European Central Bank rises rates by 0.5%
ecb.europa.eu
ecb.europa.eu
The TPI is another step forward towards the ECB getting real FED-like powers and centralizing debt. We live in historic times.
For simplification let's say they spend 10% of their anual budget servicing debt at an average of 5% interest rate
If the base interest rate rises by 50 bps, you could argue the average debt held by PIGS would eventually rise by the same amount, _at least_!
So now you have 5.5% interest rates, which is a 10% increase
So the anual budget used to service the debt would also increase by 10%, from 10% to 11%
By buying bonds from these countries you pressure the yields down
At least in Spain, the government chooses helicoptering money over investment every single time. Or prestige projects (High Speed Rail) over practical ones (freight corridors with no so fast trains for people?), higher salaries for public employees (already high compared to private economy), public pensions, etc.
The only demands seems to be higher taxes every year for everyone else. No optimization, just raising and raising taxes every time.
This is not sustainable. Savings and income are taking a nosedive for everyone who's not sucking into the public budget.
This situation is going to explode, and it's going to be ugly, not only for us.
I'm pretty worried about it, honestly. Meanwhile half the country is cheering because the government is very good at selling their narratives and cooking the stats. The reality is we're getting poorer pretty fast.
Maybe germans have some fucking great plan because in 10 years they won't sell many cars here.
They are trying to build cars there. Germany's trade surplus also leads to German companies investing more money abroad than at home.
Also, what is Germany supposed to do? What are they doing wrong? EZB is not controlled by Germany, Germany in fact always complained about the low interest rates.
But, instead of that, Germany preferred to enjoy access to a common market and devaluated Mark (that is basically what the Euro is) while pontificating from a high horse.
Instead of a functional monetary union we get this mess. And now we all have to be solidary with Germany energy problems. We will see.
I this it's still better than Germany importing Russian gas. Their whole decarbonization strategy was based on Russian gas. This is how we ended up with gas labelled as "green".
If you don't like'em, don't buy German cars, buy Seat. Technically also a German car built in Spain. At least you keep the factory workers employed.
I think I will aim for a political solution if you don't mind. There are two possibilities, a functional monetary union and a really democratic union or every country goes its way. Both work for me.
Can you elaborate on that? What are the ideas that Germany opposed?
A lot of this reads like Germany is the boogie man and every other European country is their poor victim. That's a little bit to one-sided for me.
Very different countries can't be in a functional monetary and banking union without a common fiscal capacity. In terms of the USA it would be like there was a Fed without a treasure. Or another way to see it, it's like the countries in the Euro use a foreign currency that they don't control. If you are interested I recommend this prescient article by Wynne Godley (1).
So, if the design of the Euro is bad, why don't change it? Because for some countries is very advantageous. Germany being the best example, they are an export powerhouse that now have unrestricted access to the common market and, because is a common currency, it will no appreciate or devaluate following the commercial balance. Of course, this is sell like they don't want to finance the lazy pigs in the south.
(1) - https://www.lrb.co.uk/the-paper/v14/n19/wynne-godley/maastri...
If we do this fiscal union, are all countries willing to adopt German fiscal discipline? Are all countries ok with levelling out retirement age? Social benefits?
Also, why are you not mentioning that Germany already agreed to the EU taking on common debt during the corona crisis? That the new government is very much pro further integration?
I hear a lot about what Germany is doing wrong. What are the others doing wrong? Germany was desolat themselves after the reunification, they were called the sick man of Europe. They then did harsh and brutal labour market reforms, and a bunch of luck probably as well. Now they are an economic powerhouse. With 0 natural resources, they are all imported.
It's not the Germans fault that Italy has loads of debt. It's not the Germans fault that Spain built useless ghosttowns in the middle of nowhere. They can only export what others are willing to import. And they are not exactly exporting cheap cars at dumping prices, are they?
Sure, Germany is far from perfect and they do lots of things in their own self interest. But maybe the other countries can also try to do better? How long did the Italians keep Berlusconi in power? Draghi threw the towel today, again, because the parties in parliament are unwilling to cooperate to better Italy.
Maybe try to copy what Germany is doing well, instead of feeling like a victim of German evilness.
