The ECB President Mario Draghi, after the meeting of the Council of the institution. / K. P. (REUTERS)
The current stage of the crisis is a variant the previous drama: the impact of the financial hurricane and the euro crisis with new echoes resonate today in Europe. Four years after burying Keynes and activate a kind of economic, political and social experiment based on “expansionary fiscal consolidation” and “growth-friendly reforms” in the words of German Minister Wolfgang Schäuble-, expansion and growth are missing. The output of the crisis loomed for months was an illusion. Europe continues empachada debt despite the cuts, banking shuffling despite having swallowed million, and the eurozone faces a lost decade for the Japanese (at best) with a third looming recession , lurking deflation, unemployment levels and unbearable social weariness, finally, in himalayescas dimensions. There was never a single mea culpa for misdiagnosis (the mother of all problems was fiscal discipline, according to the moral tale of the elites). Not for the subsequent succession of errors. But many indicators are equal to or worse than when the crisis started, beginning with income per capita, unemployment and debt. And these came Mario Draghi: best man informed about what comes next in the eurozone is the first major figure who says you have to change the way
ECB President believes that now the problem is weak demand
The head of the ECB delivered a bold speech a few days ago in USA and has taken action this week with purchases of private assets. That is an indication of how bad things are. But the wind changed: the ECB has a plan. There is a script, a project, a different idea germinating. A new direction, the sources consulted in institutions and between a bunch of prominent experts, can work.
the face of supply policies tested since 2010 more austerity structural -reforms, Draghi now admits Europe faces a demand problem. Still demanding reforms but warns that monetary policy can do more (and we only have a bullet massive debt purchase) and requires that the tax return and investment policy: Keynes revived, with a touch of postmodernism. There are many ways to describe what is happening in Europe: experts speak of a liquidity trap, a balance sheet recession, debt deflation, a secular stagnation. The Nobel Joe Stiglitz says it clearer: “A depression”. Economist Brad DeLong is even bolder: “A Great Depression.” Draghi desoía those trumpets of Jericho and took months talking about recovery, which was calling to the wind. “From January to March was a slow recovery. In June was weaker than expected. Moderate and uneven in August. And in September we have seen what is: zero growth, zero inflation. And a multitude of dogmatic in all that time calling for supply policies when we are facing a problem of huge demand. Draghi has been irresponsible, but at least now recognizes his mistake. Hopefully not too late, “said Paul de Grauwe, of the London School
Ken Rogoff, of Harvard, says activism ECB “necessary”, but still monetary policy is no more than “a bridge that should allow you to reach more ambitious”. “France, Italy and Europe in general still need reforms to improve its potential. In short that means recession and unemployment: Germany must move and allow a tax and investment expansion. If national and European leaders fail and miss out on Plan Draghi to literally face a future Japanese, or a return to 2010: an economic and political crisis and intractable, “he says. Barry Eichengreen of Berkeley, added that the problem is that what Europe urgently needs “always differs from what German policy is able to accept.” “Draghi plans are well managed, but require a broad political agreement. And Europe has yet to demonstrate that it is able to do “
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France and Italy ask soften the fiscal targets and raise investment
France and Italy claim that fiscal targets are tender and a European investment plan is activated to make reforms. Germany wants the sequence is reversed: first the reforms-the pigeons and then the carrot. “It is logical that Berlin wary of Paris and Rome for their unfulfilled promises a thousand times, but also Rome and Paris recelen: there were reforms in Spain, Ireland and Greece and we still see the carrot. The most serious problem is that great distrust, which manifests itself in the North-South divide ‘, European sources explained.
There is not much room for optimism in Europe. “The situation is worse than in 2007,” Charles Wyplosz roars, the Graduate Institute. “The debts are higher, the same weak banks, the chronic unemployment, faith in the resilience of the EU is less,” admits one exconsejero ECB. “The gloomy tone of the data is depressing but logical because that combination of interest rates at 0% and austerity prevents recovery. After five years of misery, Draghi now makes that discovery that lack demand. I hope with that dogmas are gone, “criticizes Wyplosz.
Experts agree that a political settlement is urgent high-flying Draghi to help. André Sapir, Bruegel, insists that “we must pass reforms in Paris and Rome, because that soften to Berlin and Berlin need to be convinced of the necessity of immediate stimuli, because that will make it easier to swallow the pill beyond Rin “. Wolfgang Münchau, Eurointelligence director, says that the rotation of Draghi “is the most important thing has happened in Europe in a long time.” “The ECB is on the brink of asset purchases to American (so-called QE) for the first time said that besides stimuli needed reforms. The most likely scenario is a small European investment plan, a gentle easing the deficit targets-in the confines of treaties, no beyond-QE and limited further reforms, possible in Italy and more difficult in France “. “The question is how long accepted European politicians such monumental errors as before”
The ECB will start to inject liquidity into the banking system in a few days, and in October will launch private bond purchases.; QE may arrive in 2015 if the economy continues to wither. In November exams banking (:, according to Rogoff “if organizations fail to improve credit raise capital should be much harder than expected by the market”) will be known. And in the political arena, Draghi plays three bands: Paris and Rome must convert their promises reforms, “or otherwise leave the ECB just before Berlin” says Tito Boeri, Bocconi. The Twenty-eight are planning to hold a summit on growth and jobs in October; The Commission will announce its investment plan there. And amid all that racket, “followed by a fine mist of data in the best confirm the stagnation of an economy that limps” predicts Alfredo Pastor, the IESE.
European policy is The result of all this mess, but also a tenacious battle of ideas. Part of the ideological spectrum gains since 2010 with recipes that speak German. The other is now reset for the dismal results, even affecting Germany, with unexpected help from Draghi. Europe must find a meeting point between these two conceptions. And language can offer a clue: the German word for “debt” has the same root as the word used to express “fault” (schuld), but the Italian term for the idea of ”belief” or trust is to turn the root of the noun “credit” (credere). Interestingly, an Italian who lives in Frankfurt is who can harmonize the two views. His name is Mario Draghi.
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