Europe’s black cygnets

By Delusional Economics, who is horrified at the state of economic commentary in Australia and is determined to cleanse the daily flow of vested interests propaganda to produce a balanced counterpoint. Cross posted from MacroBusiness.

Although the Greece default is the very obvious European black swan at the moment I thought it would be prudent to point out two other things happenning in Europe over the next 12 months that certainly have the potential for evolving from a cygnet into something bigger.


There a number of elections occurring across Europe over the next 12 months that have the potential to de-rail the current European status quo.

Greece itself is supposed to be having a national election in April which is adding to the current debacle. Greek party leaders have more than one eye on their electorates at the moment which means the bailout negotiations have politicking on top of all the other issues. The consensus appears to be that Greek politicians are playing to their electorates, but will fold at the last minute. The idea being that they will be able to say to their voters that they put up a strong fight, but will ultimately do what is demand by the rest of Europe. This is obviously a bet on a politician’s behaviour, so there is obvious downside risk.

Greece elections, however, are not the greatest concern in my mind. Greece will be defaulting in some form or another this year, the elections influence is simply a question of how ‘messy’ that default becomes.

Germany also has two state elections this year which are a chance for Merkel’s Christian Democrats to regain the national majority they lost last year. It is believed that the worry about these election result was the source of the recent hamstringing of Angela Merkel by Volker Kauder, the floor leader of her party.

Latest polls have Merkel’s popularity at a two year high, however the results of the next state election in Saarland , to be held on March 25, are anything but predictable given recent history.

Talks to form a grand coalition between the major parties in the German state of Saarland have broken down, with early regional elections due to be held instead. The poll would also have an impact at the national level.

Talks on a transitional government in the south-western German state of Saarland broke down on Thursday, almost two weeks after the regional coalition collapsed.

An early election will now be called after Christian Democrat (CDU) Saarland state premier Annegret Kramp-Karrenbauer and her center-left Social Democrat (SPD) counterpart failed to reach agreement on a new temporary administration.

The election means that Chancellor Angela Merkel’s coalition now faces a second potentially damaging political test this year.

Following the Saarland election is another election on May 6 in the state of Schleswig-Holstein leading onto national elections in Autumn 2013. If Merkel’s party is unsuccessful in the Saarland election then their will be significant pressure on her to re-assess her approach to European policy.

Although both the Greek and German elections do add to the already unpredictable outcomes in the EuroZone they are not the major political risk.  That place is left to France with presidential elections to be held on April 22 (first round) and May 6 (second round). These elections are very quickly becoming Franco-German.

President Nicolas Sarkozy is not yet officially a candidate in the forthcoming French presidential election, but that hasn’t stopped German Chancellor Angela Merkel from backing him.


Hannelore Kraft, the SPD premier of North Rhine Westphalia, said that the SPD would in any case be backing Sarkozy’s likely rival for the post, the center-left Socialist Party’s Hollande. In the “family of European social democracy this has always been a matter of course,” she told the Rheinische Post newspaper

The cross-border campaigning has already begun with a number of German politicians claiming political interference and one going as far as to call a recent Merkozy interview a “rather embarrassing” affair. Given that, at this point, European nations are still supposed to be political separate one has to wonder exactly what is going on. But that answer is easy to find as soon as you hear the man who is currently Mr Sarkozy’s presidential front runner speak.

François Hollande has said that although he is supportive of reducing the French budget deficit, he opposes constitutional limited on government budgets. He also wants to lower the rate at which fiscal cutbacks are made and he wants additional commitments from the EU around promoting economic growth and jobs. As you can see from the video Mr Hollande has been actively attacking Merkozy on the handling of the crisis and given that Angela Merkel has been returning fire during interviews it is very difficult to see how a win by Mr Hollande isn’t going to lead to some serious complications for the current Franco-German centric Europe.

Something to watch.


Although a default in Greece is likely to be disruptive, with direct contagion into Cyprus and market contagion in Portugal, the event is well known. Portugal itself is also a problem, but again this event it known and bond yields are reflective of the situation. In the scheme of things Portugal and Greece are relatively small and, although I think the market is underestimating the fallout, Europe is working on mechanisms that could potentially deal with the two countries along with Ireland. Italy is also a problem, but as I have explained previously Italy’s issue is growth more than debt so the country already has the potential to right itself.

That leaves Spain which I consider to be the major unrecognised problem. The country has seen its yields tumble since December on the back of the ECB’s 3-year LTRO but there hasn’t been anything in the economic metrics of the country to support such action. Spain has 23% unemployment and still rising, the banking system is under-capitalised and still has unknown exposure to the country’s housing market collapse.  On top of that the rising unemployment rates is pushing up bad loans in the banking system to 7.4%, a 17-year high, and is still rising.

The country is also showing the same well known signs of what happens when you attempt government austerity when the private sector is attempting to deleverage without surplus in the external sector.

Unemployment has sky-rocketed since 2007

Industrial production is falling

Internal demand is falling as unemployment and a private sector credit demand collapses

which ultimately leads to falling government revenues even as they are attempting austerity budgeting.

