Draghi’s answer to Euro depression

Australia’s Treasurer, Joe Hockey in Draghi, champions austerity for the working class – especially the poor, the unemployed, calling them leaners, not lifters. The whole of the Abbott government – like Draghi – are for an attack on workers incomes, direct and indirect, and associated with that, a direct attack on their collective power to bargain. This is the bit in this article that strikes a chord:
So the two arms of Keynesian macro policy, cheap money and fiscal spending, either don’t work or won’t be used, or both. The third arrow of policy action, to use the phrase of Japan’s Abenomics, is what is euphemistically called ‘structural reform’. “I am uncertain there will be very good times ahead if we do not reform now,” said Draghi. “Potential growth is too low to lift our economies out of high unemployment. Thus, while stabilisation policies that raise output towards potential are necessary, they are not enough. We need to urgently raise that potential.”

What Draghi means by ‘structural reform’ is ‘deregulating’ labour markets, removing labour rights, increasing the power of employers to sack workers, to impose new technology that loses jobs; to remove restrictions on shop hours, rent and price controls – indeed anything to allow market forces complete reign over all. This neoliberal policy is supposed to boost productivity, but in reality aims at raising profitability (which is not the same thing).

Michael Roberts Blog

Mario Draghi, the head of the European Central Bank (ECB), spoke to the Brookings Institution in Washington this week (http://www.ecb.europa.eu/press/key/date/2014/html/sp141009.en.html).

He was very keen to emphasise that the ECB would ‘do what it takes’ to avoid the Eurozone economies sliding into deflation and another slump.

And financial markets and the international economic agencies of world capitalism are worried. At 0.3% yoy, Eurozone inflation is now at a five-year low, far from the ECB’s mandate of keeping the inflation rate ‘below but close to’ 2%. At the same time, inflation expectations, i.e. how much households expect prices to rise, has also been falling. When expectations fall, people tend to wait for prices to fall before buying and prices stop rising as a result. It’s self-fulfilling.

There is a real risk that the Eurozone economy will stop growing at all and enter a deflationary spiral. Indeed, the IMF in its…

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I am a retired left wing and labour movement activist. Before that I worked for a long time in the Australian union movement in union education, Australian and international solidarity and organising. I am also active in Cuban solidarity, the SEARCH FOUNDATION, and promoting discussion, debate and action about green socialism based on workers control and social ownership.

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