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Actually Draghi (or at least the ECB) could do something.

Mr Draghi, is it really that difficult to see?

Using the EIP, the Commission can force countries into austerity when deficits and sovereign debts are too high, but can't force them into stimulus or tax cuts when surpluses are high. It can force countries into wage moderation and real wage declines when Unit Labour Costs rise too rapidly, but is powerless when wages rise too slowly. EIP will kick in when a country has a negative international investment position greater than -35%, but a high positive position goes unnoticed. It kicks in when inflation is too high, it does nothing when inflation is too low. Every indicator in the EIP is biased this way. The only indicator that has some balance is the current account indicator: deficit of more than -4% will sound the alarm bells, as will a surplus greater than +6%. But even this is simply another glaring asymmetry.

They could abolish the first part of each of those sentences by expanding their backing of eurozone state debts to include all state debts at all times. The ECB is what gives the Commission any power over euro-countries with trade deficits and it is within their real powers to give that up.

Of course giving up power is rarely done, so Draghi will keep complaining about a lack of demand in the northern economies while brandishing the power that keeps the southern economies from expanding their demand. And in the same way the leaders of the northern economies are not going to give away the power position their trade surplus yields.

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by A swedish kind of death on Mon Sep 22nd, 2014 at 02:06:47 PM EST

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