A less Dovish Yellen, a more Dovish Draghi
The Economist’s analysis of the recently-completed Jackson Hole Central Bank symposium, compares the position of Mario Draghi from the European Central Bank to the one of Janet Yellen, chair of the Board of Governors of the Federal Reserve. Originally arguing in line with the dovish view that there was not any urgency to raise interest rates in the United States, Yellen has recently adopted a fairly hawkish view. Draghi marked a significant departure from ECB policy since the recession, stating that if “low inflation were to last a long period of time, risks to price stability would increase.” Draghi’s departure from his usual line of reasoning seems to indicate the ECB’s increased willingness to begin quantitative easing to promote reasonable inflation and help provide the conditions necessary for sustained employment growth. (The Economist)
Speeches and Official Announcements
Remarks by Mario Draghi at the Annual Central Bank Symposium in Jackson Hole
Mario Draghi, president of the European Central Bank recently spoke at the annual central bank symposium in Jackson Hole, Wyoming discussing the cyclical and structural causes of unemployment in the Euro area. He states that “a coherent strategy to reduce unemployment has to involve both demand and supply side policies, at both the euro area and the national levels. The way back to higher employment, in other words, is a policy mix that combines monetary, fiscal and structural measures at the union level and at the national level”. He spoke out against the current tight austerity measures and instead suggested more measures were needed from the ECB to spur growth. (European Central Bank)
Fed Chair Janet Yellen on Labor Market Dynamics and Monetary Policy
Janet Yellen, chair of the Board of Governors of the Federal Reserve System, spoke next to Draghi at the annual Central Bank symposium in Jackson Hole, elaborating on labor market dynamics and how they shape monetary policy. She warned not to abandon the US Central Bank’s low interest policies too quickly, despite the positive developments in the job market and with regards to inflation. “The economy has made considerable progress in recovering from the largest and most sustained loss of employment in the United States since the Great Depression. These developments are encouraging, but it speaks to the depth of the damage that, five years after the end of the recession, the labor market has yet to fully recover.” (Federal Reserve)
President Obama Asks Business Owners to Pressure Congress for Ex-Im Renewal
President Obama used his weekly address on August 23 to make a powerful case for the reauthorization of the US Export-Import bank which helps finance and provide risk insurance for US exports for businesses of all size. By emphasizing the history of bipartisan reauthorization of the Bank, as well as the number of jobs dependent on Ex-Im projects, the President appealed directly to business people to let their members of Congress know how important the issue is while they are in their home districts during August recess. (The White House)
News
Italy wants EU-US Trade Talks Made Public
In an effort to make the TTIP talks more transparent, Italy, which currently holds the rotating presidency of the European Council, has written an open letter to all EU member-states making the case to declassify the European negotiating mandate for TTIP. The letter was co-signed by the European Commissioner for Trade, Karel de Gucht. (Global Post)
EU Gives up on TTIP for US Reinsurance Reform
Talks to include better US market access for EU reinsurers in TTIP have been abandoned, as it seems unlikely that the trade deal will bring significant changes to the current rules, which force the European industry to provide 100% collateral for their American liabilities. Instead, the European insurance industry hopes to conclude a separate transatlantic insurance agreement to provide them with the same rights as American reinsurers. (Euractiv)
Russia Sanctions Take Toll on Germany
Following the Russian sanctions on the US and the EU, German exports to Russia are predicted to drop by 20-25 percent in the course of this year. Russia accounts for about 3 percent of total German exports. This downward export trend could eventually endanger up to 50,000 jobs in Germany, depending on the length and severity of sanctions. Tensions with Russia contributed to the recent 0.2% reduction in German GDP last quarter. (Financial Times)
Angela Merkel Backs Luis de Guindos to Chair Eurozone Finance Ministers’ Group
On Monday, German Chancellor Angela Merkel spoke out in favor of Spain’s Luis de Guindos as the future head of the Eurogroup of Eurozone finance ministers. Securing this macroeconomic position would help Spain re-establish its economic reputation internationally, and would give the center-right another leadership position at the heart of the European Union. (Financial Times)
Recent Analysis
Mario Draghi Gave a Fantastic Speech on What’s Wrong with Europe, but He’s Still in Denial on One Big Thing
In his opinion piece, Joe Weisenthal, author for the Business Insider, gives a comprehensive summary of ECB President Mario Draghi’s speech at Jackson Hole. However, he also convincingly argues that Draghi is still in denial about a big mistake that the Eurozone has made: the ongoing insistence on austerity during a recession and weak recovery. According to the author, the problem lays within the structure of the currency union itself, which cannot be resolved by fiscal discipline. (Business Insider)
Insurrection Forces François Hollande to Act
After an insurrection against the government’s economic policy by Arnaud Montebourg, France’s outgoing left-wing minister of the economy, President Hollande removed him from his post. Mr. Hollande currently faces the difficult task of rapidly reducing France’s debt and restoring the French economy’s competitiveness. In order to strike a balance between cutting deficits and inspiring growth, Mr. Hollande will continue to press for further delay in meeting deficit targets and for more policies aimed at increasing growth in the Eurozone. (Financial Times)
Transatlantic Treaty: Brussels realizes that more Transparency is Needed
The French newspaper Le Monde talks about the larger significance of a letter sent jointly by the Italian Presidency of the European Union and Karel de Gucht, the European Commissioner of Trade, to the European member-states. The letter, which makes the case for more transparency of TTIP negotiations, addresses both the alleged secrecy of negotiations, and also emphasizes the need to take the public’s concerns seriously. Carlo Calenda, Italy’s deputy minister of Economic Development, thinks this “communicative gesture to the public’ is needed in order to counter the negative public opinion which persists about TTIP. (Le Monde) – Original article in French
Upcoming Events
Seventh Round of TTIP Negotiations – September 29 – October 3 in Washington DC – a political stock-taking between Ambassador Froman and Commissioner De Gucht will follow the talks on October 13.
EU Policy Agenda for Social Enterprise: What Next? – September 3 in Brussels; hosted by the European Economic and Social Committee – More Information
The EU-US Transatlantic Trade and Investment Partnership-TTIP – September 8 in Copenhagen; hosted by the British Chamber of Commerce In Denmark – More Information
Resolving Cross-Border Internet Policy Conflicts – September 9 in Washington DC; hosted by the Information Technology and Innovation Foundation – More Information
Discover Global Markets: Free Trade Agreement Countries – September 9 -10 in Detroit, MI, hosted by the US Commercial Service – More Information
Jobs and Economic Growth for Atlanta: How TTIP Will Help – September 10 in Atlanta, GA; hosted by the Trans-Atlantic Business Council – More Information
TTIP Road Show, Edinburgh, Scotland: The US-EU Trade Negotiations and the Coalition for Transatlantic Business – September 23 in Edinburgh, Scotland; hosted by British American Business – More Information
Breakfast Briefing on the European Banking Union – September 23 in New York, NY; hosted by the European-American Chamber of Commerce – More Information
Jobs and Economic Growth for Indianapolis: How TTIP Will Help – September 26 in Indianapolis; hosted by the Trans-Atlantic Business Council – More Information
Launch of new Atlantic Council Publication on TTIP’s Benefits for Small and Medium-sized Enterprises – October 9 – More Information forthcoming