The Lost Consistency of European Policy Makers

Mr. Saraceno does not post often, but his articles are always worth reading! We are now quite much in a European 1984-type phase, where only the ‘enemy’ changes, not the solution.

Sparse Thoughts of a Gloomy European Economist

Just a quick note on something that went surprisingly unnoticed so far. After Draghi’s speech in Jackson Hole, a new consensus seems to have developed among European policy makers, based on three propositions:

  • Europe suffers from deficient aggregate demand
  • Monetary policy has lost traction
  • Investment is key, both as a countercyclical support for growth, and to sustain potential growth in the medium run

My first reaction is, well, welcome to the club! Some of us have been saying this for a while (here is the link to a chat, in French, I had with Le Monde readers in June 2009). But hey, better late than never! It is nice that we all share the diagnosis on the Eurocrisis. I don’t feel lonely anymore.

What is interesting, nevertheless, is that while the diagnosis has changed, the policy prescriptions have not (this is why I failed to share the widespread excitement that…

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