The Spanish government has already injected 30 billion euros into the banking system, but more is required and the government has suggested the banks need additional provisions of 50 billion Euros. As the data shows, this is is not a country that is on a sustainable path to recovery as the economy appears to be rapidly deflating. However, as I noted back in November, the new government of Mariano Rajoy doesn’t seem to have any plans outside of continuing austerity based policy.

There is no back-up mechanism in Europe big enough to save Spain which is why it is a concern to me that the financial markets don’t appear to have fully recognised the risk associated with the country.

Print Friendly, PDF & Email
This entry was posted in Guest Post on by .

About Lambert Strether

Readers, I have had a correspondent characterize my views as realistic cynical. Let me briefly explain them. I believe in universal programs that provide concrete material benefits, especially to the working class. Medicare for All is the prime example, but tuition-free college and a Post Office Bank also fall under this heading. So do a Jobs Guarantee and a Debt Jubilee. Clearly, neither liberal Democrats nor conservative Republicans can deliver on such programs, because the two are different flavors of neoliberalism (“Because markets”). I don’t much care about the “ism” that delivers the benefits, although whichever one does have to put common humanity first, as opposed to markets. Could be a second FDR saving capitalism, democratic socialism leashing and collaring it, or communism razing it. I don’t much care, as long as the benefits are delivered. To me, the key issue — and this is why Medicare for All is always first with me — is the tens of thousands of excess “deaths from despair,” as described by the Case-Deaton study, and other recent studies. That enormous body count makes Medicare for All, at the very least, a moral and strategic imperative. And that level of suffering and organic damage makes the concerns of identity politics — even the worthy fight to help the refugees Bush, Obama, and Clinton’s wars created — bright shiny objects by comparison. Hence my frustration with the news flow — currently in my view the swirling intersection of two, separate Shock Doctrine campaigns, one by the Administration, and the other by out-of-power liberals and their allies in the State and in the press — a news flow that constantly forces me to focus on matters that I regard as of secondary importance to the excess deaths. What kind of political economy is it that halts or even reverses the increases in life expectancy that civilized societies have achieved? I am also very hopeful that the continuing destruction of both party establishments will open the space for voices supporting programs similar to those I have listed; let’s call such voices “the left.” Volatility creates opportunity, especially if the Democrat establishment, which puts markets first and opposes all such programs, isn’t allowed to get back into the saddle. Eyes on the prize! I love the tactical level, and secretly love even the horse race, since I’ve been blogging about it daily for fourteen years, but everything I write has this perspective at the back of it.


  1. Maju

    But Lambert: what if the banks (some banks) collapse and the government does not bail them out? Most people have their money in state-owned savings banks: most life would continue as usual. Nobody would need to blink if Santander collapses tomorrow, much less after they provided Madoff-sized dividends to their stockholders once again this year.

    I’m assuming that the Government acts rationally and does not bail out the banks but let them collapse, bringing their rotten burden of debt and de facto slavery down the sink. I know this is not too likely but it’s an interesting ‘what if’… and a rational option with limited or no negative consequences for Spain as such – it may be even positive.

    I think that the case of Spain is not comparable to that of Greece, Italy or Portugal with huge public debts but rather to that of Iceland and Ireland faced with a private default which they do not need to address except for the most basic concerns (private current accounts and similar).

    You are obviously expecting that Spain follows the suicidal Irish path but what if they choose the Icelandic path? I doubt they will: the conservatives, as the social-democrats, are just lackeys of the Big International Capital and will probably do as is commanded to them, but what if they do not?

    Another issue is unemployment but that should reflect in growing social unrest and possibly growing organized crime (which always pray on the misery of people) and is a rather different story.

    1. Ignacio

      Precisely the most troubled financial institutions are those “Cajas” owned by local governments (not the state, bur the “Comunidades Autónomas). Fortunately, the chance of massive rescue has faded for various reasons: first there is the austerity game, that makes it very difficult for the new government to justify pouring a single additional cent in the banking system. Second, we have witnessed an example of corruption whe one of the cajas (CAM) was intervened by the regulatory authorities: a lot of money was poured in CAM resulting in managers fleeing the entity with million in bonuses after fraudulent accounting practices, and leaving losses much higher than previously anticipated.

      The real problem is that giants as BS, BBVA or Caixa, are allowed to keep dozens of thousands of failed loans in their books as (and their respective accumulation of land and houses) while they no longer leif they were performing and accounting benefits which are not real at all. The regulatory authority should force tha banks to sell those assets in fire sales. That would help to reduce too high house prices and revive the industry sooner while helping the private sector to deleverage for the next credit expansion.

    2. Bam_Man

      If some banks collapse – and they are fairly big ones – and the government does not “bail them out”, then DEPOSITORS WILL LOSE THEIR MONEY.

      There is a great misconception out there among the readership regarding the size and ability of existing deposit insurance funds to cope with large bank failures. This misconception tends to focus solely on the fact that “bondholders” are being rescued by government interventions, when in reality it is both bondholders and DEPOSITORS.

      Think for a minute what the implications would be in a ZERO INTEREST RATE REGIME if deposisitors were to actually LOSE THEIR MONEY due to a large bank failing. The MOTHER of all bank runs would immediately result.

