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, May 4, 2014

Back in the market-conform Euro zone

Dear readers,

I am finally back in Europe after a long trip to prepare a trans-atlantic move. No, I'm not giving up on Europe, just seizing better opportunities elsewhere for lady economists.

Back in the euro zone, the atmosphere is definitely scary:

Three weeks before the European election on May 25, there is a deafening silence in Germany - much like the somniferous national election campaign of last year. The economic and humanitarian crisis affecting European citizens in Southern Europe and the very real threat of a deflationary spiral in the euro zone is either not discussed or smoothed over by the mainstream press, indoctrinating German voters with news about alleged economic recoveries, primary surpluses, improving growth rates, and broadly orchestrated PR on crisis countries' return to financial markets.  

A perfect example of such orchestrated PR was Greece's successful return to international bond markets, widely viewed as necessary to prevent an electoral victory sweep by the European left: First, the terrain was prepared with news of Greece's primary surplus, forecasted economic growth, and improved competitiveness (i.e. drastically lower labor costs). Second, Greek bankers went on international road shows in the US and UK for Greek bond placements. Well aware that Greece's failure to return to financial markets could mean a victory of the left as well as the immediate stop of market-friendly structural reforms in the euro zone, the markets played along: Greek bond issues were greeted with unprecedented investor interest and heavy oversubscriptions. And so it was for the first Greek sovereign bond issue since early 2010: notwithstanding macroeconomic fundamentals such as 27% unemployment (over 50% for the young), a 25% shrinkage in Greece's GDP vs. 2009 and a 175.7% debt-to-GDP-ratio (compared with 129.7% in 2009), the 5-yr, €3 billion bond issue by the Hellenic Republic was 8 (eight !) times oversubscribed. 

Third, Germany's chancellor Merkel made the final PR point so that everyone would understand. Days after Greece's successful return to international bond markets Merkel visited Greek prime minister Samaras to pat him on the back for his successful austerity and reform strategy. By then, the message was loud and clear to everyone: "Our strategy is working. If you, dear European voter, want Europe's recovery and success on financial markets to continue you need to vote for us, not the left."

And yet, this perfectly orchestrated PR-campaign didn't quite 'catch', at least not in the more critical blogger scene far away from Frankfurt am Mainstream. This financial blogger's comment, including a telling Goldman Sachs press notice, says it all:  "Greek bond final term sheet..." See also MacroPolis "...The perils of ignoring macro-economic fundamentals".

If Europe's VSPs think European voters are idiots who happily continue to suffer and then turn the other cheek, they should not be offended if Europe's extreme right has a landslide victory on May 25, then dissolves the European parliament and starts the Third World War in Ukraine.

Yes, I think the situation is that serious. And no, I will not stay and watch.
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