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 10, 2013

The Euro-Austerian Empire strikes back


The reaction of EU austerians in response to the Italian election results was predictable: "Euro chiefs urge austerity", demanding (!) "that euro members press on with budget cuts to end the debt crisis" reports Bloomberg. Merkel is quoted: "Now in Europe, after the Italian election, it seems to be a case of either austerity and savings programs or growth, but that's a completely false premise" (she considers austerity measures combined with Agenda 2010-type labor market reforms as growth-enhancing). Of course, Merkel's minion Olli Rehn, EU economics commissioner, supports the view of the dominant economic power in Europe: "Given that average debt exceeds 90% of GDP in the EU, I don't think there's any room for manoeuvre to leave the path of budgetary consolidation" reports the UK Telegraph. It also comes as no surprise that Italy's president Giorgio Napolitano is exploring the creation of a second technocrat government with central bank governor Ignazio Visco to brake the political patt in Italy and calm markets in case Italy's parties are unable to form a stable government.

While Beppe Grillo dismissed these explorations as cattle market trading and vowed to "bring down the old system" in a civic revolution, the boneheaded austerity stance of EU commissioner Rehn provoked a hilarious trans-atlantic cockroach war between Paul Krugman (said to be one of Beppe Grillo's economic advisors) and three tweeters from Brussels. 

For economists, the battles between different economic ideologies may be fascinating and hilarious, especially when the tone of the debate slips into kindergarten-territory, but let's not forget that in the meantime people suffer. Many of the commentators from Europe are clearly in favor of Paul Krugman using "wild words" to draw attention to the desperate economic situation in Southern Europe and the incompetence of the "cocooned Brussels elite". Unfortunately, Paul Krugman's commentators are also correct in suggesting that all the empirical evidence and public uproar about the misery caused by austerity will not faze the EU power elite as a economic and humanitarian crisis may just be what they want: --> see my post on the role of crisis for the troika's economic shock therapy in Europe. "Only a crisis—actual or perceived—produces real change. When that crisis occurs, the actions that are taken depend on the ideas that are lying around. That, I believe, is our basic function: to develop alternatives to existing policies, to keep them alive and available until the politically impossible becomes politically inevitable." (Milton Friedman, “Capitalism and Freedom”) 

Meanwhile, however, the winds of change are picking up in Europe. Even mainstream German talkshows and newspapers have started to report about the true destinations of taxpayer-financed EU bailouts (namely French and German banks instead of the people in Greece, Ireland, or Portugal) and the lies being dished out by the Merkel government. Both the political left and the right in Germany have filed lawsuits in constitutional court to stop future taxpayer-financed bank bailouts while Europe-wide coordinated social movements are planning huge demonstrations in the spring. Seems all the trans-atlantic educational efforts of anti-austerians are beginning to have an effect.
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