed in the auctions that it did not offer to other partners — even including a guaranteed “win rate.”

In this market, where fractions of a second count, a speed advantage was decisive. Facebook had 300 milliseconds to bid for ads, according to court documents. But the executives at Google’s partner companies said they usually had just 160 milliseconds or less to bid.

Facebook had yet another advantage: Direct billing relationships with the sites where ads would appear, according to the court documents. For most other partners, Google controlled pricing information, effectively putting up a wall between Open Bidding participants and site owners and hiding how much of winning bids sites end up receiving, the executives at other companies said.

Google agreed to help Facebook have a better understanding of who would be shown the ads by helping the company identify 80 percent of mobile users and 60 percent of web users, the documents said. But several other partners said they had little such help understanding who was being shown ads.

Adam Heimlich, the chief executive of Chalice Custom Algorithms, a marketing and data science consulting company, said the deal gave Facebook so much advantage that it was like allowing the social network to “start every tournament in the finals.”

Facebook promised to bid on at least 90 percent of auctions when it could identify the end user and committed to spending a certain amount of money — as much as $500 million a year by the fourth year of the agreement, according to the draft of the complaint. Facebook also demanded that data about its bids not be used by Google to manipulate auctions in its own favor, a level playing field not explicitly promised to other Open Bidding partners.

Perhaps the most serious claim in the draft complaint was that the two companies had predetermined that Facebook would win a fixed percentage of auctions that it bid on.

“Unbeknown to other market participants, no matter how high others might bid, the parties have agreed that the gavel will come down in Facebook’s favor a set number of times,” the draft complaint said. A Google spokeswoman said Facebook must make the highest bid to win an auction, just like its other exchange and ad network partners.

While both companies said that the deal is not an antitrust matter, they included a clause in the agreement that requires the parties to “cooperate and assist” each other if they are investigated for competition concerns over the partnership.

“The word ‘antitrust’ is mentioned no less than 20 times" throughout the agreement, the draft complaint said.

Spending on oil production world-wide isn’t expected to climb back up to pre-pandemic levels through at least 2025

Oil and gas prices are rebounding from their pandemic lows, but the road ahead for the industry remains challenging amid new competitive threats and demands from investors.

Global spending on oil and gas production is poised to remain below pre-pandemic levels through at least 2025, according to consulting firm Wood Mackenzie, as companies face pressure to improve returns and reduce their greenhouse-gas emissions. Meanwhile, investment in renewables and other clean energy technologies is taking off, threatening to eat into the market for oil and gas long-term.

Though oil prices have notched gains since November, they’re expected to remain below levels that support attractive returns, particularly for an industry still recuperating from last year’s historic drop in fuel demand.

As a result, companies aren’t rushing back into drilling. A third of oil producers surveyed by the Dallas branch of the Federal Reserve in the fourth quarter said they planned to raise capital expenditures only slightly this year. About half said they would either keep spending flat or reduce investments.

Exxon Mobil Corp. and Chevron Corp. cut plans to invest a combined $260 billion through 2025 to as low as $177 billion.

Over the next five years, global oil spending is projected to come to a little more than half of what companies invested in the first half of the 2010s, according to Wood Mackenzie. Last year, the pandemic had brought oil investments to the lowest levels since 2005.

The slowdown comes as investors explore alternatives such as solar and wind power, which have seen costs drop dramatically in recent years, and emerging technologies such as battery storage and biofuels.

Energy investment outside of fossil fuels, including renewables and other clean-energy technologies, is set to attract 60% of the world’s energy investment in this decade, according to the International Energy Agency.

Non-fossil-fuel investments will climb to an annual average of $1.4 trillion, the IEA says, higher than the $935 billion it has projected for oil, natural gas and coal. In the 2030s, it says, those investments will make up roughly two-thirds of energy spending.

The projected shift in investments means that, after decades dominated by fossil fuels, renewables are poised to gain ground.

By 2030, noncarbon energy—including nuclear, wind and solar—is expected to climb to almost 13% of the world’s energy demand from 9.8% in 2019, according to IHS Markit. Last year will be the first in which clean energy surpassed 10% of demand, the consulting firm projected, in data going back to 1990.

Whether this spending shift affects consumers in the next few years is uncertain, but some believe oil companies will eventually have to increase spending to meet global demand in coming decades.

