The ECB? Either it reforms or it closes

This week one of the strongest Italian political news featured Guido Crosetto. The Defense Minister and founder of FdI was not afraid to attack one of the sacred monsters of the EU and idol of the local press: the European Central Bank .

Crosetto referred to the ECB's current hyper-restrictive monetary policy, in which the Central Bank is increasing interest and cutting credit to the banking system to combat inflation, avoiding analyzing its causes and, above all, the repercussions on stability of countries. Crosetto's words were extraordinarily clear for a politician: «The country's economic conditions risk worsening if the "external protections" that have helped in recent years are lacking. This is why I struggle to understand the reasons that prompted the ECB to change its policy on the purchase of European government bonds, in a moment that is already economically very complex, in some ways dramatic, such as the one the world and the EU in particular are going through". «It's not up to me to judge but a Nobel prize is not needed, the common sense of a housewife is enough to understand that some decisions cause negative effects because they amplify the crisis. When Draghi launched whatever it takes, the economic and social situation was enormously better than the one we are facing. All the more reason today there was no reason for a close"

The reality Crosetto does not consider that the ECB is working in obedience to its only official objective, and in preparation for the unofficial, political objectives it has set itself. The sole objective of the ECB is the control of inflation, or rather its near cancellation. Not unemployment, not the stability of state debts and the banking sector, not even the protection of the integrity of the Euro area. Its only objective is the fight against inflation, and the simplicity of this aim allows the ECB to play with many of its other political objectives, such as the distortion of the financial markets to achieve climate neutrality, a political objective that has set itself assigned.

Subjecting the ECB to political control could be dangerous, above all because this would not be that of the national states, but of the Commission, therefore a very dangerous control: we would practically be giving the ECB to Germany, because this body does not exist except as an executive of the orders of Berlin. The solution could come from a stricter and clearer set of rules by changing the single objective of the ECB to the following:

• inflation control;
• control of unemployment with national maximum limits and a prospective trend towards a single European limit;
• last guarantor of the debt of the states of the Union;
• convergent interest rate policy for the Eurozone;
• specific ban on pursuing different and distortive political objectives;

Only the joint pursuit of these objectives would guarantee real European convergence and could prevent the board of the ECB, strengthened by its enormous criminal and civil immunities, from becoming yet another non-democratic and non-accountable European body.

The alternative is to dissolve the ECB: if a body is useless, or worse, harmful, then we must have the courage to recognize it and eliminate it exactly as one does with a useless body. At least every country would go back to the situation where the protection is guaranteed by its National Bank and the economic savings of divesting the Frankfurt show would be enormous.

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The article The ECB? Either it reforms or it closes comes from Scenari Economici .

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This is a machine translation of a post published on Scenari Economici at the URL https://scenarieconomici.it/bce-scioglimento-crosetto-europa/ on Thu, 05 Jan 2023 18:12:37 +0000.