      1. Ignacio

        Depositors loose their money? Have you done the math?. First, you have to sell assets, when you are done on it, then you have stakeholders and bondholders to loose money and at the end, if you have to tap on depositors money is when you use government money to insurance ALL deposits.

        1. Maju

          Indeed. What the government insurance cannot protect is too large deposits or heavy investments of other kinds.

          There are a bunch of doomsayers, some of them sounding like on payroll of a bankster lobby rather than truly sincere…

          Doom, doom, if banks fail the world ends overnight! C’mon!

  2. Ralf T

    “Germany also has two state elections this year which are a chance for Merkel’s Christian Democrats to regain the national majority they lost last year.”

    That statement is factually wrong(to put it politely). Whilst the Christian Democrats are performing decently in current polls, their coalition partner the FDP(market radicals) have been kicked out of all state assemblies, where elections have been held over the last 1-2 years. Whilst 30-35% in polls does put the Christian democrats in the lead, the other 65-70% are shared by centre-left and left of centre parties(SPD,Gruene,Linke, Pirateparty). The best the Christian Democrats can hence hope for is a “Grand-coalition” with the SPD, their main rival on the left, which, at best, changes precisely nothing what majorities in the lower house of parliament(Bundesrat[=Senate]) are concerned.
    I´m amazed again and again by how little anglo-american commentators living under a “first-past-the-post” electoral system actually understand of how an electoral system with proportional representation actually works in practice!

    1. Praedor

      Indeed. Parliamentary systems with their proportional representation are SUPERIOR to the US system that saddles the people with no representation whatsoever. A “mandate” in the US is based on the most ephemeral and nonsensical arguments (Reagan had a “mandate” during his first term because he took a huge advantage in ELECTORAL VOTES while the actual voters merely gave him 53% of the vote…nearly half voted AGAINST him…and that was a “mandate”).

      I would love to see the US Congress, both houses, go full proportional representative. THEN we’d see compromise, see the voter’s desires actually have a chance of carrying through.

  3. MarcoPolo

    “Mariano Rajoy doesn’t seem to have any plans outside of continuing austerity based policy.”

    Rajoy  is not an idea person but a functionary who has always done what he was told and now there is no one to tell him what to do.  Don’t expect much.

    The Merkozy faction has been short-sighted too. I wonder why they think they can let Greece fail and retain any confidence at all from the rest of the periphery.  Special case – who believes it? So, Schäuble goes to PT to tell them that unlike Greece they will be saved?  And I have a bridge to sell you. 

    As in Argentina when women took the streets with frying pans and threatened a coup.  There are political limits to economic maneuver.

  4. Jim

    In Greece, the parties against the austerity measures are gaining traction.

    Greek Socialists See Popularity Collapse in Poll

    The poll shows that the Socialists are backed only by 8% of voters and comes last in respondents’ choice of the five parties now in parliament. The third party supporting Greece’s coalition government, Laos has 5% support.

    Leftist parties, which openly oppose the austerity measures, saw their popularity rise significantly. The poll showed that the recently formed left-wing party Democratic Left took second place in terms of voters’ choice, with 18% of respondents saying they would support it. Communist party KKE is backed by 12.5% of voters and the Coalition of the Left by 12%.



    Poll points to a shift in voting intentions

    Dissent-ridden socialist PASOK is on a downward spiral and conservative New Democracy is maintaining its popularity while the Democratic Left has attracted the support of a large segment of austerity-weary Greeks, according to the results of a new opinion poll that also show that nine in 10 Greeks are unhappy with Prime Minister Lucas Papademos’s coalition government.

    1. Maju

      I thought PASOK was more like 6% but it doesn’t even matter because it’s such a brutal collapse (and just an opinion poll anyhow, not rocket science). Their repeated betrayal to their promises and working class character has taken its toll even more that I would have expected. In Spain the PSOE also let elections take place before they would suffer even more punishment (they lost 4 million voters – and the right gained very few), even if the situation of forced adjustment is not even remotely as bad as in Greece (unemployment is but that is another story).

      I wonder how serious are these Democrat Socialists. If they’d be a “true social-democratic” party in an Olof Palme or Allende line, that will be interesting to watch, because the anti-austerity Left would collect at least 45% of the vote (probably polls downsize their support), effectively controlling parliament.

      IF there are elections in April, either a new national unity coalition government emerges (what would put the country back in the pre-vote situation), or a quite radical left wing government takes power (I wonder if all these parties can get their action together) or there will be no effective government. It’s clear that the Right will not get any sympathies from this even if they may not take such a big toll as PASOK.

  5. ozajh

    No such thing as Black Cygnets.

    Cygnets of Black Swans are cream/light brown, just like any other cygnets. In fact, in bright sunlight they look WHITE in comparison to their parents.

    Just sayin’ …

    1. Maju

      That’s what I thought. Also nobody I know places any negative value to black swans, it’s black sheep (for biblical-cultural reasons probably).

  6. Maximilien

    “Although the Greece default is the very obvious European black swan at the moment…”

    Oxymoron alert! Black swans by definition cannot be obvious.