> are all countries willing to adopt German fiscal discipline?
Most of them have already, you just don't read about it. If anything, German authorities have been excellent at gaming the EU framework, siphoning state aids to this or that industry with all the possible loopholes they could find, while everyone else had to renounce (or even denounce) the practice.
> Are all countries ok with levelling out retirement age?
The pension age in Germany is 65 years ("and 10 months", in my best Lester Freamon accent). In profligate Italy? 67. So yeah, let's have that.
> Social benefits?
Honestly, you don't want to trade benefits with the army of temp workers that Italian "reforms" have generated. They get hardly any paid holiday or sickness, can be fired with no recourse year by year, and so on. German workers get trade union representation at board level, something that simply does not exist in Italy even in the most enlightened companies. They get loads of paid holidays and so on.
> Now they are an economic powerhouse. With 0 natural resources
Ah yes, the Ruhr never existed. From wikipedia: "The Ruhr was at the centre of the German economic miracle Wirtschaftswunder of the 1950s and 1960s, as very rapid economic growth (9% a year) created a heavy demand for coal and steel." All that coal must have been a dream.
Italy had an economic boom in the postwar age too. After all, they were fellow victims of Allied carpet-bombing of industrial infrastructure, and fellow enjoyers of the Marshall Plan. The main difference is that Italy made a few bad choices in the '80s (and possibly another one in the late '90s, when they accepted an Euro/Lira rate too low).
In any case, this attitude is not constructive. It's good that the German political classes, at least, have finally realized that the hipocrisy of privately benefiting from a sclerotic status quo while publicly denouncing it, could not go on forever. Let's build the United States of Europe, everyone doing their bit so we can fulfil the federal dream and be done with these petty rivalries from 200 years ago.
I had to look up what that means. I'm not German. Now what?
> So yeah, let's have that.
Yeah, let's. Italian pensions are about 90% of the former salary? Germany is 50%. Italians make higher payments tough as well. The difference is, Germany is doing that from a much lower debt ratio.
Temp workers are a thing in Germany as well, they get no inion representations. And again, the difference here: German economy is doing well.
Sure the Ruhr existed, have you been there lately? Crazy decline since the 70s. Wasn't a coincidence that the heaviest german metal bands come from there.
> The main difference is that Italy made a few bad choices in the '80s
Exactly. That's why they have this huge debt now, which results in the whole Eurozone shaking whenever interest rates go up. That's why we had low interest rates, which the Germans were very unhappy with. Draghi tried to work on that, but now he is out. Seems like a right to far right coalition might ein the election in the promise of flat tax and not raising retirement age. Will that be the Germans fault as well?
> Let's build the United States of Europe, everyone doing their bit so we can fulfil the federal dream and be done with these petty rivalries from 200 years ago.
Yes, please! But that only works if everyone is in and works on themselves. I don't thinkt the attitude of blaming everything on the Germans is very constructive either.
Well, then you've absorbed a biased outlook pushed mostly by the German press.
> Italian pensions are about 90% of the former salary?
Ahaha, they were, maybe, 30 years ago. This has long changed, but obviously these changes take generations to be reflected in stats - and we're obviously not going to kill existing pensioners.
> Sure the Ruhr existed, have you been there lately?
Does it matter? You said the German miracle was achieved with 0 natural resources, and I've just proven that statement to be utterly false - which should maybe prompt you to revise your positions.
The truth is that Germany powercharged its economy with coal; since then they've been good at maintaining that advantage, but it's undeniable that they had an advantage like few other European countries. Another advantage is a largely flat surface that makes it very easy to build transport infrastructure, something much more complex in mountainous areas like most of Italy, Spain, and Greece. In fact, it's half a miracle that Italy developed complex manufacturing districts in the Alpine valleys.
