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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