The ECB is purging the rottenness out of the system
by digby
Matt Yglesias notes that while all the VSPs seem to be thrilled that "crisis" across the pond is over, the people are suffering more than ever:
One of the odder trends this winter is the widespread sense that the eurozone crisis is "over" and Mario Draghi's "whatever it takes" speech saved the day.
It's not that I think the conventional wisdom is wrong, exactly. But the eurozone has slid back into recession over the course of 2012 and if anything the recession seems to be getting worse. Not only are Greece and Spain in tatters and Ireland basically treading water, but German GDP shrank 0.5 percent in the forth quarter. That's hardly the worst recession on the record books. And if Germany improves a little in Q1 they may even avoid technical recession altogether. But Germany, you'll recall, is the country that's supposed to be doing well. And that's not a "doing well" number. It's not even close. Things are so bad that EU officials are touting Latvia as a success story even though Latvian GDP is still 16 percent below peak level.
I've actually been confused by what I've been reading and Yglesias explains it well. The elite consensus is that the crisis has passed and they must "stay the course" to avoid another one. What that means is that they believe the banking crisis has passed and that's all that matters:
[T]he European Central Bank seems to have entirely washed its hands of the situation, deciding that as long as there's no acute banking crisis they don't need to care about anything else.
A bracing triple dip recession, on the other hand, is not something they seem to care about. Indeed, one can only suspect at this point that they believe it is a necessary a character building exercise. Or, as a very famous American Republican banker once said:
Liquidate labor, liquidate stocks, liquidate farmers, liquidate real estate… it will purge the rottenness out of the system. High costs of living and high living will come down. People will work harder, live a more moral life. Values will be adjusted, and enterprising people will pick up from less competent people.
He also thought that the "weak" banks needed to be weeded out, and I'm guessing the European Central bank feels that job has been accomplished. The rest will be taken care of in the long run. But you know what they say about that ...
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