> Draghi tried to work on that
Pretty much every Italian PM since the 90s tried to work on that, with various degrees of success. As shown by the Twitter thread linked in another post, Italy actually shrunk their debt faster than any other country over the last 25 years, with wide-ranging cuts. But 80s stereotypes refuse to die even in the face of facts, generating self-fulfilling prophecies in the speculative markets. It's in everyone's interest, including northern countries', that these stereotypes be removed from the public debate. If this cannot be done, sharing debt is the only other option to stabilize a currency from which norther countries benefit disproportionately. And that's what the ECB is effectively doing, measure after measure. It should have been done 20 years ago, as many people asked; but apparently doing it the hard way was politically necessarily, so here we are.
https://www.oecd.org/italy/PAG2021-ITA.pdf
"Many options to retire below the statutory retirement age result in low average labour market exit ages, at 61.8 years on average against 63.1 years for the OECD average. Granting relatively high benefits to relatively young retirees contributes to the second highest public pension expenditure among OECD countries, at 15.4% of GDP in 2019."
After the reunification, Germany, as a country, is the poster child of economic success. The balance of trade of Germany, has been just ridiculous. Still, the conditions of the average German have not improve, if something, they are worst.
So, where are all that wealth going? I suppose if you ask the politicians they will tell you that to those lazy guys in the south. Well, that's not it. The Germans should take a good look at what's going on there.
Is that the model others should copy?
Also, you keep railing about "the lazy guys in the south". I'm sorry these stereotypes exist. I don't believe them.
Do you seriously believe the problems of the Spanish economy are all because of Germany? There is absolutely not even a single thing that Spain is doing wrong?
https://marketmonetarist.com/2015/07/14/the-euro-a-monetary-...
-All countries can't be net exporters at the same time. If Germany want to be a net exporter, somebody have to be a net importer.
-High public debt in your own currency supported by your central bank it's not problematic. High private debt is very problematic.
-For the same import/export ratio, if you reduce public expenditure, or the GDP will fall, or the private debt will grow. That's mathematics.
-The current agreements of the Euro-Area forbid investment in industrial policies. If Spain wanted to spend money in creating some kind of industry that compete with Germany and protect it until is competitive, it would not be allow to do that.
-Government spending in Spain could be better (if it was allowed, that it's not), but it's better than nothing, at least that you want the economy to collapse after a high grow of private debt.
-The program of support of the PIGS(1) public debt of the ECB is not to help the PIGS, is for protecting the Euro. The moment they stop doing it, the Euro is done. That's how well this currency union was designed, that if follows its rules it disintegrate.
(1) -By the way, it seems that we can call 120 million person PIGS and nobody think is a bad thing.
-It's a common market, so not import taxes are allowed. That means that any new industry will have to compete with developed companies already established.
-Public companies are encourage to be privatized, so, you can't keep an industrial base that it's not, for now, competitive.
-The result is desindustrialization. Then those desindustrialized countries are accused of not being competitive.
-In some cases, at the European level they realize that they are losing the strategic edge to other blocks, and some kind of program at the federal level is created. Like the current thing with the chips. Of course this programs never will result of giving the edge to one of the PIGS.
In practice this is gamed in many ways, and there have been winners and losers.
I do think it's a bad thing because it needlessly creates a North/South divide. If these countries are in trouble, the whole Euroblock is in trouble.
I've had this convo before on HN: under the guise of brevity, it's an example of literal casual racism. But folks here refuse to accept it, even when supported by the fact that all serious mainstream publications have forbidden its use in print.
The Eurozone is like Asimov's Foundation, periodically going through predictable crisis to modify its equilibriums while going from strength to strength.
In your opinion. Many economists don't agree, in fact I'd say most of them say it probably leads to inflation eventually (as we see now ahem...)
If after a pandemic, an energetic crisis, a global politic crisis and a war in Europe, the explanation for inflation is "public debt", maybe there is some bias there to be examined.
If public debt doesn't matter btw, why does private debt matter? Simply publicly print away all private debt and viola problem solved. In fact why can't we all be billionaires?
Public debt is a private asset.
In practice, measuring literally all prices is very hard, so governments measure a small subset and then call a change in that basket "inflation". The baskets were perhaps once a reasonable proxy but now it leads to problems, because it causes people to lose sight of what inflation really is. Higher gas prices is not inflation, it's just higher gas prices. Higher everything prices is inflation, but unless the money supply increases it's impossible for all prices to rise. With a stable monetary base a price rise in some essentials will cause other products to lower prices to try and juice demand that's falling away, or they will disappear entirely as society gets poorer (i.e. price = infinity) but companies going bankrupt because they can no longer sell their products doesn't affect statistical measures of prices. So these are very imperfect proxies.
