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.”


Thursday, October 31, 2013

Halloween in Europe: the Return of the Cockroach Zombie

The European election campaign must have started - at least three significant events occurred recently, designed to impress Europe’s electorate:

First, seemingly by mistake, an economist at the European Commission released a not-yet-approved-for-publication paper critical of the austerity policies in the euro zone. EconomicPaper #86 by Jan in ‘t Veld argues that the “spillovers of fiscal consolidations are large”,...especially “the spillovers from consolidations in Germany and [the] core EA [euro area] have worsened the overall economic situation.” The paper is very critical of Germany which could be the reason why it disappeared from the Commission’s site shortly after its online release, and was put back only after it became known that the paper had already been downloaded by journalists (see the Wall Street Journal blog article "Paper by EU economist backs austerity critics"). The re-published paper’s abstract reads: “A temporary fiscal stimulus in surplus countries can boost output and help reduce their current account surpluses”, a statement clearly directed at Germany.…Chancellor Merkel and her minions are not amused!

Second, Germany’s green party MEP Sven Giegold announced an investigation of the Troika’s activities, complete with parliamentary hearingsand a final report. Giegold argues that the Troika’s work is too intransparent and has failed to attain its own policy goals: “The contraction of the economy was more dramatic, the increase in unemployment was far stronger, and also sovereign debts were far higher than foreseen by the first Troika programmes. For these reasons many European citizens expect that the European Parliament finds out what lead to these alarming results.” Well done ! It is high time someone looks into the secretive work of a bunch of non-elected alpha male bureaucrats who, with the stroke of a pen, decide upon the life or death (literally, in the case of retired persons whose pensions have been cut so severely that they cannot afford live-saving medicines) of thousands, if not millions, of European citizens. Unfortunately, though, investigating and supervising the Troika of EU Commission, ECB and IMF will not be sufficient anymore, as future conditionality-based aid payments will be disbursed by another bunch of non-elected bureaucrats from the European Stability Mechanism (ESM), directed by the German Klaus Regling, another fox guarding the hen house.


Third, just in time for halloween: the return of the cockroach zombie, chancellor Merkel’s beloved competitiveness agenda (see my posts on this issue listed below). After the failed austerity diktat in Southern Europe, Merkel now wants competitiveness reforms extended to all countries in the euro zone, beyond the framework of existing economic governance vehicles like the six-pack and two-pack, to ensure closer macroeconomic cooperation. Merkel’s plan calls for bi-lateral contracts between the EC Commission and each euro zone country signing a commitment to implement structural reforms in the labor market, in the health and welfare system, as well as in social security regulations. To integrate these competitiveness contracts into the existing EU legislation, Merkel wants to change protocol 14 of the European contracts.

On this blog, I have warned on numerous occasions about chancellor Merkel’s obsession with competitiveness and the economic dogma behind it see the following posts in chronological order:
If Merkel gets her way, her competitiveness doctrine will turn the European continent into an ueber-efficient Anglo-Germanic Europe and, by assigning an economic value to everything and a clock to every activity, extinguish the charming sensuality and inefficiency of the Mediterranean culture, crush the savoir-vivre of traditional France and the creative spirit of Italians and Spaniards, and spoil everything that makes life worth living.

Please stop this nightmare !
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