Minutes of a meeting of civil servants employed by the ECB Eurosystem: some snippets.
There is a meme-war going on. One of the meme’s is that the new Greek president hired 850.000 new civil servants when he was minister of the interior in a former Greek government. And though the man clearly isn’t a new broom it is sobering to look at the graph. The total amount of employees in the Eurostat ‘Mainly government’ sector at its peak hardly surpassed 900.000. Which may have been too high but to anybody stating this: please, show me that Greek health workers and teachers are worthless leeches instead of trusted, dedicated public workers. Which is indeed something the ECB should do more carefully, as its minutes show that fuzzy memes as the statement above (not even a half-truth) do influence the discussion. Yes, the ECB is, finally, publishing its minutes. From one civil servant to another civil servant: Chapeau, mr. Draghi! Summary: we’re having a demand problem so we should not boost demand but implement unspecified structural reforms, which thus far have failed to boost investment, which is why we’re having a demand problem. In Greece, axing 15% of ‘mainly government’ jobs (graph, government broadly defined by Eurostat to enable international comparison), confidence has not returned – they even voted for another government… The idea that firing teachers and health workers might not by definition be a good thing does however not seem to cross the mind of the assembled ECB civil servants (though, indeed, neoclassical DSGE models state it is by implicit assumption a good thing, at least when they are paid by the government, not when they are doing the same thing having a market job!). Did I mention already that the ECB is not too pleased when wage cuts are applied to employees of the national central banks, too? As this threatens the independence of these banks (the very fact that the rapidly increasing number of ECB civil servants, in their 1,6 billion Euro new building, even voice ‘opinions’ on this is not good for my appetite)? Yes, I’m taking part in the meme war.
Consequently, it was broadly agreed that any further monetary policy measure would need to involve purchases of government securities. One of the variants mentioned, namely to limit the purchases to a portfolio comprising only sovereign bonds of the euro area countries with the highest credit ratings, was generally regarded as being insufficiently effective….
With regard to the universe of purchasable assets, it was agreed that the programme would include purchases of securities of central government, certain agencies established in the euro area and certain international or supranational institutions located in the euro area. It was viewed as important to restrict purchases to investment-grade securities, …This, however, did not imply the a priori exclusion of particular euro area countries from the additional sovereign bond purchases.
Possible moral hazard implications for euro area governments could weaken their incentives for structural reforms and fiscal consolidation. Hence, there was broad agreement that the effectiveness of sovereign bond purchases would also depend on the appropriate action on the part of other policy-makers in the euro area. Growth-friendly fiscal policies, while fully respecting existing commitments, were seen as an effective instrument to support economic growth in the euro area at the current juncture. Moreover, the determined implementation of structural reforms, together with actions to improve the business environment, would increase investment activity, boost job creation and increase productivity growth. This would not only raise the euro area’s long-term growth prospects, but would also reinforce the positive effects of any monetary policy measures on economic growth and inflation developments. These were strong messages to be conveyed to euro area governments and the European Commission.