Dombrovskis: his admissions, and his threats, towards the European states

Those who follow the policy of Brussels and the commission a little know very well that, beyond the offices and names, everything is in the hands of very few people at the top of which there is Valdis Dombrovskis, the super commissioner and vice president with an almost total on the economy and markets. The concentration of true operational powers over the economy in one person is such that, if there was any interest in democracy, hundreds of bells would have to ring. An exponent of a Nordic liberal party, therefore the most ordolibersta there is, has reached the real, objective heights of European power.

However even he was forced to a meeting with the reality of the facts linked to the failure of European policies of the last thirty years, but this was not enough to make him change the ideas that, in the end, were at the basis of the debt crisis. of 2011 and the stagnation of Italy over the last twenty years. we see this in an important speech that was made just yesterday in front of the Fiscal Board Conference just yesterday that comes to set the guidelines of the European economic policy for the next, at least, 4 years and that was beautifully ignored in Italy, where we prefer to talk about Draghi 's breakfast ….

You can find the speech at this link . But here are the key points, remembering how the speeches of the members of the commission start sweet, continue boring, put the poison, and end with a smile, according to a repeated pattern:

• we realized we had something wrong. We were focused only on the stabilization of the economy (in Italian “Austerity”) and this meant that after the 90s, when we really understood what it meant, there was no real consensus on the matter. Furthermore, the austerity policies have strongly cut on investments by increasing, not decreasing the disparities between individual states;
• for a less unbalanced economic policy we must abandon some purely theoretical indicators, such as the “potential GDP”, and instead evaluate the fiscal policy as “Sustainable”. We replace a false, theoretical value with one of futuristic prediction, equally questionable;
• now we need to focus on growth. Countries will return to 2019 GDP, but not all at the same time and equally. Of course, according to Valdis, it would have been much worse without EU instruments, but I would ask the UK for that;
• therefore the stimuli and expansionary policies must not be stopped yet … ..
• …. but in any case they are temporary, and will have to be slowly stopped, both from the point of view of fiscal and monetary stimulus, passing through a phase in which they will be "targeted" only at certain sectors ;
• We will therefore have to go back to defining the "Medium-Term Fiscal Objectives" (OMT), that is the objective that guides the whole notorious "European Semester", the budgetary torture process for which, in March of the previous year, we must discuss with the Commission the budget for the following year, amid letters and pressure, which then turn into fiscally oppressive policies;
• In all this, however, we must thank the RRF, that is the innovative part of the Recovery Fund, because that will allow growth.

In short, despite Dombrovskis having to admit the reality of the facts, that is, the failure of the instruments of stabilization and convergence put in place so far by the Commission, and therefore the need to cancel them at this stage, he is unable to detach himself from the ordoliberal and austere preconceptions that have guided them very bad, the economic policy of the euro area so far. The pattern repeats itself, always the same, in a boring way, without any interruption. Draghi's real challenge, even on a Franco-Spanish mandate, is precisely to cancel this preconception, or at least to cancel its effects. A real challenge that almost goes against a Nordic religious belief: a bit like a missionary at the time of the Norse gods. And it is not at all obvious that it will prevail. If, on the other hand, this ordo-liberal vision wins, we will find ourselves in the mesh of a new stringent austerity within three years.

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The article Dombrovskis: his admissions, and his threats, towards the European states comes from ScenariEconomici.it .

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This is a machine translation of a post published on Scenari Economici at the URL https://scenarieconomici.it/dombrovskis-le-sue-ammissioni-e-le-sue-minacce-verso-gli-stati-europei/ on Sat, 27 Feb 2021 09:13:11 +0000.