Suffice it to say that high public debt means economic activity is being distorted in favour of the state's priorities over those of the citizens. History provides many examples of where that leads when taken too far.
Yes but the Euro is not an own currency of any single country which is why a country in Eurozone can potentially go bancrupt. this led to players betting against Italy in the last Euro crisis until the „whatever it takes“ bailout guarantee. Challenge is there now is unbounded spending across Euro countries with no end in sight. It all just feels like a race of who can spend faster until the party is over.
That's simply not true. Just look to the data. If it was true, you would see grow in those countries. And also look to the difference in economic indicators between the countries that are in the € and those that are not. Being in the Euro is not so good deal like they try to sell us.
The "whatever it takes" didn't saved Italy or the PIGS, it saved the €. And it was a direct monetization of public debt that it's against the treaties (at least in spirit).
Think about it, in order to save the €, the ECB had to go against the treaties that define the Euro. If that don't tell you that the problem is the treaties and not in specific countries, nothing will do.
I think this will happen in most places for many reasons - the enormous debt is not just a European problem it's also an American and Chinese problem. Also declining demography, ESG investing and scarce energy resources and bunch of other problems it's not looking great.
If we all just peacefully accept that standards of living have to go down for everyone (climate change is also a hint that we've pushed too far) maybe we can find some path forward.
Alternatively, we could all just agree that "standard of living" != "GDP". In the old days, measuring GDP was a lot easier than measuring the standard of living. They were highly correlated, so we used it as a proxy. But now, it's outdated, and it has been for 50+ years.
See eg https://archive.nytimes.com/krugman.blogs.nytimes.com/2012/0... for some history of how this wasn't really unexpected. Interestingly in that article higher inflation is seen as a potentially promising tool: "[T]he burden of adjustment might be substantially less if the overall Eurozone inflation rate were higher, so that Spain and other peripheral nations could restore competitiveness simply by lagging inflation in the core countries"
[1] The EU budget is tiny compared to national budgets (or eg federal budget in the US), < 3% of the EU GDP.
And that's almost completely a function of the rate of saving.
But, do compare https://marketmonetarist.com/2015/07/14/the-euro-a-monetary-...
[1] https://en.wikipedia.org/wiki/PIGS_(economics)
[2] https://tradingeconomics.com/ireland/government-debt-to-gdp
I could also refer to you as a complete idiot in this discussion but that would not be civil of me would it?
It's just blatant casual racism at this point.
Whether the ECB should buy PIIGs debt was a big issue during the Eurocrisis. Iirc, the ECB had to create additional mechanisms, some of those were challenged by courts in member nations, and authority ended up resting outside the ECB (which some nations didn't like because it is basically unaccountable). I believe this scheme, although it will almost certainly be challenged again, attempts to move authority for these decisions within the ECB.
Nothing has been fixed (because it can't be fixed with the EU as it is).
Of course that's actually a desirable feature of such institutions. Give them a mission, staff them with technocrats dedicated to the mission, defuse political interference and they'll deliver. The US Supreme Court decided you can't do that (well, in practice, that Democrats can't do that, it will be fine when Republicans do it) but outside the US this is an attractive idea.
However Politicians don't learn, they will always see political advantage from meddling with the independent entity, and then be astonished when such meddling backfires badly.
Take NICE in the UK. The purpose of NICE is to decide how to spend necessarily limited resources to deliver healthcare. How many profoundly deaf 5 year olds being able to hear is worth one grandparent who lives an extra twelve months? If this new drug is $180 to treat one patient while the generic we're using is $5, what sort of benefits does that new drug need to have to justify the price tag? These are the "death panels" Americans were told to be scared of years ago.