    And with the 1-year Greek bond (maturing in 6 months) yielding 509%, the Greece default swan is blindingly white.

  7. Francois T

    The Austerian Eurocrats are really itching for a destruction of the political models actually in existence. I’ll bet you quite a few of them dream of a United States a la radical GOP where safety nets do not exist anymore and corporations are the only game in town.

    Color me cynical, but I do not believe in the ideological sincerity of the Austerians. Everything they’ve suggested has FAILED everywhere it was implemented.

    1. Maju

      I won’t call you “cynical” but more like “clear sighted”. Austerity prophets only want to destroy the living conditions of the Working Class for no other reason than doing it (it’s pointless, it just destroys markets).

      They may find sooner than later that their crusade against the People will backfire badly. It’s happening already but they, in their blind boundless greed and lack of strategy, can’t see it.

  8. Francois T

    Color me cynical, but I do not believe in the ideological sincerity of the Austerians. Everything they’ve suggested has FAILED everywhere it was implemented. Just look at the UK and Ireland.

    Something else is in play here. I think the Austerian Eurocrats are really itching for a destruction of the political models actually in existence. I’ll bet you quite a few of them dream of a United States a la radical GOP where safety nets do not exist anymore and corporations are the only game in town.

  9. different clue

    It isn’t a black swan if you expect it. It isn’t a black swan if you can even imagine it. If the bad things you foresee turn out to happen, might it be better to call them Cassandra Swans?

    Now . . . if you had a New Madrid size earthquake under the most densely industrialized superfund-site-loaded nuked-up part of Europe . . . that would be a black swan.

  10. Bakasone

    Banksters certainly have no reason to worry about the Saarland election. This German state has no relevance – economically and politically. And a broad majority of Germans will support “Mutti” (or: Mom, as Merkel is called by political commentators) in her crusade against profligate Southerners. It seems that certain factions of the German corporate world think their time has come to take over the rest of Europe. This will come at a high price. My worry is to read in the history books of 2030 that it was Germany that made Europe fall apart.

    There was a highly instructive posting on David Malone’s blog about what might happen to the Southern banks after they took even more bad sovereign debt – with a little help from the ECB. Here’s the link:

    1. Hans Suter

      “Germans will support “Mutti”” not so, Mutti running against Steinbrueck is actually at 47/41, and Mutti’s party collects little more than a third of the electorate.

  11. ruben

    Mariano Rajoy’s gov’t do have a plan apart from more austerity. They have recently decreed an apparently very profound change in labor laws, essentially giving employers a lot more power over employees, including the ability to unilaterally reduce wages based on the slightest evidence of a productivity reduction or a decrease in a company’s competitiveness. The central idea of course is internal devaluation. So you may update your position. The new Spanish gov’t is bent on a policy of harsh intensification of austerity combined with aggresive changes in the labour market designed to empower employers. What does that tells you about the prospects for something bigger than Greece emerging on the European theater this year? Will this austerity/labor de-regulation combo work to reduce unemployment, increase industry output, increase internal demand, and ultimately and more importantly, increase gov’t revenues to make possible to service the debt incurred to when saving the banks?

    1. Maju

      There can’t be no internal devaluation without internal deflation: people simply won’t work for less than it takes to pay their costs of life (essentially rent+food+water+energy, assuming that healthcare and education remains public and nearly free). While home prices don’t collapse, labor costs in Spain will be high, there’s no plan about it but act legally against speculators (issuing new laws as needed, and they are needed) and/or spend a lot of public money in public housing as Germans do.

      No Neoliberal government, catholic (conservative) or agnostic (social-democrat) will do that. That is why the situation of Spain is doomed because there is no statesmanship inside or is kept under seven locks by an inefficient semi-colonial society and political system.

      “Will this austerity/labor de-regulation combo work to reduce unemployment, increase industry output, increase internal demand (…)”

      No. Without lowering real costs, it will just dramatically impoverish and anger the People without almost gaining any competitivity.

      Also the reform may appear all the dramatic you want but the labor market in Spain was already almost as “free” (deregulated) as any other. That’s not the problem: the problems are:

      1.- Living costs (notably housing) being extremely high, what makes the workforce comparatively expensive.

      2.- The euro being overvalued in comparison to the US dollar (and by extension other currencies), what make European companies that are not high end extremely non-competitive, not just outside EU but also inside it (that’s why so many companies collapse: they can’t be cheaper than Chinese or Polish competitors nor as high end as German ones either).

      3.- Lack of statesmanship being able to face the Germans or whoever else eye to eye. They are all just chickens who bow to almost any pressure and then beat their chests against weak foes like Libya or the Basques. It’s totally pathetic but it has been that way for centuries (corrupt oligarchies, lack of statesmanship of any kind and any attempt to reform brutally aborted) so I do not expect much. I mean, just look at how Spain ranks between Italy and Canada and is not just not member of the G7 but not even of G20!!! That is loser mentality and self-defeat.

      “… and ultimately and more importantly, increase gov’t revenues to make possible to service the debt incurred to when saving the banks?”

