ECB will be the catalyst of Eurozone’s reunification

Michel Barnier, Member of the European Commission in charge of Internal Market and Services, Jonathan Faull, Director General of the DG "Internal Market and Services" of the EC, and Benoît Cœuré, Member of the Executive Board of the European Central Bank (ECB) (from left to right) at the conference "Financial Stability and the Single Market – The Keys to Growth in Europe". (EC Audiovisual Services).

Michel Barnier, Member of the European Commission in charge of Internal Market and Services, Jonathan Faull, Director General of the DG “Internal Market and Services” of the EC, and Benoît Cœuré, Member of the Executive Board of the European Central Bank (ECB) (from left to right) at the conference “Financial Stability and the Single Market – The Keys to Growth in Europe”. (EC Audiovisual Services).

Today Thursday the new governor of the Bank of England, Mark Carney, is expected to confirm from Nottingham, a historic city in east Midlands, that the central bank of Britain is not to raise its basic interest rate from the currently very low level of 0.5%, “until the Labour Force Survey headline measure of the unemployment rate has fallen to 7%”. It’s the first time ever that the central banker of Britain is announcing such a policy measure, which clearly overshoots his mandate and ignores the repercussions on inflation in favour of economic growth and employment.

On this side of the English Channel the European Central Bank in Frankfurt am Main can’t do the same despite the fact that inflation pressures are non-existent in Eurozone at 1.6%, while in Britain it surpasses the benchmark of 2% and oscillates around 2.5%. This generous decision of BoE’s Monetary Policy Committee has been questioned but Carney, of Canadian origin, will clarify today that the central bank of Britain will hold to this decision despite the fact that the British capital markets have started pressing interest rate upwards. Carney is expected today to deliver his first public speech after he took office on 1 July, in Nottingham’s city’s chamber of commerce.

If BoE can why not ECB?

Mario Draghi, the governor of the European Central Bank would have done the same as the Canadian and probably with more dynamism, if Berlin had left the ECB to act as the central bank of the entire Eurozone and not only of Germany. With very low or even negative inflation in more than half euro area member states and unemployment in double digits, the central bank should have undertaken a real crusade to transmit its monetary policy of cheap and abundant money where it is needed most, that is in Greece, Italy, Spain, Ireland, Portugal and elsewhere helping the SMEs there realise their plans.

The central banker of Britain came out with such a bold measure touching the area of the government’s economic policy and the fiscal sector just to brink the unemployment rate to 7% from its current levels of 7.8%. All that despite a real inflation risk lurking about, given that the rate of change of consumer prices in Britain has reached 2.5%, much higher that the BoE’s target set at 2% and strong upwards tendencies.

In contrast in Greece inflation is negative at -0.5% and unemployment skyrocketing at 28% and yet the ECB does nothing for this country. The same is true for France, Italy, Ireland, Portugal, Spain and other euro area member states, where inflation is well anchored at very low levels due to the deep recession the economies are in with unemployment rising fast. If the BoE is doing this just to bring down the unemployment rate by 8 decimal points, what a worthy of its name European Central Bank should do for Eurozone, where the average unemployment rate is 12.1%?

ECB to act

It is as if the ECB is there to serve only Germany, protecting its currency from imaginary inflation dangers, an idea which has developed into a national Teutonic obsession. The fact that the ECB is based in Frankfurt, on German soil, must play an important but improper role here. The ECB should immediately liberalise itself from the German influence and start financing even from tomorrow the Greek, Italian, Spanish, Portuguese, Irish and all other governments of Eurozone where inflation is very low and unemployment high.

This may be done prudently through purchases of prime government debt paper under certain conditions, in a context of a Eurobond issue. The truth is that this prospect is not any more a maximalist proposal of some extreme federalists. Berlin is not able anymore to control the pressures from the majority of Eurozone capitals. After the German elections of 22 September a lot of things will change in European Union. Everything will start from the governing council of the ECB. Not to forget that only last July this body changed drastically ECB’s policy and started guiding the economy.

Draghi’s statement

The relevant statement of Mario Draghi was perfectly clear on that. On 4 July in the Press conference after this historic decision of ECB’s governing council he said, {The Governing Council has taken the unprecedented step of giving forward guidance in a rather more specific way than it ever has done in the past. In my statement, I said “The Governing Council expects the key… – i.e. all interest rates – …ECB interest rates to remain at present or lower levels for an extended period of time.” It is the first time that the Governing Council has said something like this. And, by the way, what Mark Carney said in London is just a coincidence}. On that occasion some journalist had commented that Draghi was doing in ECB what Carney did in the BoE.

