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EUobserver.com / Economic Affairs / Draghi urges eurozone not to give up on austerity

BRUSSELS - Budget cuts may be deepening the recession, but governments should not give up now, European Central Bank (ECB) chief Mario Draghi said on Wednesday (25 April) at a hearing in the European Parliament.

"We are just in the middle of the river we are crossing, the only way out is to persevere," the Italian economist in charge of the eurozone's central bank said.

He admitted that "fiscal adjustment" - a euphemism for budget cuts - is contributing to recession, which in some countries may last longer than a year or even two.

"In certain cases the contractionary effects could be medium or even long term, for instance where youth unemployment has been there for a long time," Draghi noted, in reference to Spain, where over half of people under 25 are out of a job.

He said the only way out is to stick to labour market reforms that "free some energies in the economy," given that countries like Spain were prosperous and competitive in the past.

by afew (afew(a in a circle)eurotrib_dot_com) on Wed Apr 25th, 2012 at 03:39:47 PM EST
[ Parent ]
BBC News - Eurozone leaders push for growth
Speaking to the European Parliament, Mr Draghi acknowledged that austerity in Europe - which has brought waves of protest in Greece, Spain and beyond - has curtailed growth without doing much to reduce fears that governments may be unable to repay their debts.

He said austerity - spending cuts and tax rises - "has been undertaken and is starting to reverberate its contraction effects, and we haven't seen the benefits".

"What is most present in my mind is to have a 'growth compact'," the ECB boss said.

by afew (afew(a in a circle)eurotrib_dot_com) on Wed Apr 25th, 2012 at 03:45:42 PM EST
[ Parent ]
Is what's needed.

We don't want no stinking jobless recovery.

guaranteed to evoke a violent reaction from police is to challenge their right to "define the situation." --- David Graeber citing Marc Cooper

by Migeru (migeru at eurotrib dot com) on Wed Apr 25th, 2012 at 05:41:34 PM EST
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Better downsize the banking sector then.

As the Dutch said while fighting the Spanish: "It is not necessary to have hope in order to persevere."
by ARGeezer (ARGeezer a in a circle eurotrib daught com) on Wed Apr 25th, 2012 at 11:34:30 PM EST
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"Growth" is just a bankster term for increased financial sector profit. Employment may not be a formal enemy of growth, but is increasingly seen as a regulatory impediment to it

keep to the Fen Causeway
by Helen (lareinagal at yahoo dot co dot uk) on Thu Apr 26th, 2012 at 03:00:39 AM EST
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We keep coming back to Kalecki's Political Aspects of Full Employment...

guaranteed to evoke a violent reaction from police is to challenge their right to "define the situation." --- David Graeber citing Marc Cooper
by Migeru (migeru at eurotrib dot com) on Thu Apr 26th, 2012 at 03:08:29 AM EST
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Merkel Backs Draghi's Call for Growth to Combat Debt Crisis - Bloomberg

Chancellor Angela Merkel backed European Central Bank President Mario Draghi's call to focus on spurring economic growth, as German officials rejected charges they are fixated on budget austerity to fight the debt crisis.

Europe needs growth "in the way that Mario Draghi, the president of the European Central Bank, said it today, that is in the form of structural reforms," the chancellor told a conference of her Christian Democratic bloc in Berlin today.

by afew (afew(a in a circle)eurotrib_dot_com) on Wed Apr 25th, 2012 at 04:11:50 PM EST
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So "structural reforms" don't just lead to growth, they are growth according to Merkel...

guaranteed to evoke a violent reaction from police is to challenge their right to "define the situation." --- David Graeber citing Marc Cooper
by Migeru (migeru at eurotrib dot com) on Wed Apr 25th, 2012 at 05:40:54 PM EST
[ Parent ]
Just as brutal national deleveraging is growth, because wages and prices fall instantly to a new equilibrium and the market leaps back. (Only failures like Keynes made out that wages and prices are too sticky for this theology to work in messy real life.)

Never mind. As Ludwig Erhard, when Finance Minister in the '50s, said of the "Social Market": "The market is social".

by afew (afew(a in a circle)eurotrib_dot_com) on Thu Apr 26th, 2012 at 02:29:34 AM EST
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Even if wages and prices did that, you would still need the commit the loanable funds fallacy and violate stock-flow consistency to get the instant magic pony growth that new classicals pretend.

- Jake

Austerity can only be implemented in the shadow of a concentration camp.

by JakeS (JangoSierra 'at' gmail 'dot' com) on Thu Apr 26th, 2012 at 02:45:00 AM EST
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No.

Because growth for the 1% is the only growth that matters.

Even if the wider economy is in a depression, as long as income is rising for the 1%, everything is happening as it should.

by ThatBritGuy (thatbritguy (at) googlemail.com) on Thu Apr 26th, 2012 at 04:10:25 AM EST
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From Delors' For a revival of Europe (h/t afew)
Then, there are the international causes of the crisis affecting the euro. Of course, it is easy for the United States Secretary of the Treasury to talk about the euro crisis forgetting his own deficit and the domination of the dollar. But the international causes of the euro crisis still exist. It is, of course, due to the excess of financial ideology. I will quote you a single sentence that shocked me when I was talking to a leading French banker, who said to me: "Jacques Delors, you understand nothing, the creation of value is essential". "And what is the creation of value?" I asked him. I did not wait for his answer, as I already knew it: it is the increase in stock market prices. We are a long way from the Schumpeterian entrepreneur and the economic moral doctrine of Max Weber. For years we lived with this ideological euphoria and the Commission services were not insensitive to it. After all, to sum up, finance was the queen of the game and capitalism worked well, provided that employees accepted to be mobile and to earn less. That was their system. Such are the international causes of the euro crisis.


guaranteed to evoke a violent reaction from police is to challenge their right to "define the situation." --- David Graeber citing Marc Cooper
by Migeru (migeru at eurotrib dot com) on Thu Apr 26th, 2012 at 04:24:04 AM EST
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The bonus pool is the booty of the current pirate banking model.

As the Dutch said while fighting the Spanish: "It is not necessary to have hope in order to persevere."
by ARGeezer (ARGeezer a in a circle eurotrib daught com) on Thu Apr 26th, 2012 at 10:52:56 AM EST
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Draghi to Holland: "Fate il vostro dovere!!"
by Upstate NY on Wed Apr 25th, 2012 at 04:55:48 PM EST
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afew:
"We are just in the middle of the river we are crossing, the only way out is to persevere,"

as the scorpion said to the donkey carrying him over the river...

"We can all be prosperous but we can't all be rich." Ian Welsh

by melo (melometa4(at)gmail.com) on Thu Apr 26th, 2012 at 04:48:32 AM EST
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Wow. Cognitive dissonance PLUS the sunk costs fallacy.

This is actually pretty impressive intellectually (in a sick sort of way).

The fact is that what we're experiencing right now is a top-down disaster. -Paul Krugman

by dvx (dvx.clt ät gmail dotcom) on Thu Apr 26th, 2012 at 05:12:18 AM EST
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