But politicians don't care about the general idea of NICE, they care specifically that photogenic Sarah, whose husband happens to work for a news publisher, is dying of a rare illness, and NICE says the $5M drug to cure Sarah's illness isn't "cost effective". Politicians want a photo of them hugging Sarah and promising she'll be OK. They definitely don't want to raise taxes to pay for the drug (higher taxes is unpopular) but they do want that photo (it'd look great on campaign adverts). And hey, the drug maker gives them $50k campaign donation, that's nice. Let's override NICE and divert $5M to get Sarah the drug. Oops, Sarah died anyway, oh well, news moves on.
Years ago the Tories introduced a "cancer fund" where for no discernible reason if you had specifically cancer, there was a separate pool of extra money so that they could be shown to be such compassionate people, who really want what's best for everybody. Well, not everybody of course, just people with cancer for some reason. Of course then photogenic people have something that's not cancer and you look really callous because you rejected them. Wow, it'd sure be easier on politicians if these funding decisions were made by some technocrats instead... oh right.
The reason why the Tories introduced the cancer fund was because NICE refused to pay for cancer drugs that worked. The reason why it is was only for cancer was because there were a large number of new drugs that were effective for cancer and NICE refused to sanction them. The only other group of drugs in a similar place was epilepsy, but the number of people who require this medication is significantly smaller (as in, there is one or two people in the UK who need a certain drug). Btw, the reason why NICE don't like spending money on drugs is because that is money that isn't going to staff wages (those unbiased technocrats again).
Btw, there is a govt full of technocrats...China. Everything there is run very efficiently: the corruption, the concentration camps, tracking of political dissidents...all very efficient.
If you think China's governments are full of technocrats, you just don't understand China at all.
Yes, china have technocratic boards (HST and SEZ are the most known projects lead by technocrats), but don't ever forget that China is run by its political power first, military second, its economic power third, and only then their technocrats. And those only have power in complex areas (i can develop if you want to know what I mean).
And the technocrats lose more ground to the economic powers everyday. Until the military enter and rebalance everything, it will continue.
I'm not even talking about local governors and mayors, if you think they are technocrats and not family members of the military or political, you're dead wrong.
There are little things more political than economics and money.
Of course they have to, otherwise Italy is bankrupt.
But I don’t see the euro lasting another 10-15 years.
Germany needs the EU more than Italy, in many ways. Particularly with herr Putin knocking at the door. They'll come around.
The German people are better off subsidizing other Europeans to buy their cars, like Ford did with their workers.
Yeah, but the imports then also become massively cheaper, so it might even out: Germany will just start importing more stuff e.g. from Poland instead of producing it locally.
And this way, they lose their main advantage: a strong economy that focuses on export. They can't have their cake and eat it too. Especially when their auto industry is set to lose greatly with the EV transition (which they still try to slow down).
This take is utterly naive. What you "get in return" from being a massive exporter is not all quantifiable. It's soft power, influence, prestige. When everyone uses your machinery, you control the standards and their evolution, you control the market.
Plus, even going back to purely economic terms, you can absolutely export and then keep the accumulated money sitting in coffers, financializing the gains (lower borrowing costs etc etc), or invest in local research to extend your advantage, and so on and so forth. None of these options require importing anything.
To me this sounds a bit like the broken window fallacy [0]. That it’s good if sometimes a window gets broken, because it generates economic activity. But this ignores the fact that economic value was destroyed in the process.
Those subsidies could be used in other ways as well, perhaps by helping startups grow.
——
[0]: https://en.m.wikipedia.org/wiki/Parable_of_the_broken_window
Value gets destroyed in the process of using anything, so much that we have a special word for it: depreciation.
Cars and other machines will wear out after enough use. Even more static goods like windows (usually the seals) fail with time and need to be replaced.
*Still a strong economy in the grand scheme of things, but during period of contraction unable to support short-term generalized expansion of foreign labor. I do think they are in a position to expand foreign labor again in the long term (although it may require finding a way to refactor their energy policies).
The question is whether a more federal eu is possible, and if northern states are willing to pay for the south.
Now, with the current economic situation in Germany, and the gas issue hanging over their heads, I think this is quite different to the 2008 crisis. Germany might be less and less willing to pay for everything
Essentially, weapons manufacturers aren’t able to do business with Germany because Germany isn’t able to fund projects that take more than one year to deliver. That leads to horrific procurement problems like showing up to NATO exercises without enough tents, or spending 10 years evaluating a helmet for German heads that the US already uses.