The International Energy Forum, a group advising energy importing and exporting countries, says the oil industry’s capital expenditures need to climb by $225 billion from last year’s levels by 2030 to prevent a fuel-price spike that would be damaging to economic growth. It warned that “peak investment,” in which oil spending stays lower than 2019 levels for good, was a more pressing post-virus issue than peak oil demand.

Meanwhile, the consulting firm Rystad Energy said in a recent analysis that it would take 80 years to find sufficient supplies to meet global demand through 2050 at the past decade’s low level of exploration activity.

For now, though, American drivers aren’t giving oil companies much reason to change course. Household spending on gasoline in the U.S. is projected to edge upward this year but remain well below 2017-19 levels, according to fuel-price tracking site GasBuddy.

Another reason oil companies will keep spending at lower levels is that electric vehicles are expected to skyrocket to about 32% of new vehicle sales globally in 2030, up from less than 4% last year, according to Deloitte, which made the forecast before a recent uptick in auto sales. In China, they will rise to 48%, and in the U.S. to 27%, Deloitte projects.

Policymakers frustrated by some lenders’ lack of action to tighten controls

The European Central Bank is threatening to impose additional capital requirements on banks that continue to ignore requests to rein in risk in the booming leveraged loan market.

Policymakers are increasingly frustrated by the lack of action to tighten risk controls in the market at some European lenders, which they fear could lead to repayment problems if interest rates rise.

If industry practices do not change, the EU regulator “won’t hesitate to impose capital add-ons” through its annual Supervisory Review and Evaluation Process process, said a person familiar with internal discussions. 

Leveraged loans are junk-rated debt usually used to back or refinance private equity takeovers of companies. Banks keep little of the risk on their own balance sheets and sell almost all of the loans on to other investors.

Fierce competition has led to ultra-low pricing, a softening of underwriting standards and increasing leverage in private equity buyout loans. The use of “covenant-lite” structures — which strip out many of the usual protections for investors — has surged.

In response, the ECB is planning more frequent “on-site” visits — performed virtually during the pandemic — to evaluate banks’ risk management procedures on recent and current deals and adjust their capital requirements accordingly, said the person.

“Where banks incur risks in leveraged lending that are not adequately addressed by appropriate risk management practices, ECB banking supervision is considering supervisory actions and measures, including qualitative or quantitative requirements as well as capital add-ons,” the ECB said in a statement.

Last summer, Deutsche Bank received a request to suspend part of its leveraged finance business because of shortcomings in its risk controls but it refused, the Financial Times has reported.

A senior eurozone central banker said the issue would be raised as a key concern in the ECB’s next financial stability review in May.

Banks have become more aggressive in investment banking as income from traditional retail and commercial lending activities has plunged because of negative interest rates. More recently, they have also had to contend with a surge in coronavirus-related loan-loss reserves.

Supervisors’ concerns have been prompted by changing market dynamics, one of the people said. Indicators suggest that inflation is picking up and once interest rates around the world start to rise, repayments on some of the most aggressive deals could become difficult. Many banks have been pricing loans on the assumption that negative rates will persist for a decade or more, the person said.

In 2017, the ECB introduced guidance that defines “high levels” of leverage as deals where total debt — including undrawn credit lines — exceeds six times earnings before interest, tax, depreciation and amortisation. 

The regulator said that such transactions and covenant-lite structures “should remain exceptional and [ . . . ] should be duly justified” because very high leverage for most industries “raises concerns”. 

Despite these instructions, the ECB found that by 2018 more than half of new leveraged loans by major eurozone banks were already above this threshold.

Deutsche Bank is among banks the ECB has contacted. Despite receiving a letter from the regulator calling its risk management framework for highly leveraged transactions “incomplete,” Germany’s largest lender refused to suspend parts of the business and said it was “impractical” to follow the request. It was not required to do so because the guidance was non-binding.

Deutsche Bank declined to comment.

As it is for many other big lenders, such as BNP Paribas, leveraged finance is a buoyant and lucrative business for Deutsche’s investment bank. It generated €1.2bn of revenues in the first nine months of 2020, an increase of 43 per cent from 2019.

Recent transactions on the riskier end of the scale include a €4.4bn leveraged loan and high-yield bond package for Swedish alarms company Verisure this month. The deal is more than seven times levered, even when using the company’s own heavily adjusted earnings number, and includes a €1.6bn dividend paid out to its private equity owners.

Deutsche is a joint global co-ordinator of the Verisure debt, with BNP Paribas, CaixaBank, Crédit Agricole and Santander also involved.

