Tags: Evans-Pritchard | ECB | deflation | eurozone

Evans-Pritchard: ECB's Embrace of Deflationary Policy Means 'Mass Unemployment'

By    |   Thursday, 08 May 2014 01:01 PM EDT

The European Central Bank (ECB) is pursuing a deflationary policy that spells trouble for the eurozone economy, says Ambrose Evans-Pritchard, a columnist for The London Telegraph.

"The ECB has failed to meet its 2 percent inflation target or to comply with its other Treaty obligation of supporting jobs and growth," Evans-Pritchard writes. "It admits that this inflicts great hardship on debtor states. Yet it seems almost proud of it feat."

The eurozone economy grew only 0.3 percent in the fourth quarter.

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The euro's strength just exacerbates the problem, Evans-Pritchard says. "The eurozone is the weakest region in the OECD [Organization for Economic Co-Operation and Development], yet it has run its affairs in such a way that the euro is the hardest currency.

"This in turn is pushing Europe closer to deflation in a self-feeding process," he writes. "The obvious policy is for the ECB to take over the baton of monetary stimulus from America."

But the ECB is in no hurry to do so, thanks to its acceptance of deflation, Evans-Pritchard argues.

This arrangement "ensures years of mass unemployment and probably dooms [European] nations to bankruptcy if and when the global cycle turns."

The European Commission forecast that eurozone growth would total just 1.2 percent this year and 1.7 percent next year.

"Price pressures are expected to remain subdued, as we expect energy prices to continue to decline and as demand is only gradually firming and unemployment is still high," Commission Vice President Siim Kallas told reporters, Bloomberg reports.

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The European Central Bank (ECB) is pursuing a deflationary policy that spells trouble for the eurozone economy, says Ambrose Evans-Pritchard, a columnist for The London Telegraph.
Evans-Pritchard, ECB, deflation, eurozone
266
2014-01-08
Thursday, 08 May 2014 01:01 PM
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