Thursday, August 2, 2012
Last week, I thought some of the comments on Mario Draghi's "uselessness" were excessive, but perhaps I was too indulgent. His remarks today seem to have disappointed nearly everyone after his seemingly bold foray last week. So is this another wet squib? Or is it a sign that the behind-the-scenes battle over the fate of the euro has become truly savage? My guess is that Draghi tried to shake things up a little last week, met with far more formidable internal opposition than he imagined (especially from Jens Weidmann of the Bundesbank), and chose the standard option of the losing general in a skirmish: beat a hasty retreat, keep the powder dry for the next battle, and wait for things to get worse while awaiting the arrival of the cavalry. Only in this case, Draghi is supposed to be the cavalry. So I guess he's waiting for an act of God to smite the opponent. So who shorted Spanish debt last week? Profit-taking time.
Hollande's program for altering the composition of the public sector will have very concrete effects: 10,000 new teachers, 500 additional cops, 500 new judicial sector jobs, 2,000 fewer finance ministry clerks, cuts of up to 1,500 at the ministry of ecology, etc.