Yesterday the ECB cut its interest rates from 0.75% to 0.50%. It’s the first cut by the ECB in as many months and it is quite interesting because Germany has all along been opposed to any further expansionary policies be it monetary or fiscal and this latest move by the ECB means that the majority of the Eurozone members are finally making bold steps to get their economies on the right footing.
There is something which I find quite puzzling about European policy-makers. They are pushing for monetary expansionary policies and fiscal austerity at the same time. What this implies is that the financial services industry gets help from the authorities to recover from the Great Recession/Lesser Depression by getting cheap loans and having their semi-toxic financial assets purchased for by the authorities at a good price considering that they are basically worthless given how illiquid, the market is currently.
On the other hand, the workers and general public who depend on government services suffer because of the austerity policies being put into effect. It’s hypocritical and the Europeans are ignoring empirical evidence which suggests that fiscal expansion should take a more prominent role in the efforts to get Europe out of the slump it is finding itself in.
No comments:
Post a Comment