Obviously this was the first step towards a new era in Eurozone, where the ECB will decide to serve all euro area member states in equitable way. Direct financing of governments is the only way to this end because the banks are unable to transmit the cheap and abundant ECB’s money where it is needed. Only in this manner the Eurozone can be reunified, because today it suffers from multi-fragmentation and cannot survive like that.

Advertising

Advertising

Advertising

Advertising

Advertising

Advertising

the European Sting Milestones

Featured Stings

Stopping antimicrobial resistance would cost just USD 2 per person a year

Parlamentarians to “break up” with reality in the Google antitrust case

EU’s guidelines on net neutrality see the light although grey areas do remain

The US banks drive the developing world to a catastrophe

“Health and environment first of all”, EU says with forced optimism after 7th round of TTIP talks

Germany readies to pay for the Brexit gap in EU finance

China Unlimited Special Report: The trip to China

COP21 Breaking News_03 December: UNFCCC Secretariat Launches Forest Information Hub

Time to be welcome: Youth work and integration of young refugees

EU to negotiate an FTA with Japan

Ukrainian civil war: Is this the beginning of the end or the end of the beginning?

Turkey to let EU alone struggle with the migrant crisis while enhancing its economic ties with Russia instead?

IQ scores have been falling for decades, new study finds

“As German Chancellor I want to be able to cope with the merger of the real and digital economy”, Angela Merkel from Switzerland; the Sting reports live from World Economic Forum 2015 in Davos

EU-Turkey relations: Will Turkey manage to revive the EU accession process talks?

Armenia should take vigorous measures against entrenched corruption

Virtual Doctor: a core part of modern healthcare?

‘Jerusalem is not for sale’ Palestinian President Abbas tells world leaders at UN Assembly

G20 LIVE: G20 Leaders’ Communiqué Antalya Summit, 15-16 November 2015

Eurozone: Inflation plunge to 0.4% in July may trigger cataclysmic developments

World response to AIDS epidemic at a ‘critical juncture’

On International Youth Day the European Youth Forum calls for true youth participation

Time is running out to protect Africa’s forests

EU Commission: Growth first then fiscal consolidation

Plastic Oceans: MEPs back EU ban on polluting throwaway plastics by 2021

Chinese economy to raise speed and help the world grow

Why social working cultures are happier and more productive

Remembering Kofi Annan

Half of all mental illness begins by the age of 14

EU to increase spending and improve delivery of education in emergencies and protracted crises

An alternative view of Globalization 4.0, and how to get there

UN says ‘many humanitarian achievements’, one year after ouster of ISIL from Mosul

The movement of anti-vaccers: taking humanity back 200 years

Apple’s tax avoidance scheme remains as creative as their new iPhone

Europe turns out more jobs this summer

Politics still matter in the US but not in Europe

Mali: Presidential elections critical to consolidate democracy, says UN peacekeeping chief

Youth and Participation: are the people rising up in Spain? 


Legal Manager – 2050

How to provide health education and thus create better health systems

Road injuries leading cause of death for the young, despite safety gains: UN report

UN condemns ‘heinous’ suicide attack on education centre in Afghanistan

The shrinking Arctic ice protects us all. It’s time to act

New skills needed for medical students in Industry 4.0

Transition between education and employment: how the internship culture is threatening the foundations of our education

Eurozone: Retail sales and inflation point to recession

Why do medical curricula shouldn’t neglect the Sustainable Development Goals

Why medicine is relevant to the battle against climate change

Fisheries: Commission proposes measures to conserve stocks of deep-sea species in the North-East Atlantic

Syria: Guterres concerned over reported attacks in Idlib, calls for ‘full investigation’

Discovering Europe: Free EU rail pass for 18 year olds

Want a fairer society? This economist says he has the answer

The banks first to benefit from the new euro trillion ECB plans to print

These European countries produce the most plastic waste per person

Storms and snow in Lebanon worsen plight for Syrian refugees

Better protection against non-cash payment fraud

Can big events really go plastic-free? A water capsule made from seaweed may be the answer

‘Collective amnesia’ over causes of global financial crash – human rights expert

Superbugs: MEPs advocate further measures to curb use of antimicrobials

Why are the Balkans’ political leaders meeting in Geneva this week?

UN chief appoints Luis Alfonso de Alba as Special Envoy for the 2019 Climate Summit

More Stings?

Speak your Mind Here

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out /  Change )

Google+ photo

You are commenting using your Google+ account. Log Out /  Change )

Twitter picture

You are commenting using your Twitter account. Log Out /  Change )

Facebook photo

You are commenting using your Facebook account. Log Out /  Change )

Connecting to %s