Two wrongs don’t make a right. Just because European governments have failed to put bread on their constituents’ tables doesn’t mean that the European Central Bank should likewise fail in its job of promoting price stability in the euro zone. That may sound obvious, but abandoning price stability is exactly what some European politicians are advocating.
For example, Italian politicians, who, given Italy’s recent dismal economic performance, would seem the least qualified to offer the ECB advice on monetary policy, are nonetheless advocating interest-rate cuts. Echoing comments by Italian Prime Minister Silvio Berlusconi, Deputy Economics Minister Mario Baldassarri said in Il Sole 24 Ore last week that all efforts to boost growth are in vain “if someone is pushing on the brake pedal.”
Who’s he kidding? If anyone is “pushing down on the Italian growth brake” it is Berlusconi himself. He has made no efforts at economic reform during his term and now seeks to blame the ECB for Italy’s lame economic performance. But it is precisely the lack of economic reform at home that has made Italy one of the least competitive states in the euro-zone economy.
More than the usual “blame game” is at work here. Pressures are mounting on the ECB to raise interest rates – and Berlusconi and Co.’s attacks are as much as an attempt to forestall future rate hikes as to get the ECB to loosen its monetary policy.