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, April 28, 2013

Über-Austerians Schäuble and Merkel: GO HOME

The necessity to regain the confidence of financial markets has always been the key justification for fiscal austerity and the often inhumane cuts in public expenditures. Well, following the debunking of the intellectual edifice of austerity economics, even the confidence argument has evaporated when Bill Gross, manager of the world's largest $289 bln Bond Fund, said that it was a mistake to think bond markets wanted governments to impose fiscal austerity measures: "Bond investors want growth much like equity investors, and to the extent that too much austerity leads to recession or stagnation then credit spreads widen out....I think, fiscally, that governments everywhere have erred....and they certainly haven't induced investment...which, we all know, is ultimately the way to prosperity."  (see "Bill Gross attacks UK and EU austerity", April 22, 2013)  

Bill Gross' comments are another indication of a trans-atlantic shift in views following mounting criticism of Europe's severe austerity course and dire warnings that europe risks 'endless depression'. George Soros, US Treasury Secretary Jack Lew, IMF Managing Director Christine Lagarde and other high-level officials at the G-20 meeting in Washington this April urged Europe's leaders to ease off austerity measures and generate demand to boost growth. The voices of top EU officials have joined this international chorus, including Martin Schulz, president of the European parliament, EU commission president Barroso and Laszlo Andor, EU commissioner for social policy, who demands a radical change of course from Germany, encompassing the introduction of minimum wages and a renunciation of its export-centered economic model.

Unfazed by his international isolation, Germany's finance minister Schäuble says NO, the eurozone has to continue the austerity course. During a recent interview with the Deutschlandfunk he defends the austerity policies and, when confronted with the news that elder Italians are committing suicide following the recent austerity cuts in pensions, displays a level of indifference, brutality, and misanthropy that is untenable for a high official of Germany. Torsten Hild, Founding Editor and Economist of the blog "Wirtschaft und Gesellschaft", thinks that Schäuble should be asked to resign. I fully agree !  After all the suffering Germany imposed on the peoples of Europe during the second world war, I find Schäuble's arrogance and publicly displayed callousness unbearable. 


Twice in the 20th century has Germany destroyed the European order with war, crimes, and genocide to subjugate the continent. It would be an irony and a tragedy, if now, at the beginning of the 21st century, the reunited Germany were to destroy the European order a third time.
 (Joschka Fischer, translated from German)   
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