Carlo Cottarelli

Carlo Cottarelli was asked to try to form an Italian government by President Sergio Mattarella. There is no chance that Cottarelli will obtain the confidence of Parliament (parties including a majority of deputies have brought up the possibility of impeaching Mattarella for nominating Cottarelli).

Mattarella is using his extraordinary powers to fight populist nationalists who disrespected the Euro. Cottarelli is an odd choice for an anti-anti-globalist — he is currently a top official at the IMF. Nominating him is a declaration of absolute opposition to the current majority in Parliament.

My view is that the rise of populist nationalists in Europe is a terrible thing (not quite as bad yet as their taking power in the USA but getting there). I also think the blame mainly belongs to DG-EcFin and the Eurocrats who do not pretend to respect Democracy, who don’t see 11 % unemployment as relevant to macroeconomic policy making, and who are technically incompented technicians.

Being vain, I googled [waldmann stability and growth pact] to find out to what extent I could tell them I told them so. I found this worthwhile still relevant blog post by Roberto Tamborini. It denounces the application of the stability and growth pact and is well worth reading. But I was most struck by the references (which include the name Waldmann because Waldmann googled himself)


Cottarelli C. (2015), “Potential Growth Rates and the Working of SGP Fiscal
Rules”, Vox-EU, 2 March.

Fioramanti M., Waldamnn R. (2016), “The Stability and Growth Pact:
Econometrics and Its Consequences for Human Beings”, Vox-EU, 19 November.

It turns out that I agree entirely, completely, 100% with Carlo Cottarelli. He has been arguing against Brussels’s approach to austerity. He is much more able than I am to write for non-economists. He makes a very simple practical proposal which I entirely embrace — he says that structural unemployment not NAWRU should be used to calculate output gaps. This is actually very important. I am quite confident there is no counterargument based on econometrics or economic theory. It would have prevented the imposition of pro-cyclical fiscal policy. If they had listened to him, he might have been saved from the very unpleasant next few months.

But voters don’t know this, won’t learn, and wouldn’t care. The stability and growth pact NAWRU nuts have discredited Europe, the Euro, international organizations, economics, and time series econometrics. Italians won’t settle for demanding that output gaps be calculated with structural unemployment, after someone promised to demand that the European Central Bank fork over 250,000,000,000 Euros.

Good thing that insane devotion to austerity and a strong currency has never provoked really dangerous extremism in Europe.