It is increasingly difficult to find metaphors adequate to describe the pathological dysfunction among European leaders as their rigidities and biases make a full blown crisis look inevitable. While there was never going to be an easy path out of the linked sovereign debt/banking crisis, since lasting solutions would require fundamental changes in institutional arrangements, short term expediencies and pandering to national prejudices were one of the worst choices on offer. So the surplus countries, unwilling to see that rescues of periphery countries are rescues of their banks and export markets, continue to punish the supposed wastrels, unable to see that their economic morality play will visit retribution on all the actors.
The discussions in some European papers, and even in this blog’s comment section, have a fundamentalist “burn them if they don’t repent” zeal. Yet even thought the rolling crisis has inflamed national passions and stereotypes, from an economic perspective, the periphery countries are no longer Other. It’s as if the northern countries have a case of body integrity identity disorder, when individuals believe they’d be better off if they were an amputee and keenly want to have healthy limbs cut off. This condition does not respond to drugs or psychotherapy and is not well understood. One theory is that these individuals have faulty sensory mechanisms, and don’t experience the limb they want to be rid of as part of their body.
Japanese stock markets are down nearly 2%, the Hang Seng over 3%, the FTSE is off just shy of 1.5% and the Dax 1.3% as of this writing as investors watch Eurozone leaders blame the victims rather than devise solutions, or even longer-lasting patch-ups. Last week the focus was Spain as the supposed bank rescue was more a bank liquidity facility that adds to Spanish debt. As soon as the government passed yet another austerity package (a condition of the rescue) which included a rescue facility for stressed regions, Valencia immediately put up its hand and said it wanted some. Spanish bond yields jumped and international markets swooned.
The focus this week is Greece. Germany looks determined to break Greece via insistence on continued austerity, even though it is clearly a massive fail. Prime Minister Anotonis Samaris said over the weekend that his country is a depression on a scale of the US Great Depression, and he wants relief from the conditions imposed in a €130 billion rescue package in March. Analysts overwhelmingly forecast that Greece will fail to meet its fiscal targets and will need even more relief before year end. This is exactly what you expect to see in a deflationary spiral: budget cuts shrink the economy, lowering tax receipts and making deficits even worse.
But as conditions in Greece become even more desperate (reader nathan found that the national railway company has suspended all international trains, for instance), German threats are becoming more dire:
“If Greece doesn’t fulfill those conditions, then there can be no more payments,” German Vice Chancellor Philipp Roesler told broadcaster ARD yesterday, adding that he is “very skeptical” Greece can be rescued and that the prospect of its exit from the monetary union “has long ago lost its terror.”
The immediate trigger is inspectors from the Troika are due back in Greece this week to “assess” progress towards meeting targets. Since there is no way for a patient in an intensive care ward to stave himself back to health, it is not at all obvious how Greek leaders can convince their new economic lords and masters that they can do the impossible. The Wall Street Journal sets forth the critical dates over the coming months:
But without a green light from the troika, Athens risks being cut off from badly needed aid and could run out of cash as early as August. It has sought emergency funding from Europe to cover a looming bond redemption in late August.
Greece faces a much more important deadline in September, when international creditors are due to make their next aid payment, which they delayed in June as the elections played out. Extending the deadline could require even more aid to support Greece while it delays more cuts.
An unnamed EU source told Der Spiegel won’t reach its goal of lowering government debt to 120% of GDP by 2020 (quelle surprise!). The article states that falling short means Greece would need €10 billion to €50 billion more in funding, which the IMF and certain Eurozone governments (read Germany) will nix.
So how does this play out? John Dizard foretold this all in mid June:
The IMF-ECB-EU troika comes next month to perform its review of Greece’s progress under the memorandum. Progress is at a halt, of course, and discussions on minor or major modifications are set to continue with the new government. In the meantime, Greece finances itself through its banking system with, effectively, drawings on the ECB’s Emergency Liquidity Assistance lines via the National Bank of Greece. That is good for some single-digit billions of euros. That can handle the government’s cash shortfall until September, supplemented by strategic non-payment of bills.
