Brussels, 30/08/2007
Financial markets are already squeezing both the cost (three-month interest rates are up to 4.7%, well above the ECB’s repo rate of 4%) as well as the availability (flight into safety and liquidity) of credit for new investment. This will drag down overall investor and consumer confidence and damage growth and job prospects. The ECB needs to restore confidence by giving the signal that it stands ready to defend growth and jobs by cutting interest rates if necessary.
Says Reiner Hoffmann, Deputy General Secretary of the ETUC: "Three- month interest rates are now as high as 4.75%, exactly the same level which managed to throw the European economy into a five-year slump back in 2000. To maintain robust growth and job prospects, the ECB needs to consider a timely cut in interest rates."
On top of this immediate action, the ETUC calls on all economic policy- makers to rethink and adapt the global and European model of economic and financial policy-making. The present policy model is based on limiting the role of the public sector by pursuing zero public deficits and debts while outsourcing the management of the real economy to central bankers and financial markets. By providing liquidity in an indiscriminate way to whatever (private) actor for whatever reason, this model of ‘casino capitalism’ has produced four to five major crises in 15 years (Savings and Loans in the US at the beginning of the 1990s, Long Term Capital Management (LTCM) hedge fund crisis and Asian financial crisis in 1998, Information and communication technology (ICT) bubble bursting with over-indebted firms 2001-2003, sub-prime mortgage debts 2007). ‘Casino capitalism’ will continue to do so unless the role of the public sector as an economic actor and regulator is re-introduced.