      Spain can’t save the Spanish banks but by means of total self-pillage… and even then. States should not bail out banks ever: they should wait till bankruptcy occur and then, and only then, intervene to save the average Joe’s current account. That’s what Iceland did (thanks only to strong popular pressure and having a statesman-sized president who vetoed the abusive impositions from outside) and that is what works. The Irish way is suicidal and stupid, the Icelander way is the only one that works.

    2. Jim

      How does Rajoy’s plan differ from that of Zapatero’s, before he was voted out?

      Didn’t the Spanish have the opportunity to elect “fringe” groups which vowed to oppose austerity?

      Yet, they opted for Partido Popular (Rajoy’s party).

      1. Maju

        No difference: neither has a plan of their own, they just apply what Brussels commands (and if they keep doing that, it will never be enough). Just that Rajoy and camarilla is happier and feel more confident about doing it, after all that’s what conservatives love to do, right?

        “Didn’t the Spanish have the opportunity to elect “fringe” groups which vowed to oppose austerity?”

        Very limitedly. The Spanish electoral system is designed to favor the twin party system a lot, mostly because there are many small semi-rural overrepresented circumscriptions by Constitutional design (the 50 provinces get double default representation, before apportioning, than the 50 US states, yet they have no political autonomy nor in most cases any other distinctiveness, so small semi-rural provinces have much more votes than would be normal under any common sense kind of apportioning).

        In most such circumscriptions you can only practically choose between PP and PSOE, heavily penalizing small all-Spain parties. Changing this is a demand of part of the Indignados movement and a reason why they often chant “they don’t represent us”.

        So, regardless of representation (see here, scroll down for all Spain results), PSOE lost more than 4.3 million votes, PP gained some 400,000 (even without a program) but smaller parties did not gain so much: United Left and regional allies: +900,000, UPD (populists flirting with fascism): +800,000, Equo (ex-Greenpeace leader): +200,000, Catalan nationalists: +200,000, Basque Nationalists: +350,000 (but not really comparable because of previous illegalization of a major party), etc. (many votes went to very small options like Anti-Bullfight (100,000), Empty Seats list (100,000), etc.). Abstention rose by two points (not too much) and null votes doubled to 1.3%.

        In general many million dissident votes were scattered through the very fragmented “true opposition” (although I question this category for UPD and some regional/nationalist parties), most of which got no seats at all. This scattering actually favored that with nearly no voting gains, the conservatives got absolute majority, something unprecedented (but rather irrelevant considering the lack of effective difference between the institutional parties).

        “Yet, they opted for Partido Popular (Rajoy’s party)”.

        As also seems to happen in the Greek case, it just seems that the Right loses less votes in such situations, what may be because their voters are not really thinking much (there was a recent study about low IQ and conservatism…) I have no other explanation: those 10 million voters are voting without really thinking about a project that did not even exist before the votes were cast (Rajoy run without a program, just a personality campaign against an obviously exhausted PSOE, which lost almost half their voters (deserved!)

  12. ruben

    I forgot to mention there is a third branch of the new Spanish gov’t plan to deal with the slump: we have harsh fiscal austerity, aggresive labor to reform to empower employers, and the third branch is a reduction in the number of financial institutions (by mean of fusions and closures) from 20 to 12 to increase the strengths of the survivors. Pretty much that is it, in a nutshell.

    1. Ignacio

      Labour reform will not have an effect in the current situation since it cannot be applied retroactively to previous labour contracts. For instance it doesn´t help to reduce the costs of restructuring the whole banking system which should be one of the goals of bank fusions. Since bank jobs have always been very stable and with relatively high salaries, dismissals are supposedly expensive, and the labour reform does nothing to help. It is true that lately, the majority of salary increases in the banking system were in the bonuses, so the salary base (on which dismissal costs depend) is not as high as one could think. Nevertheless, bankers seem reluctant to dismiss many of their employees, even after a fusion and work on expensive early retirement programs which is quite an insult for the rest of the spanish work force, specially those that cannot find a decent job.

  13. Ignacio

    Talking about Spain the small elephant in the room is the debt acumulated by residential promoters whith an outstanding debt close to 40% of PIB. Most of it is non performing. There is also the case of private non-corporate debt which samounts to 80% GDP. Mi guess is that non performing loans must account to at least 20% of it (16% of PIB). Spain has lost 5 years trying not to recognize this issue, in 2008 the spanish banking system was the “most solid of the world” if you were to believe bankers, government and media. It is interesting to note that although the socialist party poured 30 billion euros (roughly 3% of GDP) to rescue those solid cajas, this is nothing compared with the real amount of losses that banks will have to face one day. And now, because austerity is the religion, pouring more money in the finantial system is more that politically dangerous. Banks are allowed to be the owners of large amounts of undeveloped lands, lots of houses in different stages of construction and lots of finished new and used houses. Banks are horrified at the prospect of house prices falling for several years, nevertheless they do their best to keep most of the housing inventories out of the market with the aid of public money, praying that those prices do not plunge too much and waiting for some miracle to come to the rescue.

