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“The risks of doing little – that is, so that cyclical unemployment turning into structural – outnumber do too – ie, increased excessive wage and price pressures, “said this Friday Mario Draghi in a long-awaited communication on the symposium held by the American Federal Reserve in Jackson Hole in the United States.
<- end st_tag_p ->In the past year, Draghi had not been present at this annual symposium, and this year their intervention was very awaited. The magazine “The Economist”, the “Leader” column, titulava this morning: “Be bold, Mario.” The theme of this year’s symposium was the Employment and Unemployment wrapped under the heading “Revaluation of the dynamics of the labor market” and, of course, as central bankers are the problem and its role.
<- end st_tag_p ->Interestingly, the entrance to the symposium, a group of protesters from the Center for Popular Democracy, wearing t green shirts ironically wondered “What recovery?” and required the Fed to continue with the policy of stimuli. The chairman of the Fed, Janet Yellen, spoke to them saying, “We’re doing everything we can,” even knowing that the stimulus program ends in October and that the discussion about when to start the rise in interest rates is on the table
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The Italian has not announced anything new in Jackson Hole, repeated what has said about the continuation of the euro zone monetary policy “accommodative” (with historically low interest rates and providing liquidity to the banking system) and the willingness to take more aggressive unconventional measures. But it was clear to us political messages within Europe:. “Returning to a high job demands, in other words, a combination of monetary, fiscal and structural both at the national level of the union action”
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Fiscal policy must have greater role
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Draghi explained that no “normal” in the eurozone economy is living – structural unemployment “rose from 8.8% in 2008 to 10.3% in 2013″ and is markedly “concentrated in layers with lower qualifications” that have each increasing difficulty to suit a European economy that “just can not compete on costs with emerging countries.”
<- end st_tag_p ->In a “normal” situation “a high degree of caution, for fear of overeating” is admissible said. But not in the current situation “is different.” The president of the European Central Bank (ECB) stressed, therefore, that is necessary “action on both sides of the economy”, ie they are accurate global policies for aggregate demand in conjunction with the structural level of each member country of the euro policy .
<- end st_tag_p ->Monetary policy “accommodative” (which has been followed and may even be enhanced) by itself “runs the real risk of losing efficiency in the generation of aggregate demand”, especially as the ECB has already dropped interest rates for refinancing of banks to near 0% (in the case of the euro area, at 0.15% since 11 June), he said. Therefore, it is essential that fiscal policy will take its place. “It would be helpful to the general direction of policy, whether fiscal policy could play a larger part to the role of monetary policy,” he said
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Some analysts have interpreted these words as a critique of the dominant policy centered on austerity.
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Flexibility in rules
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Draghi said at the symposium that there “bend rules” exist within the eurozone, there is “room for maneuver to achieve a composition of fiscal policies more growth friendly” and there must be a complementary action at European level with a particular program large public investment.
<- end st_tag_p ->recommended that tax policy takes into account the multiplier effects of short-term – reducing the tax burden where the multiplier effect is higher – and the cuts to public spending should focus on unproductive areas where the multiplier is low. Asked for greater coordination in fiscal policy to the scale of the euro zone, a topic that has lately repeated
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In the field of structural reforms emphasized the role of readjustment of skills of the workforce and in particular the low-skilled unemployed. Draghi said: “Making up the trend of growth will have to come mainly from the increase in labor productivity” and that “employment is concentrated in sectors with high added value and high productivity, which, in turn, is a function of skills “. He concluded on this point: “Our comparative advantage must come from a combination of cost competitiveness with a specialization in high value-added activities – a business model that countries like Germany already successfully demonstrated”
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