Countries should be more careful with all types of compensation. This is the message that the economist Arnoud Boot caught during the speech of the president Christine Lagarde of the European Central Bank (ECB).
According to her, inflation cannot be curbed as long as governments give money easily to citizens. “Actually, her message was: how to get governments in line, to stop the constant compensation for everything,” says Boot. But the economist finds Lagarde’s message surprising, because he believes the ECB is to blame when it comes to politics. If the ECB, Lagarde and his predecessors hadn’t been saying for years that money was free, interest rates were zero or negative, this would not have happened. The ECB is at the origin of the political and government derailment.’
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“Then Christine Lagarde is sitting with baked pears”
According to Boot, the loose monetary policy implemented for years has caused damage to the company. “Politicians were then under pressure to spend money to get votes with it.” However, Boot points out that the many compensation schemes during the corona pandemic made sense. As a result, there has been no inflation. But you have to look at monetary policy in the pre-corona period.’
Look specifically at the year 2019. ‘The economy was at its peak, that’s the last time you want to sustain it monetary. However, the ECB could not say goodbye to politics, yes, and then some crises occur in which you are forced to act.’
Billions for Groningen
Meanwhile, a system has emerged in which politicians are expected to always have the option of being backed by the ECB. “Politicians have used it to create one fund after another.” In particular, it now points to the tens of billions spent on Groningen’s “debt of honour”. “It is absolutely right that houses need to be renovated. But King’s Commissioner René Paas wants it to be used for all sorts of other things, like bus lines and train lines.”
The economist understands little of it. “This is not Groningen’s debt of honor. He’s asking for thirty billion euros for things that have nothing to do with the renovation of houses». However, Boot expects this will not stop there and sees several funds on the horizon in which billions will be invested. “South Limburg, the east of the country and the southwest. There are all sorts of areas where infrastructure investment needs to be made, but that investment has to be part of the government budget, with the normal considerations to be made. If you don’t, funds will be created that will say yes to everything. Then Christine Lagarde has baked pears.’
Source: BNR
Andrew Dwight is an author and economy journalist who writes for 24 News Globe. He has a deep understanding of financial markets and a passion for analyzing economic trends and news. With a talent for breaking down complex economic concepts into easily understandable terms, Andrew has become a respected voice in the field of economics journalism.