Without overhauling their government, he concludes that the best Germany can do to help NATO is to give funds to other countries that have more capable procurement processes.
Would the government do that? Probably not, they might buy some tanks and spent the money for other things, so a different part of the economy is benefited. But when looking at the overall economy / gross product, it doesn't really matter.
That is only one of many, many German industries that would suffer from the demise of the Eurozone. The benefits of the common currency sustaining demand across the continent waaaaay outstrip any perceived "loss of control" for the German economy.
Okay, if the government actually cannot spent the money (even partially) at all, then yeah, the original claim would be true. I don't think this would be the case though.
This seems to be exactly that.
The trick here is that it's not 'sovereign debt' as being held by one country , but rather it's a 'package of debt' with a normalize rate and more guarantee...
It's what Pro-EU have been advocating for decades , to avoid 'spread' within eu-zone...
Is raising rates by 0.5% anywhere near enough to get inflation to 2%, given that inflation is currently at 8.6%?
https://ec.europa.eu/eurostat/statistics-explained/index.php...
You can already see the impact of this in the real estate market. Its not pretty and i believe they will play hot potatoes until the next administration can take the blame. Don't know how it is in EU but probably similar dynamics.
Nobody wants to be that guy who takes the fall for the next recession. It's going to last a long time and lot of people seem like they are poised to buy the dip again like they have before.
Remember that markets falling to 40% isn't an outright meltdown but we've had it fall far past 50%, 80% was the biggest fall and that is the more likely scenario.
The current inflation is primarily caused by high energy prices, secondary by shortages (semiconductors, grain, vegetable oils, etc) and third (delayed effect) higher wages due to worker shortages.
In theory, a rate hike reduces demand. But it won't for the above goods and services as they're barely optional. People are going to continue to heat their houses, vehicles will keep moving, factories won't be shut down at scale. People won't stop eating either.
I believe the much more aggressive rate hikes by the FED, multiple already, validate this point. It's not done nothing to reduce inflation.
I'm thinking it's going to be energy savings (by consumers and industry) and working on energy alternatives/abundance to really kill high inflation.
Another example of a non-working instrument: here in the Netherlands the long term mortgage rate (15-20 year fixed rate) has more than tripled in just 4 months time. It doesn't even move the needle in house prices. It has slightly slowed down growth, and that's it. The reason it doesn't work is because there's no supply and the demand is not that elastic. People need a place a live.
In Germany apartment prices went down in few cities with an overheated market. If prices stagnate long enough inflation effectively makes prices go down like in Germany from 2000 to 2010
A lot of companies in Germany (same in the Netherlands) are exporters. The products they produce are not consumed by local consumers, hence higher wages do not increase local inflation.
Similarly, for some companies wages are a limited part of their expenses. Some factories have like 10 workers to produce millions of items of output.
https://www.statista.com/statistics/921364/value-of-m2-money...
It's way too early to make this claim. Fiscal policy such as setting interest rates has been studied and projected to take anywhere from 9 months to 24 months to see an effect on inflation metrics such as CPI. We won't know if what the Fed has done will have its desired effect until much later. We can only do what has been observed to have worked in the past and hope other secondary inflation drivers (i.e. supply shortages, commodities crisis) continue to die down.
[1] https://www.lancaster.ac.uk/staff/ecajt/inflation%20lags%20m...
Nobody expects interest rate hikes to have an immediate, direct effect on prices. The immediate effect it is supposed to have is not on energy prices but on wage negotiations.
If these expectations become entrenched the cycle is very hard to break. Only a severe recession with high unemployment will work at that point and nobody wants that.
So yeah, I think if by medium term you mean 1-2 years, it's certainly possible. Short-term there's basically nothing any single central bank can do about commodity inflation anyway. Lowering economic demand in the EU as a means to tackle high global commodity prices is a questionable strategy when the continent is on the brink of recession. They're screwed either way though.
The Asset purchase programme (APP) and pandemic emergency purchase programme (PEPP) will continue for now though, the latter is planned until 2024.
