Previously
on MoreLiver’s:
W/E: Weekly Support (updated!)
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Quote of the Week:My guess is that the ECB will not do any of these things. It will continue blaming eurozone governments for not implementing structural reforms. Eventually, it will adopt a programme of asset purchases that is too small, which it will abandon prematurely at the first sign of recovery. The result is that the eurozone will end up looking like Japan, but with one difference. Countries whose policy goes off track have nowhere to go. The member states of a monetary union have alternatives. By failing to deliver on its inflation target, the ECB could give member countries a good reason to leave the eurozone: they could have a better central bank. My advice to the ECB: do not let that happen. (Münchau / FT)
EUROPE
EUROPEAN CENTRAL BANK
Draghi has few legal ways to fix the euro – FT
By
pussyfooting around with liquidity policies instead of acting on inflation, the
ECB has signalled that it is safe to bet against the inflation target
ECB in
policy limbo, boxed in by its own plans – Reuters
The ECB is
in a policy no man's land, bombarded by news of a stagnating euro zone economy
but hesitant to move forward with new stimulus until measures it loaded in June
have ignited.
DEPRESSION
Blogs review: The forever recession – Bruegel
As the
recovery takes hold in the US, Europe appears stuck in a never-ending
slump. With the ECB systematically undershooting its inflation target and
recent signs that inflation expectations could become de-anchored, the bulk of
commentators in the blogosphere are again calling for more monetary actions.
Noticeably, some have completely lost hope in the ability of the European
institutions to turn this situation around and are now calling for countries to
simply break away from the EMU trap.
Europe Facing The New Economic Normal – Econmatters
George
Friedman: It is becoming increasingly reasonable to believe that rather than an
interlude in European prosperity, what we now see is actually the new normal.
The key point is not that Germany's economy has contracted by a
trivial amount. The point is that it has come time to raise the possibility
that it could be a very long time before Europe returns to its pre-2008
prosperity and to consider what this means.
Worse than the 1930s: Europe’s recession is
really a depression
– WaPo
It's a
policy-induced disaster. Too much fiscal austerity and too little monetary
stimulus have crippled growth like almost never before. Europe is doing worse than Japan during its "lost decade,"
worse than the sterling bloc during the Great Depression, and barely better
than the gold bloc then
POLICY
Stiglitz
Says Stalling Euro Area Shows Dismal Failure – BB
Euro-area
austerity policies to tackle the region’s debt crisis have been a “dismal
failure” as economic growth grinds to a halt, Nobel laureate Joseph Stiglitz
said.
Nobel
economists say policy blunders pushing Europe into depression – The
Telegraph
German
Chancellor Angela Merkel defends eurozone and says it is hard to manage a
currency for 18 states
The Italian Runaway Train – A
Fistful of Euros
With
markets continuing to finance debt levels that any official study will soon
have to recognize as unsustainable lack of proactive policies from the ECB will
only fuel concerns that the size of the pill may become just too big for the
bank to persuade Germany comfortably swallow, leaving the specter of private
sector involvement to once more rear its ugly head.
Italy’s Downward Spiral – Project
Syndicate
Hans-Werner
Sinn: Italy is now in a triple-dip recession. But it
didn’t get there by itself: Though the economy’s long slide reflects Italian
leaders’ failure to confront the country's loss of competitiveness, it is a
failure that is widely shared in Europe.
The OMT programme was justified but the fiscal union question remains – Bruegel
The
monetary union, even with the OMT programme, is incomplete and the issue of
fiscal union remains unresolved. To permanently stabilise monetary union, the
EU will need to agree on a small fiscal union.
OTHER
Global PMIs point to punch-drunk and confused economy – TradingFloor
At first
look, the flash August purchasing manager indices appear to provide some
positive outlook for the global economy. That is exactly what scares me. The
news is not really that encouraging, and instead acts as an excuse for
policymakers to stand back and dream of better times.
Secular stagnation: Facts, causes, and cures – a new eBook – voxeu.org
Secular
Stagnation: The Book
– Krugman
/ NYT
Six years
after the Crisis and the recovery is still anaemic despite years of zero
interest rates. Is ‘secular stagnation’ to blame? This column introduces an
eBook that gathers the views of leading economists including Summers, Krugman,
Gordon, Blanchard, Koo, Eichengreen, Caballero, Glaeser, and a dozen others. It
is too early to tell whether secular stagnation is really secular, but if it
is, current policy tools will be obsolete. Policymakers should start thinking
about potential solutions.