Another highly leveraged buyout this year is BC Partners’ takeover of US gynaecology company Women's Care Enterprises. The deal’s overall leverage is more than nine times its ebitda, according to S&P Global Ratings. Deutsche is again a joint bookrunner.

NEW YORK TIMES

• A highly transmissible coronavirus variant that was first identified in the UK is spreading rapidly in the US and likely to become the dominant strain circulating domestically in March, according to the CDC, unless measures are taken to counter it. + JPM, C, WFC: America’s top banks say the economic recovery has held up better than they expected and should continue in the new year, and that they will release some of the stockpiles of cash they had set aside as reserves to cover a wave of bad loans that haven’t materialized.

• US retail sales dropped by 0.7 percent in December as Covid-19 cases surged—consumers held back on retail spending during the December peak of the holiday season as the country confronted a surge in coronavirus infections.

• “A sizable chunk of President-elect Joe Biden’s $1.9 trillion plan is aimed at lower-income people, which, in combination with ultralow interest rates, could drive down unemployment rapidly,” says columnist Greg Ip.

• The IRS won’t start accepting 2020 individual income tax returns until February 12, several weeks later than usual, as it manages tax legislation and prepares for returns from people who didn’t get full stimulus payments from laws passed in March and December.

• During a rare Workers’ Party Congress meeting that ended this week, North Korean president Kim Jong Un offered a look at military hardware, including drones and a nuclear submarine, as well as a hypersonic warhead.

• The financial industry, which received a light touch under the Trump administration, could face more aggressive regulation if Joe Biden’s nomination of Gary Gensler—who formerly led the Commodity Futures Trading Commission—to lead the SEC is approved.

• +/- AMZN: A lawsuit in New York alleges that a deal between Amazon and five major book publishers has led to higher e-book prices for all consumers, because it prevents rival retailers from selling e-books from those publishers at lower prices.

• So-called story ETFs invest not in an entire market or single sector but rather in a concept or trend, and cut across industries, trying to capitalize on ideas such as alternative energy, cloud computing, or 3D printing—but their narrow focus increases their risk.

• H.O.T.S.: The pandemic-puppy craze has been a boon for pet-food and supply companies, but the trend may not outlast the pandemic; Large lenders have deposit-fueled cash piles, but it’s uncertain how that will benefit shareholders; “The holiday retail sales slump has boosted the argument for the Biden administration’s stimulus plans.”

• Front page story reports that European Union governments in the midst of rolling out their coronavirus vaccine programs are criticizing PFE after it announced it would delay additional supplies to European countries until mid-February.

• The Dutch government resigned two months ahead of upcoming elections after a child benefits scandal involving thousands of families falsely accused of defrauding the state rocked the political establishment and sparked an emergency cabinet meeting.

• Brazilian authorities are airlifting oxygen supplies to the Amazonian city of Manaus, where a new strain of the coronavirus appears to be surging, leading to a number of deaths by asphyxiation.

• Big Read piece on the “messy fight over free speech” in the US says “The decision to ban Donald Trump has created a moment of reckoning for social media companies—but by taking action against perceived hate speech, they have demonstrated the arbitrary power they hold.”

• The effects of an unanticipated “blue wave” after Democrats won two Senate seats in Georgia have been far-reaching—tech stocks have struggled while prices of commodities such as copper and shares in CAT and DE have advanced.

• Lex Column: While cryptocurrencies have a use beyond speculation and illicit transactions, as investments they are to be avoided; Short interest in Babcock is dissipating as critics crystallize gains; Regulatory challenges at C and WFC could limit any upside the banks see from an economic recovery.

• Comment: “A Senate trial is not the answer to Trump,” says Vernon Bogdanor. “Impeachment is ill-suited to the problem posed by a divisive and dangerous leader.”

• Billionaire MSFT co-founder Bill Gates has become the largest owner of farmland in the US by quietly acquiring large plots across the country, totaling about 269,000 acres across 19 states, with the largest chunks in Louisiana and Arkansas.

• + AAPL: The tech giant will drop the Touch Bar from its next line of MacBook Pro computers and will return to physical keys for those functions, according to analyst and Apple watcher Ming-Chi Kuo of TFI Securities. Sunday

• Dr. Anthony Fauci, the government’s top infectious disease expert, said that “more ominous” strains of Covid-19 have emerged from South Africa and Brazil, and that government scientists are taking the them very seriously.

• Federal authorities have charged a Missouri woman named Emily Hernandez with storming the Capitol and posing with House speaker Nancy Pelosi’s nameplate during the riot.

