Photo: AP/Riccardo De Luca
Everyone should go read this Q&A with Mario Draghi in WSJ’s Euro Crisis blog.It’s quick, but there’s a lot of meat in it, including an acknowledgment that austerity is a growth depressant (though he still believes it’s necessary).
He also distinguishes between good austerity (cutting bloat) and bad austerity (cutting infrastructure spending), and he gets close to defining “structural reforms” which is one of those things that gets bandied about a lot, but frequently means very little.
WSJ: Which do you think are the most important structural reforms?
Draghi: In Europe first is the product and services markets reform. And the second is the labour market reform which takes different shapes in different countries. In some of them one has to make labour markets more flexible and also fairer than they are today. In these countries there is a dual labour market: highly flexible for the young part of the population where labour contracts are three-month, six-month contracts that may be renewed for years. The same labour market is highly inflexible for the protected part of the population where salaries follow seniority rather than productivity. In a sense labour markets at the present time are unfair in such a setting because they put all the weight of flexibility on the young part of the population.
WSJ: Do you think Europe will become less of the social model that has defined it?
Draghi: The European social model has already gone when we see the youth unemployment rates prevailing in some countries…