    These zombie banks are doing their best to keep their status quo while sinking the economy thanks to their inactivity, avoiding writrdowns, keeping private debt too high for a recovery. The regulatory authorities and the government do not address this necessity with the necessary thrust and we are struck in a situation with high unemployment ensured for years to come.


  14. Bakasone

    Just noticed Ralf T is lamenting how little “anglo-american commentators” know about Europe. Perfidious Albion again. Just doesn’t want to recognize the superiority of our economic model… In Germany I get to hear this every other day. Amongst the so-called opinion leaders there is growing resentment in Germany against Britain and the U.S. The rise of nationalism isn’t limited to the periphery.

  15. Fiver

    Good questions. There certainly are interesting possibilities on the electoral side, but I have to wonder if the “left” in Spain, France or Germany have well-considered what it’s going to be like to be taken out to the woodshed by Markets the first time something is done the global banksters don’t like – as in no can-kick down the road when you need one.

    Banks and governments interests are aligned whether the program is austerity or reflation so long as the well are healed. Even in Greece where the monied have moved theirs or even left, with the public in desperation venting on the hapless government who colluded in the money’s flight – anger too late at the predators mere servant.

    Is the left in favor of forced fiscal union in a crisis and the prospect of a more powerful set of Crats? Or just handing it all to the current Eurocrats and bankers who drank the riskless debt derivatives cool-aid that got it all to this happy juncture? Would fiscal union be sugar coated with a print-to-spend stim program? Why fiscal union if the ECB just hits print? And will Greece be out, then in the back door. A default that regenerates somehow? The proposed can (either version leads to major further ECB moves) is a big one, maybe good for 2 years.

    And that’s when we find out what the left and public generally is really made of, ’cause very gong to be revisiting this same crisis a couple years down the road. Maybe the real bastards will finally be brought to heel.

    1. Lafayette

      Would fiscal union be sugar coated with a print-to-spend stim program?.

      You are missing the point on Fiscal Union.

      It has no intent whatsoever to address any actual problem as regards the EuroZone menace from the banksters. It’s intent is simply to level the economic playing field.

      For instance, a common fiscal regulatory environment would mean less competition between the two countries when it comes to corporate taxation and the uniform application of the Value-Added-Tax.

      Ireland is most concerned because it has attracted American industry with its very low corporate taxes. Its corporate tax rate at 7.5% is about a quarter of that of France and Germany. The free ride is over for Ireland …

      Uniform Taxation and the regulation of the Services Industries are the two last items on the EU Integration agenda. They have been left for last because:
      • They are the most important of the areas that needed in-depth negotiations to arrive at a consensus, and
      • The Services Industries, due to comparative Labor Input cost-levels, has become the mainstay portion of GDP in the EU as Manufacturing seeps off to the Near East (ex-Soviet Bloc nations) and the Far East.

      1. Maju

        Switzerland does not have that kind of “fiscal union” (fiscal harmonization actually, what is very different than having the federal government collecting some taxes directly). That’s a major reason why Swiss do not want to enter the EU, because their cantons (federated states) would lose their right to tax freely.

        It works for the Swiss but apparently it is not allowed in EU for fear that it could distort internal markets (internal market that is a joke considering that WTO almost force to import everything at very low taxes).

      2. Fiver

        1) You neglect the implications of the word “forced”.

        2) You neglect the loss of budgetary control, i.e., sovereignty.

        You can talk up the rest as much as you like, but it does not mask a further concentration of power in even fewer, less-accountable hands. In the absence of a GLOBAL set of rules that responds to people, not corporations, fiscal/political union is mere code for “economy of scale” and “efficiency”. THAT has been the great mistake all along, the infernal assumption that bigger is better no matter how disastrous the outcomes.

    2. Maju

      “I have to wonder if” [anybody knows] “what it’s going to be like to be taken out to the woodshed by Markets the first time something is done the global banksters don’t like”…

      What will happen. I hear much doomsaying (“the alternative is bankruptcy” for example said Papademos yesterday) but how can bankruptcy be worse than what Greeks are suffering now? Bankruptcy is probably a much better option than eternal dilettantism.

      In the case of Spain, which extremely different than that of Greece, it is a choice between Irish-style national suicide or Icelandic-style national dignity and survival.

      So you tell me, Fiver, answer your own rethorical question: “what it’s going to be like to be taken out to the woodshed by Markets the first time something is done the global banksters don’t like?” Because I can’t think anything worse than being enslaved and sucked dry.

      “Banks and governments interests are aligned”

      Myth. The interests of nations are not those of the banks. Another issue is who do governments serve, nations or banksters? If the latter, then it’s high treason and guillotine should apply.

      “… so long as the well are healed”.

      Nobody ever “healed” obeying the IMF. Learn your history!

      Enough. There is a revolutionary process going on in Greece as we speak. That IS the reality, the hidden power that banksters are unknowingly awakening.

      1. Fiver

        And YOU hold your tongue. Good grief. Nobody despises the global financial/corporatist elite that is driving us headlong to calamity more than I do. I merely pose the reality any GENUINE “leftist” must face if at all serious.

