Panetta (ECB): “Follow US monetary policy? No, we are different and equally stable truth”

Good, bad and ugly. Fabio Panetta These days he was already looking forward to Il Foglio, He explained to the public today at the Salon de Cincusento in Palazzo Vecchio. “Using this rhetorical tool taken from Sergio Leone’s film, I tried to make people understand the simple idea”, At the Festival of Hope he says Member of the Executive Committee of the European Central Bank. “Inflation exists as the economy grows and the increase in demand creates pressure on supply And rising prices, without which it would not be a real problem. Then there is the second type, The bad thing is: inflation emerges when prices start to rise but the economy does not. This is what we see today, and there are a series of shocks going on around the world. But even in this case the central bank does not need to intervene: it has the opportunity to act on demand, control it when purchasing power is high and prevent inflation from getting out of control. Then there is the third type of inflation, which is the worst of all, Not determined by transient factors such as production disruptions. If a diffusion mechanism is set up to send inflation out of control, the ECB is called upon to intervene. Not today because it creates more evil than good: it does not affect the causes of inflation and slows down the course of production. Central bank operations are not currently effective.

However, in the proverbial monetary policy between hawks and pigeons, Panetta says he’s “the most hawk of all”. “If inflation becomes a permanent phenomenon that out of control of price growth, I would be very supportive of intervening. But when monetary policy needs to expand, there is no reason to take it one step at a time. It may backfire,” Panetta explained.

Then the comparison with the United States and the central bank “they have a different economic situation than us,” explains the economist. “In recent years, ECB has become more efficient in guaranteeing price stability: Bringing inflation back to 2 per cent, as all investors expect, will be particularly costly. On the other hand, for the United States, the inflation dynamics in recent years has been about 2 percent as established by the central bank. In addition, by 2020 US GDP will have fallen by 5 percent, but household income will have increased by 3-4 percent.: This means that the government has intervened with the most significant transfers. Thus, the kinetics of consumption is greater than the trauma caused by the epidemic. “In terms of consumption, we are experiencing an almost completely opposite situation across the Atlantic.” Yes: Demand for goods and services in the euro is relatively small. So should we follow America? No.. After many attempts, we have formed a monetary union that is the third largest economy in the world. Not all individual Eurozone countries individually can have the benefits they enjoy today with the monetary union. If the price of raw materials goes up, it will affect everyone. But the tight monetary policy in the United States today will not affect us if we are twenty small countries. It’s a proven stability mechanism. “

A strong message for skeptics: The euro strengthens a country’s sovereignty. “In the past, Italy had very low margins of monetary and financial autonomy,” Panetta continues. “Like the rest of the world, we were conditioned by Germany’s monetary and financial conditions in the US or Europe: if there is a large country that represents one-third of the region’s GDP, it inevitably binds us. Today we are in a different situation. We have a stake in the National Central Banks and a panel of six independent members from various countries that determine the optimal monetary and financial conditions for the Eurozone. Obviously, an equally integrated and integrated economy is needed at the community level “especially when unexpected external shocks such as the corona virus variable occur.” We have international experts who can explain what some types of health risks are. Traumas affecting need. Act accordingly: To deal with this situation it is necessary to decode what is going on at the forefront of epidemics on economic grounds. When families and businesses are in a state of particular uncertainty, there is a huge increase in savings, which is what we have seen. That is why Europe, which is more vulnerable to economic problems, is helping to create a system that helps control uncertainty and tackles crisis.