sexta-feira, setembro 30, 2011

Moral Judgment and Bad Economics from the ECB

It seems that the ECB's policy prescriptions are being guided more by ideology and moral judgment than by sound economics. A very revealing letter from the ECB to the Italian government from August has just been published in the Italian press. ...

See the full article in

The ECB is following the inappropriate IMF recipe.  Privatization is seen as a cure-all, instead of focusing on the loose lending practices that allowed  inefficient public services to survive, as we've seen with the rising liabilities of deficit-prone State-owned companies

In fact, the ECB should be more concerned with the funding costs disparities of European banks, and the failure of prudential regulation among the various national central banks which allowed excessive credit growth. 

See Excessive SOE debt coming home to roost