Mario Draghi is bending to the pressure of France and Italy: In Jackson Hole ECB chief urges surprising departure from the economical state. The flood of money the ECB had not shown, together with the recent austerity measures have the desired effect. Draghi now advocating state growth programs and new debt.
ECB chief Mario Draghi goes to the demands of debt countries for a more flexible debt settlement one . Countries should be encouraged to spend more, Draghi said in a speech at the Fed conference in Jackson Hole. The ECB chief, in doing so a surprising change of course, reports the Financial Times. In particular, Germany could therefore raise as the largest economic power of the euro zone growth by issuing more on investment and taxes shortly.
Draghi’s comments bring the ECB closer to the position of the Italian Premier Renzi and likely both in Rome and in Paris encounter consent. Both countries already struggling with huge debt mountains and urged repeatedly to a softening of the deficit rules in the Euro-Zone (more here).
Renzi had even declared a softening to a main goal of his tenure. Italy has so far failed to implement effective reforms to the economic crisis and slipped back into recession (more here). So far it has been Renzi is criticism of the ECB. On the Fed conference Draghi took advantage now but in a more flexible debt settlement. They could be used to “to respond to the weak recovery and create space for the cost of necessary structural reforms .” The ECB chief therefore approved a proposal of the Commission President Juncker on a 300 billion-euro program to promote growth in Europe .
Draghi growing concern over the high unemployment and low inflation in Europe also signals that the previous measures of the ECB would have no effect ( read more here). The massive money printing and de Sale of government bonds could therefore do nothing if they were not accompanied by structural reforms in each country and a loose regional monetary policy.
The money printing itself does not want Draghi, however, give up. Rather, he suggests so, cheap money for the euro zone will no longer impose conditions . In future could thus increase the boundless mountains of debt in Europe. The risk of a crash is for Draghi here as part of the Euro-rescue anyway subordinated (more here).
France keeps the deficit reduction for subordinate and argues instead for growth promotion even at the cost of new debt . The French finance minister Montebourg, told the newspaper Le Monde, the priority should be on soon to come out of the economic crisis. This would be more important than the reduction of budget deficits. The previous austerity in the euro zone have driven unemployment only in the height. The budget makes improvements impossible and drive in many countries people into the arms of extremist parties.
The government in Paris had recently lowered again after weak economic data its growth targets for this year and next. The new debt is also likely in 2014 are above the EU requirements. In particular, the relatively high unemployment inhibits the use of the French.
Draghi pleaded for closer coordination of governments and currency supervision . A reconciliation of the national budget and fiscal policy should allow for more growth friendly overall financial policy for the euro zone. This Draghi is likely to allude also to the recent decision to Union Bank, through its central bank supervision of all the euro-zone banks takes over (more here)