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I think the German government would dispute your analysis of current ECB policies. Draghi's policy of keeping interest rates ultra low - and QE on a massive scale - has much reduced the cost of financing Ireland's (and Greece's') historically high sovereign debt to the chagrin of German savers, who haven't been getting any "return" on their savings.

He has resisted incessant pressure from German Bankers and policymakers to end QE and increase interest rates so long as inflation remains below the ECB target rate as close to but below 2%. As a result, inflation has been rising, ever so slowly, and by doing so also reducing the real cost of financing historic debts.

It may not be much, but that is about all the ECB can do to help net debtor countries vis a vis net creditor countries - absent the issuance of Eurobonds, which Germany absolutely refuses to allow - as it would allow (say) the Greek Government to piggy back on Germany's credit rating and ultra low sovereign debt interest rates.

From a German moral hazard perspective, high interest rates is the penalty highly indebted countries should pay as punishment for past profligacy - both to reflect the higher risk of default and as a deterrence from future profligacy.

Draghi hasn't been playing that game.

Index of Frank's Diaries

by Frank Schnittger (mail Frankschnittger at hot male dotty communists) on Tue Jan 30th, 2018 at 05:29:15 PM EST
[ Parent ]
My criticism is not particularly directed to the ECB, which can only affect monetary policies. It is more to the inability of EU institutions to forge a balance between the needs of the different countries comprising the union and their tolerance of and obtuseness towards the damage done to countries such as Portugal, Ireland, Greece, Spain, Italy, Cyprus, etc. Especially annoying - to the point of being maddening - is the almost universally accepted discourse about all of these problems - which is to ignore them and leave the German myth of the problems being due to lazy/corrupt peripheral countries.

If that be the case, why were they allowed into the EU? Had no one in the upper levels of EU governance ever come across Mundell's papers on 'optimum currency unions'? The costs in human suffering and EU accepted major injustices mocks the very claims of concern for social welfare on which the project was founded. It has been and remains painful to watch, even if it is currently overshadowed by the fiasco of Brexit and the Trumpeting elephant just across the Atlantic. We - all of us - seem resolute in steering directly for the shoals in this political gale.


"It is not necessary to have hope in order to persevere."

by ARGeezer (ARGeezer a in a circle eurotrib daught com) on Wed Jan 31st, 2018 at 06:02:54 AM EST
[ Parent ]
I would be less concerned about inequalities between member states - which as Fitzgerald shows, have been reducing (Greece excepted) - than growing inequalities within member states, particularly between metropolitan and rural areas, between young and old, and between different occupational groups. All of these issues are still primarily in the policy domain of member state governments, and hence of national elites. Thus personal, wealth and corporate taxation, social welfare, housing, education and health are very largely national competencies.

The EU can serve as a convenient bogeyman for national elites to deflect attention from their own policy failures - hence Brexit - but it would be to fall into the nationalist myth of the big bad Brussels bureaucracy to ascribe the primary blame to the EU. If anything, EU competencies in the areas of competition, agriculture, and regional development have served to reduce such regional/class inequalities by breaking up local oligopolies and introducing competition from other national or international oligopolies - euphemistically referred to as costs of transition - and providing opportunities for the more entrepreneurially minded to seek markets elsewhere.

Of course this has also furthered the cause of globalisation, but the EU has at least attempted to mitigate the monopolistic tendencies of global corporates, something national elites (particularly of smaller states) are completely unable to do. So my suggestion is that we need stronger governance of global corporates by the Commission allied to the transfer of more competencies for health, education, social welfare, infrastructure, energy and taxation from national elites to the EU - both to promote common and more equal standards and services, and to effect economies of scale - as in the case of pharmaceutical procurement.


Index of Frank's Diaries

by Frank Schnittger (mail Frankschnittger at hot male dotty communists) on Wed Jan 31st, 2018 at 11:38:29 AM EST
[ Parent ]
I think the biggest concern is a governance structure that enables the very practices we saw by the various EU institutions wrt Ireland, Portugal, Greece, Spain, Cyprus, etc. Establishing a common currency under such circumstances constitutes a massive creation of an attractive public nuisance vastly more damaging than an un-fenced, un-monotored swimming pool during a hot summer.

"It is not necessary to have hope in order to persevere."
by ARGeezer (ARGeezer a in a circle eurotrib daught com) on Thu Feb 1st, 2018 at 03:29:36 PM EST
[ Parent ]
That is limiting the view to the legitimate powers of the ECB. Since the crisis the ECB and the Eurogroup hass also grabbed power with both hands.

It was as far as I understand the ECB that put Greece under economic blockade in the summer of 2015. The advantage is the loweer visibility it gets then sending in ships to blockade the harbours, but the effects were similar. If the ECB wanted to they could stop wielding the stick when it comes to the deficit countries, there is nothing in the treaties that demands that they do so.

by fjallstrom on Wed Jan 31st, 2018 at 03:43:03 PM EST
[ Parent ]

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