I had no problems with the prescription that Mr. Wolf had suggested to Mr. Mario Draghi. This is the note on which he concludes:
To any sensible observer, all this screams that ECB policy has been far too tight. If the eurozone is to enjoy any hope of adjustment with growth this must change, and now.
The eurozone risks a tidal wave of fiscal and banking crises. The European financial stability facility cannot stop this. Only the ECB can. As the sole eurozone-wide institution, it has the responsibility. It also has the power. I am sorry, Mario. But you face a choice between pleasing the monetary hawks and saving the eurozone. Choose the latter. Explain why you are making the choice. And remember: fortune favours the bold.
I cannot say whether the ECB monetary policy has been too tight. Perhaps, for some countries. But, not for all. What did the ECB achieve by being too loose in the first part of the last decade? The Eurozone crisis.
Mr. Wolf writes that broad money growth is a meagre 2% and that Eurozone nominal GDP ha stuttered. Isn’t it possible that the Eurozone has real structural problems in growing that monetary policy alone cannot help resolve?
So, the answer, according to Mr. Wolf is that Mr. Draghi should not defer to hawks. I might not agree with it but I concede that Mr. Wolf has the right to make that suggestion. What disappoints me more is the absence of qualifiers to his suggestion. Mr. Wolf makes it sound almost as though such an easy solution has been staring in ECB’s face and that they have been ignoring it all along.
If only policy-making was so easy, why are we here now at this point, the world over? The problem with those who advocate loose and accommodative policies is not that they advocate such policies but that their advocacy stops short of the hard work required to show why their policy prescription is the best (or the least worst) of all options. They are being too lazy.