Keep up the Pressure on Germany's Austerians

...because only international pressure and the international isolation of the Merkel government will make Über-Austerians Schäuble and Weidman yield to reason.

So it was last week, as the G-7 finance ministers met in London against the background of record unemployment and growing austerity fatigue in Europe. US Treasury officials made it very clear that they expected Germany, the country with the best economic performance in the eurozone, to support economic growth by raising private demand and thus help the economically weaker southern European nations get out of the deep recession caused by the draconian austerity measures instigated by the Merkel government. Fiscal austerity is to be scaled back, giving countries more time to reduce their budget deficits. And suddenly, Germany's Über-Austerian Schäuble showed "some signs of greater flexibility and said....that he supported the European Union's move to give France and Spain more time for deficit reduction." (see the New York Times of May 11 and the Washington Post of May 13: "Europe Shows Budget-Cut Realism as Slump Prompts U.S. Pressure").

With the backing of the United States, even eurozone leaders now have the courage to stand up against the powerful Merkel government: France's president Hollande refuses to support Merkel's new baby, the 'competitiveness pact' which is nothing else than Agenda 2010 re-loaded for Europe. Instead, he insists on implementing policies to promote economic growth and employment with a French-German "New Deal" against youth unemployment and a 10-year investment plan focused on four key sectors: the digital industry, renewable energy, health, and infrastructure. He even called for a eurozone economic government with its own budgetary capacity, a harmonized tax system, and a president. --->see Francois Hollande's communiqué de presse here and here:

And finally, a new pan-European initiative recently started an online-campaign against Merkel's competitiveness pact and a 'Troika for all'. This campaign gathered almost 10.000 signatures during its first week online, exemplifying the overwhelming discontent with economic policymaking in the eurozone. 

---> See the link to the campaign "Another Europe is possible" here and sign the petition.

Mother's Day Dedication

When god created my mother an angel appeared and asked: "why are you spending so much time with this creation?" God answered, "Have you taken a look at the data sheet for her ? She must be completely washable but not be made of plastic, she must have over 200 movable, replacable parts and her body must still be able to function even when she subsists only on diet coke and small snacks. She must have a lap big enough for four children to sit on and a kiss that can heal everything, from a scratched knee to a broken heart - and she must be able to perform all kinds of tasks with only two hands."

The angel was amazed about all these requirements: "That is too much work for one day. Wait 'til tomorrow to complete her." God protested: "I will not do that. I am too close to complete this creature that has grown so dear to my heart. She can already heal herself AND work 18 hours a day." The angel came closer and touched the creature. "But you made her so soft, God." God agreed, "She is soft, but I also made her strong. You have no idea what she can bear."

"Will she be able to think?" asked the angel. God answered, "She will not only be able to think but she will also be able to argue, reason and negotiate....better than a man."

The angel noticed something, reached out and touched the creature's cheek. "Oops, looks like there is a leakage in your model. I told you this is too much work for one day."  "That is no leakage", corrected God. "That is a tear." "What is the tear for ?" asked the angel. God answered: "The tear can express her joy, pain, sorrow, or disappointment, her love or loneliness, her heartache and pride."

The angel was impressed: "God, you are a genius. You thought of everything! This creature is truly amazing."

And she was ! My mother had an emotional strength that always amazed me. She suffered emotional pain and many pressures but she still gave her family all  the love, hope and happiness she had inside herself. She selflessly constrained her own dreams so that her family could live well. She loved us without reservation and did everything for the family she loved. She was proud of her children and thus gave us strength and confidence to live up to our potential. 

It was the love of my mother that made this world a beautiful and happy place for me. 

I wouldn't be who I am without the love of my angelic mother. 

Though you have left us many years ago, there is not a single day that I don't think of you.

I miss you so ! Wherever you are in heaven:  Happy Mother's Day !

This blog is dedicated to the wonderful, loving creature that was my mom....and to all the other strong women in my family who left this world too early, esp. my beloved grandma and my aunt. 

And to all the other strong women out there, I say: Stay as strong and loving and persevering as you are to make this world a better place. Happy Mother's Day !

Public Opinion in Germany turning broadly against Austerity

Thanks in large part to the persistent efforts of anti-austerians on both sides of the atlantic, a combination of developments finally seem to turn public opinion against austerity, even in Germany:

First, the media frenzy and ridiculing of coding errors in Reinhardt & Rogoff's "Growth in a Time of Debt", a policy paper that served as the 'scientific' foundation of austerity economics, did not go unnoticed in Germany. "Monitor", one of Germany's most influential political broadcasts, covered this economic policy 'mishap' and drew attention to the fact that it cost millions of people their jobs, first in Southern Europe and now possibly in Germany due to the imploding European demand for small cars. (see also my post "Austerity....in Europe - economic incompetence or indoctrination ?)

Second, while mounting international criticism does not faze finance minister Schäuble who continues to insist on his non-sensical 'expansionary austerity' policies, the Merkel government does not like to be internationally isolated and has moderated its policy stance, allowing countries more time to attain their fiscal benchmarks.

Third, the slow realization that there aren't too many policy options left to solve the eurozone crisis, given:

a) Germany's deteriorating economic performance due to the European slump in demand for German exports;
b) the evident ineffectiveness of ECB monetary easing and the German Angst related to lower interest rates;
c) the unwillingness of German employers to allow higher wages in Germany so as to reduce imbalances in labor cost competitiveness among countries in the eurozone;
d) the unwillingness of the German government to finance a fiscal stimulus of German demand for imports from and investments in the European periphery.

Given these predicaments, a moderation of the austerity policies in the Southern European periphery seems the easy way out, especially as a quid pro quo for tougher labor market reforms as suggested by conservative commentators: "This leaves room for the new bargain between creditors and debtors. The advantage of an explicit trade-off between more aggressive reform and looser fiscal timetables is that it would at once offer a more palatable political message to voters and buy credibility in markets." (Financial Times, "The New Deal for Europe: more reform, less austerity")

However, just slowing the pace of fiscal consolidation will be too little, too late for the eurozone, already well on its way toward deflationary depression. As Paul Krugman suggests, "the obvious policy conclusion.... [that should be drawn] ....is not simply that we have too much austerity, but that right now we shouldn't be having austerity at all."

--->watch this video: El-Erian, Co-Chair of the world's largest bond fund PIMCO, says that the economy is not as good as markets imply.

What the eurozone desperately needs right now is an ambitious investment and employment creation program financed by tax revenues from the financial transaction tax (FTT) and special tax surcharges on the rich as suggested by the German Green Party. Judging from the 1-2% jump of the Greens in the opinion polls, this policy course seems widely supported by German voters. Furthermore, recent US economic history shows that well-designed and well-timed tax increases combined with other well-coordinated policy measures are very effective in raising much needed public revenues, stimulate job-creating growth AND reduce public debt at the same time.