ASK a Greek government official what is ailing the economies of the European periphery, and he will almost certainly mention weak demand, before launching a tirade against austerity-obsessed politicians from northern Europe. Ask a German official, however, and the answer will be very different. In March, as the European Central Bank prepared a new salvo of stimulative measures, Jens Weidmann, the president of the Bundesbank, expressed his disapproval. Stimulus is no panacea, he warned, and “can’t replace urgently needed reforms”.
Structural reform is like exercise: nearly everyone could use a bit more of it. This newspaper has been known to recommend it to governments from time to time. Yet the extent to which economies stuck in a mire of low growth and low inflation should focus on structural reform, rather than stimulating demand, is a tricky question. Few economists would argue that Italy’s economy is a model of efficiency. Yet some economists reckon that making it easier to sack workers and cut prices is risky when a country is already facing high unemployment and...Continue reading
Source: Business and finance http://ift.tt/1ROcOSC
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