By Duval Guillaume
In Europe, ever more monetary laxity is necessary because Germany refuses fiscal stimulus, even though the latter approach is preferable.
On 4 September the European Central Bank (ECB) not only lowered again the interest rate at which it lends to banks to 0.05%, but it has also launched a major programme of purchases of company shares that it carried out directly in financial markets (this time, then, without going through the [private] banks), a first for the bank. This policy aims to encourage new lending to companies in Europe but it is drawing increasingly strong criticism in Germany, where the central bank is accused of seeking to sell the euro cheap, and of depriving savers by reducing still further the interest rate, leading to the creation of new bubbles.
Relevant criticisms but …
These criticisms are justified, not only in terms of economic efficiency but also in terms of social justice: the expansionary monetary policy of the ECB is, in effect heavily subsidising, through the use of public funds, financial players who played an important part in the current crisis. But for now, there is little choice if one is to avoid the a further deterioration in the economic situation in Europe. Public opinion and German leaders do not want to hear about the alternatives: relax fiscal austerity at the national level, halt efforts to lower labour costs and launch a major investment plan, financed by debt at a European level …
Fiscal stimulus would be fairer and more efficient
Yet this path would most likely be more cost effective than the purely monetary approach pursued so far. It would also be more socially equitable because it would ease the burden on ordinary people, instead of just making life easier for speculators. But limiting ECB action would imply that our German friends finally give up their excessive love, almost religious, for punitive austerity as the only way of possible redemption for sins committed by Europe’s profligate grasshoppers. German friends, if you want a less lax monetary policy, it is up to you to create the conditions …
Revolting Europe 
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