Earlier today Dr. Doom Nouriel Roubini tweeted that the eurozone fiscal compact was dead on arrival even before it had been ratified. Roubini has previously said that Europe’s austerity strategy is failing and that the European Central Bank (ECB) has not done enough to boost growth in the eurozone.
At the IMF meetings, Roubini got the chance to quiz European central bankers on their policies. He said there was one thing that was making the downturn even more severe and suggested weakening the currency. From Reuters:
“So if domestic demand is going to be anemic and weak in this fiscal adjustment because of private and public sector deleveraging you need net exports to improve to restore growth. That’s what happened in emerging market crises.
But in order to have an improvement in net exports you need a weaker currency and a much more easy monetary policy to help induce that nominal and real depreciation that is not occurring right now in the euro zone. That’s one of the reasons why we’re getting a recession that’s even more severe. So, can’t we think of monetary policy as helping to induce the change in relative prices that’s necessary to have a restoration of growth if domestic demand is weak through net export improvements?”