It might not be enough to handle both the government’s cash shortfall and an accelerated deposit drain for even that long. At some point, probably by September (when the next instalment payment to Greece under the memorandum is due), the ECB cuts further advances under the ELA. Then Greece imposes its Article 65 controls on transfers out of Greece, and a deeper involuntary austerity begins.
That program includes capital controls, by the way, which might be partly circumvented by over-invoicing imports and under invoicing exports. But the bigger point is that a program for intensifying Greece’s misery is already queued up. And the Germans officials are increasingly saying that Greece exiting the euro might be for the best. Even Mario Draghi signaled that a Grexit was an acceptable option:
Is a Greek exit from the euro area still a leading concern?
Our unequivocal preference is for Greece to remain in the euro area. But that is a matter for the Greek government. It has stated its commitment, now it must deliver results. Regarding the renegotiation of the memorandum [to ease the austerity measures and reforms imposed on the country, I will not take any stance before seeing the Troika’s report.
German Finance Minister Wolfgang Schäuble is taking a similar line.
That talk may have started out as a way to undermine Greece’s negotiating position (the only card it has to play is its threat to leave) but the Germans seem to believe it. They fail to get that the problem isn’t Greece per se but that their policies simply won’t work. And if they’ll push their test to destruction with Greece, they’ll do it with Spain, which is decaying at an astonishing rate. But as Delusional Economics points out, Eurozone leaders are in denial. Draghi predicts a recovery in the next year and said “the country [Spain] will get back on its feet quickly.” That may prove to be his “subprime is contained” quote.
Ambrose Evan-Prichard argues there is a way to break the stranglehold of the Troika:
…the ECB is currently in breach of Article 127 (clause 5) of the Lisbon Treaty obliging it to contribute to “the stability of the financial system”. The first duty of every central bank is to avert disaster.
It is time for Spain and the victim states to seize the initiative. They cannot force Germany, Holland, Finland, and Austria to swallow eurobonds, debt-pooling and fiscal union, and nor should they try since such a move implies the evisceration of their own democracies.
What they can to do is use their majority votes on the ECB’s Governing Council to force a change in monetary policy. Germany has two votes out of 23, with a hardcore of seven or eight at most. The Greco-Latin bloc can force a showdown. If Germany storms out of monetary union in protest, that would be an excellent solution.
The Latins would keep the euro – until the storm had passed – allowing them to uphold their euro debt contracts. There would be less risk of sovereign defaults since these countries would enjoy a pro-growth shock from monetary stimulus and a weaker Latin euro against the Chinese yuan, the D-Mark, and the Guilder.
The currency misalignment eating away at EMU would be cured instantly. There might even be a stock market rally once the boil was lanced. It would certainly be a better outcome than the current course of deflationary Troika regimes and loan packages for economies trapped with the wrong exchange rate, destined to end with one country after another being thrown out of EMU in a chain reaction.
For Germany it would entail a revaluation shock and stiff losses for German banks and insurers with large holdings of Club Med debt.
It’s hard to foresee how this ends, but if the powers that be are balking at another €10 billion to €50 billion for Greece, they will not pony up the hundreds of billions that many analysts see as necessary for Spain. The Eurocrats are running out of runway, and there’s no sign of a Plan B. If we didn’t all have a stake in the outcome, this would make for great theater.
Here’s a metaphor for you. Kicking the patient to death and then complaining that they didn’t respond to treatment.
Pritchard suggests/assumes Southern leaders want to get out of the problems they’re in. I’m doubtful that he is correct. Draghi is also a “southerner”, but he believes that he and his ilk must use this ‘opportunity’ to ‘make healthy and competitive’ the southern nations. Rajoy’s party blocked any attempt at reform by the previous government because it wanted to be in control, and was willing to do anything to get that power. These are not people who care about national stability.. They just want to further their own agenda, and they don’t really believe their actions are unsustainable.
I must agree: a key element in all this crisis has been persistent lack of any half-serious South European leadership. At least not one doing the right thing or getting any results: they allow themselves to be bullied by the likes of Merkel and their own businesspeople, destroying the societies they are suppossed to be in charge of.
And if in Italy at least ministers cry when they do it, in Spain they laugh mockingly or throw insults around, like true cartoon supervillains.
