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I usually find ECB press releases pretty dry. But this speech by Juergen Stark, member of the Executive Board of the ECB, caught my eye. I'm glad to see that the ECB fully recognizes the risk of prolonged government interference. The memory of the failure of socialism in Eastern Europe is still fresh in their mind, and they understand the need to reverse any financial stimulus later on. And that point is made strongly in this speech. The ECB must be worried about what's going on over here at the Fed.
Not sure about you guys, but I'm betting more and more on the Euro these days.
Here is an excerpt from the ECB speech. Full Article: European Central Bank - The economic crisis and the response of fiscal and monetary policy - by Jürgen Stark, Member of the Executive Board of the ECB
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But let me hasten to add that policy-makers must not get carried away by recent events; they should act in a measured way, and not throw the baby out with the bathwater. While governments have had no alternative but to support systemically relevant financial institutions, they should, as a rule, keep their assistance to specific sectors or firms to a minimum. And when they do intervene, they should prepare clear and credible exit strategies. No matter how serious the current crisis is, the market economy remains the best way to organise our economic affairs. It is only 20 years ago since the breakdown of the socialist system in eastern Europe, which demonstrated the failures of central planning and heavy government involvement. Therefore, once we emerge from the current crisis, the role of government in the economy needs to be scaled back. Its presence in the banking sector must be gradually reduced as the restructuring of the sector starts to take effect. The stimulus measures must be reversed in due course. We have seen in the past how so-called temporary measures ended up being permanent.
An exit strategy is a comprehensive programme to withdraw and neutralise measures taken during the financial crisis, without causing any harm to the economy. If they have no well-defined exit strategy, governments may get bogged down and the positive impact of the measures taken may be undermined. A well thought-out exit strategy is needed to reassure economic agents that a timely restoration of the level playing field in the different sectors of the economy is the ultimate objective. As such, an exit strategy needs to contain clear criteria about the timing of the withdrawal of the financial support and the reversal of the fiscal stimuli.... (full article)
Not sure about you guys, but I'm betting more and more on the Euro these days.
Here is an excerpt from the ECB speech. Full Article: European Central Bank - The economic crisis and the response of fiscal and monetary policy - by Jürgen Stark, Member of the Executive Board of the ECB
......
But let me hasten to add that policy-makers must not get carried away by recent events; they should act in a measured way, and not throw the baby out with the bathwater. While governments have had no alternative but to support systemically relevant financial institutions, they should, as a rule, keep their assistance to specific sectors or firms to a minimum. And when they do intervene, they should prepare clear and credible exit strategies. No matter how serious the current crisis is, the market economy remains the best way to organise our economic affairs. It is only 20 years ago since the breakdown of the socialist system in eastern Europe, which demonstrated the failures of central planning and heavy government involvement. Therefore, once we emerge from the current crisis, the role of government in the economy needs to be scaled back. Its presence in the banking sector must be gradually reduced as the restructuring of the sector starts to take effect. The stimulus measures must be reversed in due course. We have seen in the past how so-called temporary measures ended up being permanent.
An exit strategy is a comprehensive programme to withdraw and neutralise measures taken during the financial crisis, without causing any harm to the economy. If they have no well-defined exit strategy, governments may get bogged down and the positive impact of the measures taken may be undermined. A well thought-out exit strategy is needed to reassure economic agents that a timely restoration of the level playing field in the different sectors of the economy is the ultimate objective. As such, an exit strategy needs to contain clear criteria about the timing of the withdrawal of the financial support and the reversal of the fiscal stimuli.... (full article)