Hutton on ECB

[Chris Burford <cburford@xxxxxxxxxx>]

At 22/05/02 19:12 -0400, you wrote:

> How does Hutton explain the tightness of the ECB and of the fiscal
> convergence criteria? Those are more orthodox than U.S. policy.
>
> Doug


You appreciate I am skimming this book and needing to rely on the index to
share some of the ideas with this list.

(It is often a problem on email that we hear about a book through secondary
reviews quite rapidly, but few of us have time seriously to review it
ourselves. So we are often discussing what the book appears to symbolise
rather than what it tries to say from a more serious left wing perspective.)

Hutton appears to support ideas which are referenced to Pierre Jacquet and
Jean Pisani-Ferry "Economic Policy Co-ordination in the Euro Zone" (Centre
for European Reform, 2001). Pisani-Ferry was a former adviser to the French
finance minister. Hutton argues that the "growing recognition of the need
for reform" shows that it is not utopian. (Unfortunately he wrote this
before Le Pen's success in the presidential election)

The paper appears to be arguing that the targets of the ECB should be
adjusted so that its reports should include not only when prices overshoot
but when they undershoot.

Your question is however a wider historical one, and I would need to read
the whole book probably. An argument that I have heard presented is that
the strictness of the convergence criteria in the 90's was largely a
reflection of how the undercontrolled short-term movements of world capital
would treat budget deficits anyway.

Given that the economic orthodoxy was that you cannot buck the markets, it
illustrated how Europe could not afford to give itself as much latitude as
the USA could, (like many other countries).

Hutton may put it differently but I have already managed to scan up a
passage showing that he considers that euroland is the only conceivable
challenger to the dollar and that one of the implications of this is that
it could have the option of running its economy on somewhat more
expansionary lines.

Thanks for addressing one of the problematic questions that Hutton's
approach raises.

Chris Burford