economics isu
The euro crisis
Mario Draghi's premature canonisation
Jan 15th 2013, 15:15 by R.A. | WASHINGTON
ONE additional point related to the previous post: I find it shocking how readily we all seem to be accepting the European Central Bank's inaction on euro-zone economic weakness. Some perspective is in order. Real euro-area output is at roughly the level of the end of 2006 and it is declining. The euro-area economy hasn't grown since the third quarter of 2011. Total employment is below the level first attained in the second quarter of 2006 and it is declining. The unemployment rate is of course at a record high 11.8%. And inflation—both core and headline—was virtually nil in the second half of 2012.
That's simply a dismal macroeconomic performance. I mean really, really awful: falling output, rising unemployment, and inflation below target. The European Central Bank acted aggressively to essentially end the euro-zone sovereign-debt crisis, and we all appreciate that. But its demand stabilisation efforts have been woefully inadequate. Where the Bank of England and the Federal Reserve have deployed a range of tools to address high levels of joblessness amid low inflation the ECB has basically shrugged. That's all the more stunning, to me anyway, given that macro stabilisation is the ECB's first job, and given that all the austerity and reform it has demanded will be for nought given rubbish monetary policy.
I understand the extraordinary relief at being free, for now, of repeated market attacks. But the complacency on the macro situation (and on the broader process of institutional reform, for that matter) are just astounding. The view seems to be that enough of a crisis lull has been won to allow the ship to right itself in time. But it seems just as probable to me that while the euro-zone stands around (having no work) waiting for good times to return something else will break and bring crisis, of one sort or another, surging back.
Mario Draghi's premature canonisation
Jan 15th 2013, 15:15 by R.A. | WASHINGTON
ONE additional point related to the previous post: I find it shocking how readily we all seem to be accepting the European Central Bank's inaction on euro-zone economic weakness. Some perspective is in order. Real euro-area output is at roughly the level of the end of 2006 and it is declining. The euro-area economy hasn't grown since the third quarter of 2011. Total employment is below the level first attained in the second quarter of 2006 and it is declining. The unemployment rate is of course at a record high 11.8%. And inflation—both core and headline—was virtually nil in the second half of 2012.
That's simply a dismal macroeconomic performance. I mean really, really awful: falling output, rising unemployment, and inflation below target. The European Central Bank acted aggressively to essentially end the euro-zone sovereign-debt crisis, and we all appreciate that. But its demand stabilisation efforts have been woefully inadequate. Where the Bank of England and the Federal Reserve have deployed a range of tools to address high levels of joblessness amid low inflation the ECB has basically shrugged. That's all the more stunning, to me anyway, given that macro stabilisation is the ECB's first job, and given that all the austerity and reform it has demanded will be for nought given rubbish monetary policy.
I understand the extraordinary relief at being free, for now, of repeated market attacks. But the complacency on the macro situation (and on the broader process of institutional reform, for that matter) are just astounding. The view seems to be that enough of a crisis lull has been won to allow the ship to right itself in time. But it seems just as probable to me that while the euro-zone stands around (having no work) waiting for good times to return something else will break and bring crisis, of one sort or another, surging back.