- Countries with broken economy like Italy win
- Countries that kept their economy more viable lose
- Zombie companies will keep going?
- Mortage owners lose (some European countries have floating rate mortages)
source on that one?
Not sure how that would play out on todays (well, current as today Italy's last gov is no more) landscape...
Assuming 'stable' is a synonim for stagnationg and slow decline then yes. The 90's were pretty good but there has been been almost no real growth after the Euro was introduced in 1999.
It's even worse in relative terms. Back in 1995-2000 Italy's GDP per capita was around 130% of the EU average, now it's less than 100% and not that far from the more succesful Eastern European countries which joined in 2004 (around 80-85%). And these numbers only tell a part of the story since the average GDP per capita went down significancly after most ex-communist countries joined the EU between 2004 and 2007.
France, Germany, UK & Italy had almost equal GDP per capita in 2000, Italy was even ahead of France and Britain during most of the 1990's and look what happened later:
https://data.worldbank.org/indicator/NY.GDP.PCAP.PP.CD?locat...
Obiouviously Italy is still a rich country with a "strong" economy but if it stays on the same trajectory for the next few decades it will likely become one of the poorest countries in the EU.
Most of those countries aren't in the Eurozone, with the notable exceptions of Slovakia and Lithuania.
> - Countries with broken economy like Italy win
The reason private debt is relatively low is because their banks largely do not function and have turned into bailout mechanisms (and Italy had to take the step of bailing in private investors because they were unable to finance their debt, given the relatively large size of the banking sector, this basically froze their financial markets).
Correct, Italy has run primary surpluses since the 90s...their debt is 150% of GDP, the conclusion is what?
The other stuff is largely false...but assume it isn't, what is the explanation for Draghi's reforms? Youth unemployment is 35% (for reference, this is higher than many places in Africa). People confuse the policies that have been forced on Italy due to Germany's ordo-liberalism, and actual economic strength.
Also, there is massive regional inequality within Italy. Some regions in the North are basically Germany. The companies are run by Germans, the investors are German, the population largely speak German. Those areas, it is true, do well. But if you are looking at Southern Italy, there are huge problems (and btw, anyone who is trying to tell you the opposite has an agenda, I have never seen this outside the context of "...so ordo-liberalism works, it must continue, deflationism works"...because if it is true that Italy is a basketcase, which it is then people start asking whether a fixed exchange rate is a good idea...which it isn't).
Again though, what is the perspective...Turin is a famous manufacturing city but is still in decline, and is fairly grim overall...and that is supposed to be the part that works for citizens (same is true of Milan, which is a services hub so even more insulated from the decline that hit Turin...still grim, still in decline).
Btw, I think out of any place in Europe, Italy has the most economic potential. They have the financial markets, they have the universities, they have the people...but it is unfortunate that the only context in which they are presented as economically successful is within an agenda that attempts to further the status quo that has served them so poorly. If Italy stops believing in ordo-liberalism, they can grow.
s/some/most/
https://www.ecb.europa.eu/press/pr/date/2022/html/ecb.mp2202...
(1) interest rate hike cuts interests.
(2) asset purchase programme cuts interest rate differences between countries.
Euroarea as it is now is very non-optimal currency region (by the Mundell's definition)
To fix it, Euroarea needs fiscal transfers. The US has automatic federal level stabilizers that smooth differences between states. Euroarea needs something similar in the long term. Common EU level unemployment would work well.
The interesting thing about leaving the low interest regime is that this chance is BOTH only 0.5%ppts in absolute terms AND infinite in relative terms...
Nobody simplifies my Mandarin.
Gifted as both a past tense transitive verb and an adjective has been around for hundreds of years and never stopped. So, I’m not sure what you’re on about there.
the interest rate on the main refinancing operations
and the interest rates on the marginal lending facility
and the deposit facility will be increased to 0.50%, 0.75% and 0.00%
FWIW, until recently I was cautiously optimistic w.r.t. Italy, but the stunt of ex-premier Conte's M5S and Salvini's Lega driving out Draghi's (relatively) competent gov in favor of populism damped that a bit.. One of the biggest droughts in Italy's history won't help the economy either.