• Chinese president Xi Jinping wrote a letter to SBUX founder and former chief executive Howard Schultz asking him to help strengthen the fraying relationship between the US and China.

Train operator that connects Britain to continent says there is a ‘real risk’ to its survival

Eurostar, the train operator that runs services through the Channel Tunnel, has called for a UK government bailout following a collapse in travel between Britain and the European continent.

The company, which is controlled by French state railway SNCF, is at risk of bankruptcy following a 95 per cent drop in travel since March. It has been running just two return services a day and has warned that it could run out of cash this summer.

The French government has a majority 55 per cent stake in Eurostar, and Belgium 5 per cent after the UK government sold its stake in 2015.

Shareholders — which also include Canadian institutional fund manager Caisse de dépôt et placement du Québec, and Hermes Infrastructure — have already pumped in €200m (£178m) to keep Eurostar afloat during the crisis but the company said this money was “finite”.

“Without additional funding from government, there is a real risk to the survival of Eurostar, the green gateway to Europe, as the current situation is very serious,” Eurostar said on Sunday. “We are encouraged by the government-backed loans that have been awarded to airlines and would once again ask that this kind of support be extended to international high-speed rail.”

New travel restrictions that come into force from Monday are adding pressure on infrastructure operators, with airlines and airports also calling for more support. The new rules require all travellers to Britain to have recently tested negative for Covid-19 and to quarantine for 10 days unless they test negative a second time five days after arrival.

Airports, most of which have been privatised in the UK, received business rate relief worth up to £8m a year in November but say it is not enough to support the industry through the pandemic.

Some smaller airports, such as Newquay and Cardiff, have already closed to passenger flights while many larger airports have reduced capacity. Heathrow’s terminal 4 is closed until the end of 2021 while at Gatwick airport the south terminal is also shut.

Airports argue that they need to keep providing some capacity for critical functions, such as flights to offshore oil, gas and wind operations to maintain electricity supplies, as well as post, freight, and emergency services.

Karen Dee, chief executive of the Airport Operators Association, said: “The UK and devolved governments now need to set out as a matter of extreme urgency how they will support airports through this deepening crisis.”

Airlines UK, the industry trade body, on Sunday also called for additional support, including grants, cuts to air passenger duties including the removal of the tax for return domestic journeys, as well as more loans and an extension to the repayment terms for existing ones.

Christophe Fanichet, head of SNCF Voyageurs, told French transport correspondents last week that Eurostar was in a “very critical” situation.

He said part of the problem was that the company was seen in the UK as a French business that was not supported by the British, and in France as a UK-based business not aided by the French. The company was negotiating for UK loans, as well as a possible recapitalisation by shareholders. 

The UK government sold its 40 per cent stake in Eurostar for £757m before the general election in 2015 as it sought to pay off debts. At the time, dividend payments to the government were projected to exceed £700m over the next 10 years, according to the National Audit Office.

The UK’s Department for Transport said: “The government has been engaging extensively with Eurostar on a regular basis since the beginning of the outbreak. We will continue to work closely with them as we support the safe restart and recovery of international travel.”

Chief executive says manufacturing of high-end models hit by ‘a crisis upon a crisis’

Audi will delay the production of some of its high-end cars because of the “massive” shortage of computer chips that is sweeping across the automotive industry, its chief executive said.

The luxury car marque, part of the Volkswagen group, has put more than 10,000 workers on furlough because the chip shortage has slowed its production lines, said its head, Markus Duesmann, in an interview with the Financial Times.

Audi will “do everything we can to keep it below 10,000 [fewer models produced] for the first quarter,” said Mr Duesmann.

The Volkswagen brand itself has said it will make 100,000 fewer cars in the first quarter as a result of the shortage of chips, with Nissan, Honda, Daimler, Renault and General Motors also saying they are facing problems. Ford said it would close its plant in Saarlouis, Germany from Monday until February 19, according to the DPA news agency.

Mr Duesmann described the problems as “a crisis upon a crisis”. Demand for cars slumped for much of last year because of the coronavirus pandemic, prompting auto suppliers to cut their orders for the computer chips that manage everything from a car’s brakes and steering to its electric windows and distance sensors.

But demand for cars jumped unexpectedly in the final three months of 2020, as buyers became more optimistic. Audi had its best quarter ever, largely because of a rebound in China.

“We had a very strong fourth quarter, but in the months before it was not so clear how that would develop, and everybody was quite surprised by the strength of the market in the last few months,” Mr Duesmann said.

