Europe needs to return to financial discipline for social peace

The author is president of the Bundestag and a former German finance minister

“In the long run, we are all dead,” John Maynard Kane wrote 98 years ago. He believes that short-term economic intervention is essential in times of crisis to stabilize the economy. Including new stimulus programs Funds for post-EU epidemic recovery, This tradition is consistent with Tihya. I was in favor from the beginning – to the surprise of some.

My time as German Finance Minister a Reputation for success As a matter of policy. Yet, as I have now, my goal was sustainability: it makes sense to take a loan in times of crisis for the stability of the economy, until the question of repayment is forgotten. The need to pay later is often overlooked. Many governments focus on the “easy” bitcoin acceptance of Keynesianism – and then postpone the payment of their debts. This leads to continuous expansion of sovereign debt. Sooner or later, inflation looms. Keynes saw it Refers to the possibility of “raising the existing foundations of society” as a major threat.

Currency values ​​are under pressure in many parts of the world, including the EU, here and elsewhere. Is flanked by financial arrangements. Financial supply in the eurozone has increased significantly due to the inadequacy of the supply of goods and services. It raises inflation expectations for companies and private households. Thus, the eurozone has taken the risk of devaluing a currency that could be virtually inevitable dynamics.

Already consumer price index Exceeded “Below but close to 2 percent” is the European Central Bank’s benchmark. Central bankers are not alone in their alarm. Keynesian economists such as Leni’s Summers or Olivier Blanchard have lamented the crossing of the red line on people’s debt and pointed out the possibility of rising inflation. In real estate, stocks and industry works, the danger is already acute. The property price index rose 6.3 percent last year. In fact, the quarterly growth rate has even reached double digits. A significant portion of the currency overhangs created by the ECB are clearly being invested in the capital or property market and eating up speculation bubbles.

This is not a mere economic problem. It also poses a risk to the social fabric. Most of the donors in the states are rich individuals and entities. Public ing increases their wealth, widening the gap between rich and poor. Kane Be careful once Beneficiaries will be hated. Now the gap between “Haves” and “Have-Notes” has become a huge threat to social cohesion.

So we have to go back Financial and revenue normalization. The burden of debt must be reduced. Otherwise, the Kovid-1p epidemic is likely to be followed by a “debt epidemic” that could have serious economic consequences for Europe. With older populations, EU countries will fight to match the US and China in productivity and competition if they allow it. Excess debt To damage their financial flexibility. Thus, all eurozone members must be involved in efforts to return to strict budget discipline.

Experience shows that in high-debt countries, balanced budgets are almost lazy without external pressure. With their own devices left, members of a confederation state can succumb to the temptation to carry debt at the expense of the community. I have discussed this “moral hazard” many times with Mario Draghi. We have always agreed that competition and sustainable monetary policies centered around the structure of the European Monetary Union are the responsibility of member states.

I am sure he wants to uphold this policy as the Prime Minister of Italy. It is important For Italy and the EU as a whole. Otherwise we need a European institution with the power to enforce compliance with the rules agreed upon collectively. For this the agreement needs to be amended. Yet, without this national amendment, the European Commission is assuming more importance in this case.

Brussels’ acceptable pledge is a Eurozone debt repayment deal equal to the sinking funds of Walpole and Alexander Hamilton on Sunday. As the first Treasury Secretary, Hamilton forced the new United States in 1792 to deposit good securities, practice budget discipline, and reduce their debt. This is the statement entitled ‘Hamilton’s Moment’, it is sometimes not a reciprocal of the proposed of o for the European Union.

The debt relief plan worked and could work again today. It provides a mixed strategy of “carrot and stick” like the one run by the IMF – another legacy of Kane. I believe that Europe would be wise enough to follow the British economist in this aspect of his doctrine.

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