Draghi's "Growth Pact" = Internal Devaluation
Cam Hui | May 06, 2012 04:06AM ET
As we await the results of the French and Greek elections, there has been a considerable change of focus in the eurozone from the paradigm of all-austerity-all-the-time to growth strategies. The villians, according to those who push back at the "fiscal compact", is Angela Merkel and, to a lesser extent, Mario Draghi.
What I don't get is that many analysts have failed to understand (see the report :
Structural reforms are essential to restoring competitiveness but will also cause pain in the short term, the ECB president said.
"Structural reforms hit vested interests," he said, adding that they "change profoundly the society." These changes are themselves "a source of pain," he added.
"We are just in the middle of the river that we are crossing. The only answer to this is to persevere and for the ECB to create an environment that is as favourable for this as possible," Draghi said.
Notwithstanding the news flow over the pending elections, the fight over austerity and structural adjustments is by no means over, regardless of the electoral outcome.
My bet, in the long run, is still on Draghi and Merkel. In the short run, however, anything can happen.
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