I've written here about the limits of the ECB's announcement, like it being limited to short-term (3-year and under) paper and, above all, the continuing damage being done by austerity politics.
Kuttner picks up on one of the conditions of the ECB purchases of bonds that are required of the countries whose bonds are being bought up by the ECB in the secondary market:
To qualify for ECB purchases of their bonds, nations like Spain and Italy, whose securities are under speculative attack, must submit to the austerity police.This is a problem and a serious limitation of the ECB program.
Before the central bank will give them any help, these nations must apply for aid to Europe's still-to-be ratified bailout fund, the European Stability Mechanism. And applications for such aid trigger stringent austerity requirements of the sort visited upon Greece and Portugal -- whose main effect was to drive these suffering economies further into the ground.
Not surprisingly, Italian Prime Minister Mario Monti and his Spanish counterpart, Mariano Rajoy, were quick to say they wanted no part of this deal. All of which leaves the European crisis in just about the same state as before the ECB announcement.
But Spain and Italy are both currently complying with stringent austerity demands under German pressure and other agreements anyway. Monti's government in Italy is really one of Angela Merkel's Democracy 2.0 governments, imposed on Italy by the EU without technically overriding the rules of Italian democracy. And there have been numerous reports that Spain will be asking for a direct bailout soon. And both Germany and Finland have recently expressed their approval for the drastic One Percenter "reforms" that Mariano Rajoy's conservative government is imposing on Spain. (Ana Pardo de Vera, El norte de Europa quiere evitar el rescate de España Público 11.09.2012)
In any case, Kuttner seems misinformed about Spain's position on the ECB purchases. De Vera reports, "el jefe del Ejecutivo dijo exactamente lo mismo que en su entrevista de ayer lunes en TVE, esto es, que se está estudiando y no se ha tomado ninguna decisión" ("the chief executive [Rajoy] said exactly the same thing [in his Tuesday meeting with Finnish conservative Prime Minister Jyrki Katainen] that he said in his yesterday, Monday, in TVE, that is, that he was studying it and hasn't made any decision") on whether he would ask for the ECB purchases or not.
But Kuttner has another good reason for his skepticism: "Even German Chancellor Angela Merkel supported Draghi's latest plan -- a telltale sign that the ECB initiative changes just about nothing. Perverse austerity still reigns." Austerity policies in a depression are a bad, bad idea. The EU can't fix the eurozone debt problems until the troubled economies resume healthy growth.
Tags: angela merkel, austerity economics, eu, euro, european union, spain