This caught out car parts suppliers, who were forced to compete with surging demand from the consumer electronics sector, as new gaming consoles and smartphones hit the market. Carmakers themselves, having switched to just-in-time manufacturing, no longer keep stockpiles of supplies themselves.

Some chip companies have now prioritised the car industry, but the long lead times in chip production mean auto suppliers will have to wait several weeks for their orders to be fulfilled, according to industry insiders.

“There is a very long [supply] chain with different supply levels,” added Mr Duesmann, saying it was smaller auto suppliers that had problems keeping up with the increased demand.

The former BMW executive, who took over at Audi last April, added that the chip shortage might “also affect the second quarter, but only in the order in which we build cars”.

But he said that as things stand, the VW-owned marque’s overall output for 2021 would not suffer as a result, as Audi would make up for lost time in the latter half of the year.

Yield curve control makes monetary policy more effective

Amid its pandemic firefighting, the European Central Bank is ploughing on with a strategic review of its monetary policy framework. One previously neglected idea is coming into the discussion. Pablo Hernández de Cos, Spain’s central bank governor, suggests that the ECB could explore “yield curve control”, or the policy of directly setting long-term interest rates.

It is not a novel policy. Since 2016, the Bank of Japan has committed to keeping the market yield on 10-year Japanese government bonds near zero. The BoJ will buy or sell whatever quantity of bonds is needed to meet this goal.

Targeting long-term rates is an alternative to quantitative easing — mass bond buying — and forward guidance. It achieves directly what QE does indirectly: lower long-term market yields on benchmark securities so as to encourage investors to direct capital elsewhere, ideally to productive investment by businesses wishing to expand. It also directly affects the market cost of borrowing for longer periods, which forward guidance tries to achieve by signalling to markets that central banks will keep short-term rates low for some time into the future.

Why use a tool that gets the same results through other means?

The first answer is that it does so more effectively. Compared with QE, directly targeting 10-year borrowing costs takes the guesswork out of how many government bonds the central bank must buy to achieve what it deems appropriate financial conditions. Compared with forward guidance, direct targeting removes the risk to financial intermediaries that the central bank may not make good on its guidance, and change short rates sooner than it now predicts. This also means the central bank does not hurt its own credibility if it needs to tighten sooner than it thought.

A second answer is that precisely because yield curve control makes little difference to other tools today, now is the least disruptive time to introduce it. At some point policy will need changing, perhaps to tighten in a recovery, or perhaps to offset upward pressure on market rates from US budget stimulus.

In either case, yield curve control would let the ECB move or keep long rates where it sees fit, and avoid politically difficult and technically uncertain deliberation of how many bonds to buy. In fact, Japan’s experience shows that explicitly targeting the 10-year rate reduces the need to buy bonds at all. That should be attractive for the ECB. Its original decisions to engage in large-scale bond purchases were politically excruciating, and thus too slow.

A third argument is that lowering — or lifting — rates is far simpler to communicate to the public than bond purchase programmes in the trillions.

What are the arguments against it? One is that yield curve control falls under the treaty prohibition on credit facilities to governments. But why should targeting long-term market rates be less acceptable than buying huge amounts of government bonds to achieve the same result?

Another objection is that there is no obvious long-term bond yield to target. There are 19 eurozone sovereigns, and the ECB currently buys a portfolio of all their debts. But this objection no longer applies. The EU is ramping up the issuance of common European bonds in order to fund its recovery policies. The yield of the 10-year common European bond would be a perfect benchmark for the ECB to target.

This would not address another motive for the ECB’s bond-buying, which is to keep securities markets functioning smoothly, in particular for high-debt eurozone governments. But every economist is familiar with what is known as the Tinbergen rule: for each policy goal you need a dedicated instrument. Market functioning and optimal long-term market rates are different goals. Using yield curve control to achieve the latter leaves bond purchase programmes free to focus on the former.

But yield curve control could have a side benefit, too — one even more important than its main function as a monetary policy tool. Making the common European bond yield an operational target for monetary policy would encourage markets to adopt it as a benchmark for pricing other securities. In time, this would help nudge European banks away from their bias towards holding their own national government’s bonds, a source of instability the ECB and other EU policymakers want to reduce.

Adopting yield curve control today would not just improve monetary policymaking. It would also give significant support to the EU’s policy objective of a banking union. Beyond its price stability mandate, this is a form of support the ECB is treaty-bound to give.