The crisis has reached Germany, warns ECB president

By LUIS MIRANDA | THE REAL AGENDA | NOVEMBER 8, 2012

Mario Draghi, the president of the European Central Bank (ECB), said Wednesday that the effects of the crisis are beginning to be felt in the German economy, which until now had remained largely untouched by the difficulties experienced by other European nations.

In a statement, Draghi said that Germany had remained somehow unaffected by the crisis and that many of the problems seen in other countries had not extended their tentacles to the country. The difficulties in the rest of the euro zone, especially in countries such as Spain, Greece, Italy and Portugal have been more visible, while Germany was seen as the ‘untouched one’.

“But recent data suggest that these events are beginning to affect the German economy,” Draghi said in a speech in Frankfurt on the eve of the meeting on interest rates from the ECB.

In this respect, the Italian banker said that given Germany’s openness, it is not a surprise that the country is affected by the slowdown in the rest of the euro zone, especially when 40% of GDP comes from direct trade between Germany and the rest of the region. Additionally, about 65% of foreign direct investment in the country comes from other euro countries.

“The financial events in Germany are the mirror image of the financial situation in the rest of the euro zone and this means that measures to ensure the stability of the euro zone as a whole will also benefit Germany,” he added. Draghi sought to justify recent austerity measures imposed by the Euro bankers on nations that requested bailouts for their banking system or the governments themselves.

The ECB president reiterated his defense of the decisions taken by the institution, particularly in the case of the direct purchase of debt from countries that formally request it. He said that this move “sent a clear signal to the markets that fears about the euro zone are baseless”. Draghi miss the point — most likely intentionally — regarding the actions taken by the government in Brussels. That is, none of the measures adopted so far have visibly accomplished anything.

Under the current policies neither Europe nor any other region or country in the world will be able to come out of the debt hole. This is even more true when countries and their governments are guaranteed that financial rescues are waiting for them as long as they follow economic and financial policies crafted by the unelected European technocrats. As mentioned here before, the bankers actions are comparable to combating a raging fire by pouring fuel over it.

Draghi then tried to emphasized that the purchases of debt, although unlimited, are not random. “It is important to emphasize that unlimited does not mean uncontrolled,” he said. Later Draghi stressed the indispensable condition that countries request the intervention of the ECB and that they fully accept the conditions offered through the European Stability Mechanism plan which conditions the so-called financial rescue to the intervention of the International Monetary Fund.

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About Luis Miranda
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