This chart uses very simple assumptions. It takes the OECD economic outlook data on headline and underlying primary public budget imbalances and look at the impact on GDP if these were brought to zero, assuming a fiscal multiplier of 1.3 (the median of Olivier Blanchard’s range of 0.9-1.7).
You have the House of Lords, the Queen and your established traditions – we have the Bundesbank.
Independent central banking is part of the national “sacred” in Germany. And while it may seem very strange to foreigners to put unelected central bankers on a par with, say, national sovereignty in Britain, free speech in the United States, or secularism in France, one has to respect that national sensitivity (each country has its fetishes).
But it was not always thus. Indeed Marsh’s book, in addition to highlighting France and the Latins’ historic monetary rectitude, recalls that leading German politicians of the new democratic Federal Republic were often deeply uncomfortable with the power wielded by the unelected central bank. They provide uniquely useful arguments for those who want to limit the power of the unelected European Central Bank and restore democratic norms in Europe.
UPDATE: The original version of this post was lost following a hacking attempt on this website. New security and daily backups are in place so with any luck this will no longer be a problem in the future. It has been republished with some modifications. Reactions to the original piece have been lost.
…we have not been able to find any US economist making a strong case for the euro prior to its birth.
This is perhaps the most striking find in a fascinating survey by the European Commission of U.S. economists’ assessments of the coming of the euro, as expressed in some 170 publications. The document is enlightening in two respects: first as an intellectual history of American economic thought on the euro, an “American interpretation” which in fact still predominates, and second as an X-ray into the “Eurocratic mind” and its attempts to explain away criticism of the euro. Every self-styled EU-expert should probably read it or, failing that, this post, which summarizes and provides extracts of its 50-odd pages. Continue reading
UPDATE: This post was originally published on 19/07/2012. It has been republished as the original was lost following a hacking attempt on this website. New security and daily backups are in place so with any luck this will no longer be a problem in the future. Reactions to the original piece have been lost.
This post was prompted by a little debate I had on Twitter with my fellow euro-bloggers Ronny Patz and Jon Worth. The question being: What is the most powerful EU institution?
In particular, I had criticized Der Spiegel for suggesting in a profile piece on European Commission President José Manuel Barroso that he “has been the head of the most powerful EU institution for eight years.” The statement, I felt, was deeply misleading. In my experience, both the European Council (representing national governments) and the European Central Bank are infinitely more powerful. It prompted these exchanges with Jon and Ronny:
Last November, when the euro-shit really started to hit the fan, Vladimir Putin – with his habitual freedom of expression – predicted the European Central Bank would need to intervene to the tune of €1.5 trillion.
Mario Draghi, who became ECB president that month, went on to prove the Russian premier two-thirds right by injecting a mind-exploding €1 trillion in low-interest three-year loans to eurozone banks. Things have calmed down since the wily Italian bowed to the inevitable and did this little bit of steal QE.
Still, as Charlemagne points out, there is still plenty that can go wrong, which might prompt the ECB to prove Putin 100% right.