        What is it that has been unfolding in front of your eyes if NOT a vicious display of the banks/wealthy and their captured governments’ serial betrayals of the public interest everywhere? This is an exercise in pure top-down power dynamics. Who is winning?

        I see no evidence whatever that the so-called “left” generally in Europe has even remotely crossed the mental Rubicon that divides those serious about taking on the banks which automatically includes US banks, which must happen for ANY real way forward, from those who are not.

        You say Greece is in a “revolutionary” frame of mind. Perhaps you can read something other than quite understandable anger in that “mind” but at this point I cannot. In any case, to pretend you have any idea what direction it will take, that it will be an outcome favorable to the “left” is way too premature to say the least. I very much hope it does – maybe. The “left” must both know itself, and be brutally honest with the people, what it means in terms of what it will have to confront, i.e., intense hostility from the globalist powers that be, and a very, very tough slog under constant attack. There isn’t anything resembling a path for Greece that is not very painful, absent a very much larger European movement of a similar frame of mind – and if and when that appears, the same thing goes. It will be under vicious attack – except even greater.

        Maybe you are prepared for what a real revolution involves, even if completely non-violent, in terms of real material sacrifice. Most are frightened stiff by far less daunting prospects. Very, very sadly, that’s why we’re here – the so-called “left”, both in Europe and elsewhere, substituted debt for a re-distribution of wealth and power. And now the globalist bastards have it and everyone else exactly where they wanted us all along.

        1. Maju

          Your obsession with “the left” is quite meaningful curious and precisely what makes all this discussion potentially pointless (because you are entrenched in your liberal, i.e. “US-conservative”, ideology).

          Whatever the case, my question stands: what would/will happen if Greece, say, breaks the bourgeois rulebook declares bankruptcy today? Because nobody says… all is “doom, doom” but no precisions.

          So speak your mind: what will happen to us if we collectively decide that the age of debt slavery is over? Will they cut my nose? Electroshocks? Burning sticks under my nails like in old Fu Man Chu movies? What will exactly happen and how?

          Because one thing is wanting and another achieving.

          “You say Greece is in a “revolutionary” frame of mind”.

          I think that we are witnessing a revolution in Greece as we speak. What we saw these last days yells volumes: ministries, universities, prefectural administrations and city halls occupied, maybe a million people occupying the streets of Athens while the banks (the physical offices) burned (and nobody was outraged anymore).

          Revolutions are not solved in a day but the situation in Greece is clearly revolutionary (at a level at least the one of Egypt and probably much more).

          “Maybe you are prepared for what a real revolution involves, even if completely non-violent, in terms of real material sacrifice. Most are frightened stiff”…

          What it takes? Sharing? Living with the basics but that nobody is poor anymore? The Greeks are clearly at that stage already if you heard their opinions: they know they can’t positively live under the Troika conditions and that hardly anything short of nuclear hecatomb is worse.

          1. Maju

            You have not replied to my question yet, Fiver: what will happen if Greece declares bankruptcy? How will this be worse than what is already happening?

            You just have no clue, do you? You are just parroting some dogma without any idea of what is all this actually about.

            I’m fine with you going silent but let be clear that you do not have any answer to my questions in spite of all your doomsaying: you’re just running away.

          2. Fiver

            I’ve reconsidered this entire exchange, and will give this 1 more shot. You’ve misread me entirely, I believe because I get so weary of prefacing every post with:

            1) I am a democratic socialist. I believe it is always the responsibility of the more able, in particular those in any position of power or responsibility, to look out for the interests of the disadvantaged.

            2) I am an environmentalist/ecologist. Anyone with any understanding at all of those areas knows that irrespective of whatever we might wish, the biosphere has the last word.

            3) Unlike the great majority of those who wear the same label(s)I concluded in the ’80’s that I had to understand the galloping phenomenon of globalization and in particular, the multinational corporate system that was spawned. By the mid’90’s I concluded I had to understand how business models on this scale actually operated, which led to how the money system and markets work – NOT because I was out to make money, but because I believed it crucial to understanding how we were possibly going to turn around the Human ship headed for a systemic wreck that makes anything prior look like a picnic.

            4) I am both an idealist, in the sense of what I believe is possible IF we ever get our act together, and a realist who sees no evidence as yet that we are going to do it.

            5) I put things very, very bluntly because the last thing we need now is the sort of airy-fairy bullshit so very many find so comforting. We quite simply do not have time for that. I might have 5 years left if I’m lucky. I’m going to do what I can to alert as many as possible to the extreme danger we are in as possible. And that means you don’t lie to people about the prospects.

            Now, you very clearly did not understand my first post, took me for some sort of twerp and then hurled tiny slices of my post back at me as if I was a far-right clown. I responded to your tone in kind, but in fact I believed I’d made it very clear what I was talking about, i.e., that those purporting to be on the “left” or “liberals” or whatever the fuck you want to call them, have been co-opted for so long they have absolutely no intention of actually taking on this globalized financial/multinational Corporate State, or indeed, anything else.

