Draghi Says Euro-Zone Recession Almost Sure to Happen
Bloomberg reports Draghi Says Euro-Zone Recession Almost Sure to Happen
The euro zone is nearly certain to experience a recession by the end of 2023, former European Central Bank President Mario Draghi said, according to the Financial Times.
Speaking on Wednesday to a conference in Brussels organized by the newspaper, he said the slump probably won’t be “deep” or “destabilizing.”
“It is almost sure we are going to have a recession by the year-end,” the FT cited the ex-central banker and former prime minister of Italy as saying. “It is quite clear the first two quarters of next year will show that.”
Belgian Governor Pierre Wunsch, speaking earlier in Brussels, acknowledged the impact of tighter monetary policy and said that growth risks are “tilted to the downside.” The euro zone is “entering some weak form of stagflation,” he added.
Draghi Comments
“Either Europe acts together and becomes a deeper union, a union capable of expressing a foreign policy and a defence policy, aside from all the economic policies . . . or I am afraid the European Union will not survive other than being a single market.”
“The European economy has been losing competitiveness in the last 20-plus years, with respect not just to the United States but Japan, South Korea and, of course, China.”
“In many, many technological areas, technological fields, we have lost presence, we have lost footprint.”
Draghi Presses for a Fiscal Union
Mario Draghi, is a former ECB head, former head of the Bank of Italy, and former technocrat (unelected) Italian Prime Minister.
I expect his recession comments will be repeated 100 times if not more by mainstream media. But his comments on a fiscal union is the real story here, not recession.
Draghi avoided the term fiscal union but he seeks a bailout of Southern Europe generally and Italy specifically. As ECB head, he pushed hard in monetary union direction and failed.
I have been commenting on this since 2004 or so.
The Euro is Fatally Flawed
The euro itself is fatally flawed because there is not a single interest rate that makes any sense for Germany, Greece, Italy, France, and Spain, let alone 19 countries.
It take a unanimous vote to change anything not specifically allowed by the Maastricht Treaty.
At the outset, France was allowed to force its agricultural policy on all the other nations to protect the family farm. Also at the outset, Germany demanded no fiscal union.
Every year, global trade policy fails due to France. And when Greece nearly blew up on Draghi’s watch, the EMU would neither let Greece sink nor bail it out.
Italy has needed bank reform and productivity reform for decades, but even while president Draghi made almost no progress on either front.
Single Market a Failure Too
The single market (EU) is a failure as well. There are 28 countries in the EU and to change anything important is nearly impossible.
It took decades to make a simple trade agreement with Canada, because a couple of tiny EU nations demanded changes that Canada would not accept.
Nannycrat Rules
The EU is governed collectively by a bunch of nannycrats who in the name of competitiveness, would break up every company before it even got started.
Google, Microsoft, Amazon, Facebook, and Nvidia could not exist in the EU because nannycrats would break them apart before they ever got big.
The US has the strongest, most free capital markets in the world. Chinese corporations get state support to aid exports.
In contrast, the EU has nannycrats who insist on fairness with no clear idea of what fair is.
Draghi laments ““In many, many technological areas, technological fields, we have lost presence, we have lost footprint.”
Indeed, and I just explained why.
Looking Backward, Not Ahead
Germany looks backward still attempting to protect its lead in diesel technology and analog phones. German infrastructure is pathetic due to lack of investment.
The EU is far behind the US and China on Artificial Intelligence (AI). The EU is guaranteed to drop further and further behind because instead of attempting to catch up, the EU seeks more regulation to stop everyone else.
Military and Foreign Policy
Draghi wants a” union capable of expressing a foreign policy and a defence policy, aside from all the economic policies.”
What a hoot. A single country can block any foreign policy action. Hungary and Poland both have done so, the former on Russia multiple times.
It’s as if Illinois could block whatever the President of the US wanted to do.
It is preposterous to moan about foreign policy and hint at an EU army when the EU cannot even get its act together on agricultural policy.
EU Won’t Fail, It Has Failed
Draghi laments “I am afraid the European Union will not survive other than being a single market.”
Already, the EU is nothing more than a “single market” led by dysfunctional nannycrats with endless regulatory madness and too little free market capitalism.
The EU fights over border policy, AI, G5, agriculture, trade, an EU army, and literally everything. One might say the same about the US, but it only takes a majority to change things in the US, not 50 of 50 (28 of 28 in the EU).
The EU won’t fail because it already has failed. But the cancerous death has been slow and agonizing. EU and EMU Rules make that impossible to change too.
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