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, February 6, 2014

Economic Policy Recommendations to prevent a Lost Decade in the Euro Zone


As a follow-up to my summary of the first Troika impact report, here are my economic policy recommendations to prevent a lost decade of deflation, depression, rising unemployment and poverty in the euro zone:

First: implement an immediate STOP of the deflationary austerity and competitiveness policies, at least until all the results of the Troika investigations have been reviewed and analyzed. After that, a democratic decision should be taken on how to proceed.

Second: for the short- to medium term, I recommend a macroeconomic strategy change toward active, job-creating economic policies with, for example, sound investments in renewable energy projects to reduce the costs of oil imports into the euro zone, and the massive employment of the most valuable renewable energy of the continent, namely our people, in the social service sector to benefit fellow Europeans, native animals, and the protection of the environment.

The financing of such welfare-enhancing investments and services should be derived NOT from new debt, but from the revenues of an adequately designed financial transactions tax as well as bank fees for the speedy reimbursement of tax payer-financed European bank bail-outs amounting to hundreds of billions of Euros (see the estimates by Sven Giegold at the bottom of his article). According to IMF data, only 15%-40% of these funds have so far been returned to Europe's taxpayers. The money is desperately needed NOW, not later, to repair the damage caused by the misguided austerity and competitiveness policies in the euro zone. If banks have the money to pay million-Euro bank salaries and boni again, they also have the funds to reimburse Europe's taxpayers !

Currently, we are saving at the wrong end and are rescuing the wrong ones, namely zombie banks that would not be able to survive without taxpayer support. That is why I also recommend:

Third, structural adjustment programs for Europe's banks, with strict conditionality for the orderly closure of zombie banks, and a restructuring of the remaining banks along the lines of the 14-point reform and adjustment program noted in my post of August 29, 2012 and the forthcoming study by Sven Giegold of the European Greens: “Banking structural reform; a Green perspective”. The conditionality of the structural adjustment programs should be regularly supervized and inspected by competent and democratically legitimized inspectors. 
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