Rinaldi: we must eliminate the output gap from the EU budget assessments
The output gap, the theoretical difference between full employment GDP and current GDP, has been used in the last 20 years by the Commission and its technicians as the justification for imposing a continuous contraction of public spending on Italy. The technicians of the Commission stated that we could not spend more because we were already at full employment so our "Output gap", the vacuum of economic activity to be filled with public spending, was zero. Too bad that the Output gap is a fictitious measure, artfully constructed and repeatedly contested by technicians.
In a hearing with the European Commissioners Dombrovskis and Gentiloni on the revision of the European budget rules, Antonio Maria Rinaldi spoke on the matter, as you can read and hear below.
To which I ask the following questions.
He does not believe that in the European Semester package there should be among the essential points of not taking into account the output gap as it is an index that should evaluate the difference in production capacity between the real economy and its potential, while in practice it has shown to be an objectively non-quantifiable parameter and the projections produced over the years have systematically proved to be unreliable, arousing more than justified disputes?
Furthermore, it is shown that the growth potential, as noted by the Commission, incorporates increasing levels of unemployment and low investment, binding countries to restrictive fiscal policies which in turn cause low growth and therefore counterproductive to reducing the public debt ratio. It goes without saying that the OECD itself calculates the output gap with a different method.
The method used by the Commission has the further negative effect of determining foreclosure in pursuing countercyclical and development policies that deteriorate financial stability itself, creating the conditions for systemic crises.
Thank you.
WhatsApp Video 2022-01-26 at 14.47.04
Here are the answers of Dombrovskis and Gentiloni who, objectively, agree with Rinaldi. If so why did it take so long to get there?
WhatsApp Video 2022-01-26 at 14.47.20 WhatsApp Video 2022-01-26 at 14.47.27
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The Rinaldi article: we must eliminate the output gap from the EU budget assessments comes from ScenariEconomici.it .
This is a machine translation of a post published on Scenari Economici at the URL https://scenarieconomici.it/rinaldi-dobbiamo-eliminare-loutput-gap-dalle-valutazioni-di-bilancio-della-ue/ on Thu, 27 Jan 2022 08:00:25 +0000.