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, February 10, 2013

CameroMerkel's austerity cum competitiveness-Agenda 2020 for the EU


"...Austerity measures are straining growth....We need growth, we need green growth, we need growth that is inclusive, that is job-creating, and that is gender-inclusive....
We need greater solidarity between and amongst generations."

Following Christine Lagarde's extraordinary speech in Davos.....as I was starting to dream of policymakers who, having learned from their mistakes, would immediately stop all austerity measures in the eurozone and implement policies supportive of inclusive growth, I was jerked back into the sad reality of Europe: while  enlightened people talk about inclusive growth and solidarity, our European nincompoop politicians keep playing the same old and tired tunes of austerity and competitiveness.

The EU budget deal of February 8 is an utter disaster, complete with the usual pork for the farmer’s lobby and other special interests, rebates for the oh-so-poor Brits and Danes, and a heavy dose of public service bashing by Britain’s Cameron (he demanded ! a €1 bln reduction in EU civil servants’salaries and pensions). The budget also includes the most non-sensical, pro-cyclical expenditure cuts on research, energy and transportation projects. Apart from €6 bln previewed for the fight against youth unemployment, there are NO funds allocated specifically to counter the disastrous economic and social effects of austerity measures in the Southern European periphery. Shameful ! What is the purpose of a European Union if not to help Europeans in a grave economic crisis ? 

Far from proposing to fund counter-cyclical economic recovery measures, the new European dream team of David Starve the Beast Cameron and Angela the Schwabian housewife Merkel forged an unholy alliance to push through the first ever real-term cut in the EU budget and a seven-year agreement on actual spending which is normally set year-by-year. The final agreement previews a 7-year budget of €960 billion [1] and actual spending allocations of €908 billion, down from the €994 billion spent in the current budget cycle. The difference between the budget plan and actual spending allocations results in a deficit of €52 billion already at the planning stage which clearly contradicts the intent of the recently enacted fiscal pact. (see  Bloomberg: “Europe Leaders Bow to Cameron Demand to Deepen Spending Cuts” and Lost in Europe: “Kein Zukunftsbudget”).

The European Parliament should put this budget deal where it belongs: into the garbage bin.

In addition to successfully pushing through an EU austerity budget, CameroMerkel discreetly directed EU president Van Rompuy to launch their competitiveness agenda, the so-called reform contract which would commit countries to competitiveness reforms along the lines of Germany's Agenda 2010. Central to this competitiveness agenda is the lowering of unit labor costs via nominal cuts in wages and non-wage benefits as well as labor market reforms that would facilitate the firing of workers and the individual determination of wages, thus putting additional downward pressure on wage levels.

European unions have already registered their protest in a press release by IndustriAll European Trade Union, an association of 197 national unions, arguing that the planned reforms are an attack against tariff autonomy and that the EU has no mandate for the determination of national wages. Resistance is also forming among Europe's social movements which are planning europe-wide action days for the EU summit in March.

_________________________
[1]  The proposed EU budget amounts to roughly 1% of EU-GDP and is dwarfed by public spending at the national level which averages 50% of GDP. 
Posted by at

No comments:

Post a Comment

Subscribe to: Post Comments (Atom)