Thanks for visiting this blog, created in July 2012 out of great concern for the fate of the €uro currency area, once again on the verge of collapse due to the economically ill-advised and heartless austerity policies imposed on Greece, Spain and other heavily-indebted €uro area countries by a christian democratic German chancellor impressed with the budgeting skills of Schwabian housewives. Meant to reduce the public debt and put the countries back on a path to economic growth, these macro-economically idiotic policies are doing anything but cause "pointless misery" as Paul Krugman so aptly describes it (Bloomberg, July 23-29, 2012).

Instead of reducing public debt, the austerity measures set in motion a vicious cycle of economic contraction, rising unemployment and poverty, lower tax revenues, private capital flight, and rising public debt shares as the economy declines faster than the public debt. What’s more, the austerity-driven ‘blood, sweat and tears’ policies recommended to the European periphery derive from the same economic doctrine that brought us to the brink of disaster in 2008. These policies are not only misanthropic and counterproductive to economic growth and debt reduction in Europe, but will prove explosive for the €uro currency area unless a drastic change of course takes place - and soon.

While I do not pretend to have ‘the’ solution for the €uro crisis, I would like to offer alternative economic perspectives and views on current events, and hope to chart a more humane path toward a balanced, socially fair, and sustainable economic future for the €uro area.

On the origins of the 2008 Great Financial Crisis:
“90+% of traders are men, and they bet all of our bank deposits on liar loans which froze credit leading to 40% average losses passed on to ordinary taxpayers; then begged for trillion-dollar bailouts upon which they paid themselves 50% higher boni.”


Sunday, December 2, 2012

A progressive alternative to Merkel's muddle-through government

Following the Eurogroup's latest 'Greek Deal', the economic prospects for the eurozone remain bleak, if not downright depressive (see Yanis Varoufakis' excellent analysis). For fear of telling the truth to the German electorate that her Schwabian housewife policies have failed, chancellor Merkel is bound to continue her muddle-through strategy until the general election in September 2013. Meanwhile, the Southern European periphery is condemned to another year of economic and mental depression, and a growing humanitarian and political crisis.

Germany's largest opposition party SPD (social democratic party) has 'appointed' a chancellor-candidate (Peer Steinbrueck) who continues to support Agenda 2010 policies and thus is likely to pursue an economic strategy very similar to Merkel's austerity cum supply-side reforms package, albeit with an emphasis on economic growth (see my post "What do recent events mean for the EU and economic policy in the eurozone, part II").  And Germany's Greens, the only possible SPD-coalition partner to prevent another Merkel government, also voted for pro-Agenda 2010 candidates (see my post "Best-case economic scenario postponed").  Enough for Europe's non-austerians to despair !

Yet, even Germany has a small group of progressive economic policymakers and experts who could form an alternative (shadow) government ready to take the baton from Merkel's Schwabian housewife team and enact the necessary U-turn in economic policies in the eurozone, away from the explosive debt-deflationary strategy currently pursued toward a humane, job-creating growth strategy which is also the only viable strategy for a sustained and sustainable lowering of debt ratios in Greece and elsewhere. The financing of such a strategy could be provided by the receipts from a financial transactions tax, a solidarity tax imposed on financial institutions and the rich, as well as project funds from the EBRD and the EIB.

Germany's progressive (economic) shadow government could include (please take note, Mr. Soros):

- Sven Giegold (Greens), currently MdEP and member of the Committee for Economic and Monetary Affairs, as Minister for European Economic Policy working in close coordination with
- Heiner Flassbeck (SPD), currently chief economist of UNCTAD, as Minister for International Economic Policy and Cooperation, 
- Gerhard Schick (Greens), currently the Green speaker for fiscal policy, as Minister of Finance, 
- Peter Bofinger (no party affiliation), currently professor of economics and a member of Germany's Council of  Economic Advisors, as Economics Minister.

An excellent coordinator of this progressive shadow government would be Claudia Roth (Greens) in the role of chancellor or vice-chancellor/Foreign Minister.

While this shadow government exists only in my imagination, it might be a good idea for such a group of progressive policymakers to actively start a conversation about alternative economic strategies for the eurozone, so as to be ready to take charge if and when the current debt-deflationary strategy explodes in our faces, and the euro with it.
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