All I can see in Peston's summary is the same-old same-old nonsense about wage demands magically destroying 'competitiveness' and creating econo-doom.
Or to be more precise, he argued that the current rise in energy and food prices is comparable to the oil-price shock of the early 1970s. And he insisted that the failure of most European economies back then to suffer the short term pain of tighter monetary policy, higher interest rates, led to inflationary wage settlements that undermined economic competitiveness. "Before 1973 and 1974, there was everywhere in Europe full employment," he told me. "It is after the absence of sufficient lucidity in analysing what was happening after the first oil shock, trying to protect ourselves from the first oil shock and not understanding that we had a real transfer of resources associated with the first oil shock, all that created mass unemployment. "And we are still fighting against unemployment which is at a level that is not satisfactory in the euro area and which is the legacy of these mistakes in the first oil shock." Or to put it another way: cut rates and risk long-term, serious damage to all our prosperity.
"Before 1973 and 1974, there was everywhere in Europe full employment," he told me. "It is after the absence of sufficient lucidity in analysing what was happening after the first oil shock, trying to protect ourselves from the first oil shock and not understanding that we had a real transfer of resources associated with the first oil shock, all that created mass unemployment.
"And we are still fighting against unemployment which is at a level that is not satisfactory in the euro area and which is the legacy of these mistakes in the first oil shock."
Or to put it another way: cut rates and risk long-term, serious damage to all our prosperity.
What Trichet fears is what he calls "second-round effects", such as wages being set at levels that assume inflation will not fall - which could precipitate endemic inflation, a debilitating virus that would be hard to shake off.
