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, June 23, 2013

The planned Transatlantic Trade and Investment Partnership (TTIP) and Obama's visit in Berlin

Following the first ever real-term cut in the EU budget and the launch of the "Convergence and Competitiveness Instrument" pushed through by David 'Starve the Beast' Cameron and Angela 'the Schwabian Housewife' Merkel, CameroMerkel's austerity cum competitiveness-Agenda 2020 for Europe is proceeding to step 2: the Trans-Atlantic Trade and Investment Partnership (TTIP) of 800 million people, designed to overcome Europe's alleged "competitiveness crisis" --->see Cameron's EU speech of January 23, 2013. Here are some key extracts:

“There is a crisis of European competitiveness as other nations in the world soar ahead..…Europe’s share of world output is projected to fall by almost a third in the next two decades. This is the competitiveness challenge and much of our weakness in meeting it is, frankly, self-inflicted….[through] complex rules which restrict our labor markets"..…and “excessive regulation”.


"Europe is being outcompetet, out-investet, out-innovated and it is time we made the European Union an engine for growth, not a source of cost for business"...."You ought to deal with your debts, you ought to cut business taxes, you ought to tackle the bloat in welfare...."

This, of course, is music in chancellor Merkel's ears and explains why her initial plans of further institutional deepening of the EU (e.g. banking union, common fiscal policy etc.) are being delayed or have been completely put on ice. Instead, Merkel prefers the traditional British strategy of broader trade relations with as little government interference as possible. This also explains why TTIP fits perfectly into CameroMerkel's agenda. The potential benefits from institutional changes envisioned under TTIP are expected to be huge---> see extracts of my Harvard research paper on TAFTA in "Olli's follies and the Pros and Cons of TAFTA":

"Regulatory harmonization and the mutual recognition of each other’s product standards and certification procedures will facilitate market access and reduce production and distribution costs. Further, the security of market access and the guarantee of FDI property rights will diminish investor uncertainty and is bound to stimulate two-way trade and investment flows as well as job creation on both sides of the Atlantic." ....."TAFTA enjoys strong support among labor unions ..... who view the agreement as their “last chance” to introduce Europe’s labor and welfare standards in the US."...."Employer groups, on the other hand, are apprehensive about [an] expected upward pressure on US labor and welfare costs, and the potentially damaging effect on US competitiveness." [1]

The last sentence should give us pause: Knowing Cameron and Merkel and their close relations to  powerful corporate lobby groups, it can be expected that the traditional European labor and welfare standards our forefathers and -mothers fought and died for will be under heavy assault, including the standard sick leave protection continental Europeans enjoy, the 5-6 weeks annual vacation and the 5-day work week. A recent JP Morgan research paper on structural adjustment in the Euro area provides a flavor of things to come if US employers had their way (bold face markings by blog editor):

"....there are deep seated political problems in the periphery, which, in our view, need to change if EMU is going to function properly in the long run."......"Constitutions tend to show a strong socialist influence, reflecting the political strength that left wing parties gained after the defeat of fascism.....:  constitutional protection of labor rights; consensus building systems.....; and the right to protest if unwelcome changes are made to the political satus quo."......"Countries around the periphery have only been partially successful in producing fiscal and economic reform agendas, with governments constrained by constitutions...." (see JP Morgan's 16-page paper and comments here). 

Constrained by constitutional protection of labor rights and consensus building systems ? Not to worry: CameroMerkel's market-conform democracy will make amends. 

While Obama's words in Berlin (see extracts below) have soothed some of my concerns, they are just nice words and we have seen what happened to Obama's nice words about Guantanamo. Hence, it is important to be very very watchful and to supervise closely the upcoming TTIP negotiations (scheduled to begin already in July 2013 and expected to continue through 2014). Pan-European democratic supervision and input by all concerned social partners is absolutely essential ! 

For posterity, here are some extracts of Obama's Berlin 2013 speech directed squarely at Merkel's economic policy in the eurozone:

...."And now, as we emerge from recession, we must not avert our eyes from the insult of widening inequality or the pain of youth who are unemployed. We have to build new ladders of opportunity in our societies even as we pursue free trade and investment that fuels growth across the atlantic. America will stand with Europe as you strengthen your union. And we want to work with you to make sure that every person can enjoy the dignity that comes from work, whether they live in Chicago or Cleveland, in Belfast or Berlin, in Athens or Madrid - everybody deserves opportunity. We have to have economies that are working for all people, not just those at the top."


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[1] EIU Crossborder Monitor of June 21, 1995: “More Market Access: Trade Partners Wary of Bold Initiatives Globally.”

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