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, January 30, 2014

First impact report on the Troika's operations

Last October, I reported on Sven Giegold's initiative for an investigation of the Troika's operations by the European Parliament's powerful Economic and Monetary Affairs Committee (see my post of October 31, 2013: "Halloween in Europe...."). 

Well, the committee members didn't loose any time: they immediately sent out questionnaires to various stakeholders, including representatives of labor unions and high government officials of countries that signed reform programs designed and supervized by the Troika (EU commission, ECB and IMF). Throughout the month of January, EP delegations visited Portugal, Cyprus, Ireland, and Greece; meetings took place between national and EP delegates; and parliamentary hearings were held with key Troika officials, including economics commissioner Olli Rehn, former ECB-chief Trichet, and ESM-chief Regling (see "Auswertung der Troika-Arbeit: Anhörungen und Delegations-Besuche).



On January 28, the first impact report of the Troika's operations was presented, based on a thorough analysis of replies to questionnaires sent to affiliates of the European Trade Union Confederation (ETUC) in Cyprus, Greece, Ireland, and Portugal. The findings are devastating:

The Troika's policies of fiscal consolidation are overly ambitious and poorly designed, with little emphasis on the revenue side. The fiscal consolidation measures, combined with a dismantling of systems of social protection, and the complete lack of counterbalancing measures to promote growth and employment have severely damaged domestic demand and triggered a deep recession. 

The Troika's structural competitiveness reforms promote labor market deregulation, dismantle wage bargaining systems, abolish key workers' rights and enforce cuts in minimum wages, public sector salaries and pensions, often under the threat of ceasing loan instalments (e.g. in Greece).

Economic impact: The deep recession caused by the Troika's fiscal austerity measures has shrunk the economy, worsened public finances and increased public debt levels. It has also led to a fall in or a complete collapse of investment activity, despite severe wage cuts. Troika demands for privatizations of public assets at fire sale prices are bound to lead to private oligopolies.

Social impact: Skilled workers and qualified young people are leaving the crisis countries while the remaining population suffers record unemployment and soaring poverty, rendering a significant part of the population destitute. "There is a tremendous rise in indebted households, with the unemployed and homeless being forced to turn to soup kitchens and food distribution." (e.g. Greece) Inequality is widening, with rising unemployment and the dismantling of social protection measures the main drivers. 

Political impact: The imposition of reform policies by unelected Troika officials are putting democracy under heavy strain. Citizens feel they are being overtaken by rules that are external to them and not in their or their country's best interest but "instead serve to uphold the 'sanctity of debt' at all cost" to spare the banking systems of creditor nations. Only 15% of Southern European citizens trust their countries' government, between 19% (Greece) and 43% (Italy) approve of the EU leadership, and less than 30% maintain their faith in democracy.

Legal impact: The report makes it clear that key provisions of the European Treaty, such as "the obligation of the European Union to recognise and promote social dialogue and the autonomy of social partners (Article 152 TFEU)", have not been respected at all. Instead, the European Commissiion has actively assisted in a breach of these provisions, going "against major principles of the European Social Acquis". The report concludes: "Fundamental principles and key objectives of the European Treaty are there to be respected at all times. .... the failure of the Troika programmes to deliver economic and social results shows that the respect of Treaty provisions is a necessary guarantee to design policies that actually work."

No need to say anymore. This report speeks eloquently for itself !
Posted by at

No comments:

Post a Comment

Subscribe to: Post Comments (Atom)