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, March 17, 2013

Did Euro-Austerians blink ?


No, not really: just a little PR and a lot of self-justification, but the austerity course remains intact.
Let me explain...

On March 10, I reported about the EU's initial reaction to the Italian election results and the mounting trans-atlantic critique of the draconian fiscal austerity imposed in the eurozone to pay for EU taxpayer-financed (bank) bail-outs. Just a day later, the German mainstream press wrote about a draft EU summit declaration that proposes a "differentiated growth-friendly fiscal consolidation strategy" and "short-term government programs for more growth and employment". Even Olli Rehn is said to have indicated that selected governments will get more time to reach their fiscal deficit targets. As a nod to Italy, the draft summit statement even provides space for productive public investment spending.

Bloomberg reports that "German officials have backed the commission's approach, indicating that the Berlin leadership is sensitive to criticisms that budget cutting has gone too far." (Bloomberg, March 15)  Is this a reaction to the warnings of the market gods (see video here) or a face-saving mea culpa of the "cocooned elite in Brussels", preparing the ground for a gradual dismantling of the fiscal austerity strategy ?

Hélas, I don't think so. I think, it's just part of a successful PR strategy pioneered by chancellor Merkel which is working like a charm in Germany: publicly, take a compromising step toward your opponents, slab a catchy name on the new strategy, introduce a few miniscule policy changes but leave the core strategy as is and publish a scholarly article to justify it (see "Fiscal policy in Europe: Searching for the right balance") 

Paul Krugman's comment on this "self-justifying piece on fiscal austerity":  "how does that 'delicate balance' [mentioned by the Commission] feel in countries with 15, 20, 25 percent unemployment ?"

                                 source:  Paul Krugman, "Of cockroaches and commissioners"

The EU commission's arguments to justify a continuation of austerity in the eurozone sadly demonstrate that the expansionary austerity zombie still roams our beautiful continent.

In my next post, I will report about a new PR campaign for a particularly indestructible zombie:
the cockroach zombie Agenda 2010, re-loaded.  
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