            As to Greece. I am well aware that Greece is in a state of extreme societal flux and how hard it is for people there. I thought Greece should default when I first became aware of the totality of the real financial situation in Europe back in early 2009, and had no doubt whatever by spring 2010 that was the best option. But it’s going to be tough, no matter what. If you want it to be a decent outcome, you are going to have to take on the real elite in Greece, not just the politicians (who as you’ve seen will simply betray you again) that were nominally responsible for the abject failure to ensure the public interest was secure by drowning the country in debt. I note that the same goes across most of the developed world.

            Greece is in about as bad an economic hole as its possible to be in – small population, few resources, no strategic role, in the context of a global race to the bottom. So if Greece is going to be both free and fair to all its poeple, it’s going to mean long years of material struggle against an enemy that is ruthless – not a German enemy, that is distractive nonsense. We all have the same enemy, and that is the global elite that is anchored in and backstopped by US power. Consider well the case of Cuba.

            I’m on YOUR SIDE. I just advise telling the truth – tell them WHERE YOU want to take the country and HOW you intend the get there that goes beyond eruptions of anger. And make it clear for all: This will be hard. But it is WORTH IT.

            Now good day to you, and good luck.

          3. Fiver

            I just spent an hour giving you another chance at making some small effort to understand what I said in either post. It is quite stunning to me, really, but there it is. In any case, you have it now.

            As for “running away” that sort of infantile crap goes nowhere in my book – or anyone else’s.

          4. Maju

            If so, sorry, because I took you very wrong. When I think of the Left, I do not think Obama or Papandreu, who are just socket puppets of the right, but of the real revolutionary Left, or at least old school socialdemocrats able to nationalize a couple of banks not to pay their debts but to make them serve the people for a change.

            I just thought you were parroting Papademos and the Troika: “bankruptcy is dooooooom!”, when we all know that bankruptcy is the only way to start anew (no panacea but at least a life line).

  16. Lafayette


    François Hollande has said that although he is supportive of reducing the French budget deficit, he opposes constitutional limited on government budgets. He also wants to lower the rate at which fiscal cutbacks are made and he wants additional commitments from the EU around promoting economic growth and jobs.

    Both Germany and France face elections this year and in both instances, the Right in power is “supposed” to lose to the Left. However, history has it that in times of economic peril, the French and Germans vote on the Right preferring competence over good-intentions.

    As for Hollande, he is a Socialist Aparatchik who hasn’t a single bit of experience in industry/commerce or any other professional capacity – typical of most French politicians. He is a pure-product of France’s political system.

    Though unliked on personal level, few people can dispute the fact that Sarkozy is action-oriented and not overly prone to letting problems fester. In fact, his sole drawback is that he is hyper-active.

    At the end of another term for Sarkozy, France would seem ripe for a change. But the French Left seem tied to an old adage that proves perennially true, “Since 1935, they have learned nothing and forgot nothing”. They haven’t a new-idea or new-notion of affirmative action. They do know however what they are against.

    Unfortunately, however, negativism is no proper way to run a country.

    1. Foppe

      But how can you know how he will rule if he’s never done so yet?
      This “apparatchik” moniker is apparently intended to make us believe he’s really a Bolshevik (why this is supposed to worry us is somewhat unclear to me; for all their faults they seem to have managed running the USSR quite well for most of the 80 or so years it existed), and your suggestion that he lives in 1935 makes me think that either you are really afraid of him, or that this is the best “analysis” of François’s political position that (conservative) french journalism has to offer. In either case, it seems much too facile and stereotyping to be true.

      Now, I am sure that it is true that French people sometimes associate ec. liberals with “competence”, but unless I am mistaken, Sarko is managing quite well to seem incompetent. So..

    2. WorldisMorphing

      I agree. But I would add that it’s the problem of the left worldwide.
      Like Bill Maher said : “The democrats effectively moved to the right and the republicans moved into and insane asylum”

      In France, Sarkozy seems (from my limited knowledge of his every action and stances)like a competent moderate conservative. I’m a French-Canadian, I have heard him a few times…and my opinion of him is that he does not appear to be of the batshit grotesquely indoctrinated kind.
      Which brings me to my point:
      I’m a rather left leaning person,(although I can’t bear the pigeon-holing much anymore…)I would not have voted for Segolène Royal…
      The problem of the Left worldwide is that it cannot afford to be the party of the “weak” if it is to command respect. The technological construct that we have incrementally built in the past two centuries will render most people “unnecessary”. The free market fairy apologist will have an increasingly harder time believing in the infinite REAL growth prospects it wants us to assume. So the left has no other choice but re-build itself as the party of “purpose” WITH A STAKE in “Enlightened Self-Interest”. This is necessarily an international vision in scope. That’s why the left is tied up catering to the working class. Only when the right is insanely dumb&hostile like in the U.S. can the “left” really appear to be efficient because the crazy’s would unleash such calamities that even the Warren Buffet’s of the world are put off by it…

      We all know the problem is that technology has progressed but people had a hard time imagining that innovation would NOT generate all the growth that was “needed” to balance the accounts. So we started creating fictional growth.
      This is the mess we are in.
      Managing complexity and ecology, reforming property rights and the theory of economic rent; That’s where we’re at. Everything else is pointless and futile.

Comments are closed.