Joao Gusman – Bloco de Esquerda
Classical solution to liquidity trap is fiscal expansion. Outright Monetary Transfers (OMT) will be a transfer of income from periphery to core due to interest payments. Debate is whether ECB should accept losses. The argument that the Central Bank taking losses from peripheral debt, which is a misunderstanding of the role of a central bank. A default by a member state on debt owed to ECB will have no fiscal consequence on other member nations except for the loss of interest payments. There is also no reason to expect inflation risk. ECB does not need to sell assets and can indeed issue its own if needed. We do however need to change the rules for the ECB to allow it to finance other economies. The European Crisis requires a debt restructuring involving the ECB. We also need a Eurozone institutional design change, which would involve changing the rules for the ECB, e.g. making it responsible for employment, like the Fed. It should be restructured to do the job of a central bank.
Antti Rokkanen, Left Alliance (Finland)
Had three years of Eurozone crisis. ECB has absolute economic power but has refused to use it. ECB is a class war organisation, we need to understand how to use it. Limit on public discussion of central bank policy is a victory for the right. Must force ECB into democratic control. Agrees that ECB mandate should be expanded to include fight unemployment. Household indebtedness is very significant in the Northern countries, highest in Denmark. If we take private debt into account, aggregate debt in Eurozone is 480% of GDP. Need an investment program on a European level. European Investment Bank should begin investment part-funded by central bonds from ECB, EEF should do similar to fund research in renewable energy and technologies.
Andrej Hunko, Die Linke
Neoliberals are dogmatic monetarists, up until the point they need liquidity. Their liquidity programme is no good for us. We need to bear in mind that reform of the ECB will involve a profound democrat reform of the European Union. Problem of the OMT Program is linked to performance of austerity reforms. Ultimately we should have a public bank able to fund public spending – EL put forward such a proposal but was unsurprisingly blocked. The prohibition of monetary transfers between states should be debated. European Citizens Initiative is part of Paragraph 11. We should include a debate on the question of full employment.
Marina Montagua, Bloco
Explanations of ECB have pragmatic and theoretical origins. Pragmatic origin is to see it as a project of European capital. Mitterand ‘I love Germany so much that I’m happy to have two of them.” Theoretical role relates to the role of money and to the division between Metallists and Chartelists. Metallists see money as naturally emerging from a barter economy with gold used as a mechanism of trade due to its intrinsic value. They see the movement to a fiat currency as being due to cheaper cost of paper. This leads them to see money as neutral, a facilitator of trade, exogenous to trade, a pure technical (apolitical) process.
Chartalism sees money as debt in nature. Value of money derives from social structures, not in the value of gold. Its origin is in fines and in the development of the state. The State prints money so that it can collect taxes in money. Money has value because it can be used to pay tax. Money is thus endogenous to the system. The State spends and then collect taxes. Deficits are ex-post, they are used to validate spending.
The mainstream economists attempt to change the European state and institutions to conform to their idea of how money should operate. The creation of the ECB sees money as apolitical, a technical basis for expanding markets. The idea is that once markets are integrated, capital will flow to the countries where it is most needed. Also since they believe the money stock is limited, they believe that public debt will crowd out private investment by attracting all the money.
The structural consequences of this forced governments to attempt to hide public debt via Public-Private partnerships. It also meant that the ECB was slow to buy state debt and does not inject money into states. ECB is giving money to private banks, but this is not going to member states.
The only guarantee of private debt sustainability is growth. We need a strategy of productive reconstruction, using public banks and a deep debt restructuring.
There is a structural problem of investment. We need public banks. One of the speakers called for European-level public services, such as healthcare.