What’s one going to do, when perverse incentives ensure that ‘leaders’ rarely articulate the best interests of a nation or its people?
BITCH LIKE HELL, I guess. Like the Argentine woman in the photo linked below, with her middle finger in the air and a sign critical of the president reading, Si las mentiras tienen patas cortas, Kristina debería caminar con el culo:
Touché, ma cherie!
This seems to me a rather astute comment. In the case of Spain, the PP has a radical vision of massive privatization, sale of public assets and property, dismantling of the social welfare apparatus (to the point of charging for public schooling), and so forth, and the economic crisis has given them a marvellous opportunity to implement it without all the compromising that would otherwise have been necessary. Their vision is a sort of restoration of an aristocritc oligopoly, in which there is no middle class, and everyone works for a few.
When the PP got into power, to some extent it believed its own propaganda, thinking everything was the fault of the reds (how their more radical elements, like Esperanza Aguirre, call the socialists), and imagined that in a year or two the economic situation would take care of itself and they would hailed as heroes for having solved such a difficult problem. Obviously not all of them are idiots and some of them knew better, but the more political hack types amongst them thought (and to some extent still think) along lines like this – they saw the opportunities to implement their societal vision – and to establish themselves for a long time in power – and this was exacerbated by being in absolute majority – and they failed to see the gravity of the already extant problems. To this day it remains hard for them to see that the fundamental problems are not too many labor union representatives and too many public employees (both shibboleths also of minor significance in the current context).
Of course, by now it is fairly clear that the PP cannot do what it wants – it takes its orders from higher up – half a year ago they criticized the PSOE for raising the VAT by 1 point – now they raise it by 3 and change categorizations so that the general rate is more generally applicable – as much as I detest the PP, I would not claim that they wanted to raise the VAT – they certainly did not – and they did so because it was a quid pro quo that came more or else explicitly with the bank bailout. The hacks keep floundering around because they are incompetent and oblivious, and the more serious players in the PP don’t know what to do, because it is already probably too late to right the foundering ship.
Thanks, that’s probably a better way of putting it than “they don’t care”: They do care about stability (to the extent that it’s compatible with their reactionary agenda), but they don’t understand what’s up, and figure we’re just in a cyclical downturn (or they believe they can sort of stabilize the situation at a later point via some variation on extend & pretend).
Meanwhile, the liberals are just feckless (probably because they still believe in the meritocratic project that is globalization/EU-ization, never noticing/wanting to notice that the Maastricht Treaty was a neoliberal’s wet dream).
Or better said, the liberals are just as neoliberal. From Tony Blair to Zapatero, they talk for the people and work for the powerful.
Not sure I agree on that. Would rather say that a lot of liberals are ideologically empty, and thus rather prone to corruption so long as they can tell themselves what they’re supporting isn’t problematic/is the least bad alternative.
B, Thorstein Veblen could explain it all in a trice.
f, re Draghi a “southerner” – use genealogy instead of political geography for definition of Agents, and see what evolves.
That’s what the quotes were for. :)
Actually, that would be really interesting to see laid out. How many of the power players in the EU are descendents of the old European aristocracy?
Nah, just check how many are GS alums. ;)
Red herring alert!
No “red herring”: Draghi and Monti at least are suspiciously Goldman Sachs old boys. They are not the only ones but they are the most obvious ones.
And GS played a key role in the Greek crisis, at the very least. It’s difficult to understand from outside but I’m sure that behind the soulless face of Draghi there is a quite good understanding of what is going on: at the very least brutal class war from top to bottom that Margaret Thatcher could only dream of when she was PM.
This began experimentally with Pinochet, followed with Thatcher and Reagan, then came Yeltsin and now it’s the Eurocrisis managed by Merkel, Sarkozy/Lagarde and Draghi.
It’s not just GS but GS surely provides some networking venues for this Neoliberal demolition of democracy.
Maju, the genealogy was dismissed, attention drawn to GS alums only. Dig deep into DNA to discover Top Dogs at GS, DB, JPM, from “Europe.” The .01% Corporate Nobility from the States joined with M-I Nobility and Confederate Nobility from the States, which joined with the Old “Royal” Blood from Europe.
“…even in this blog’s comment section, have a fundamentalist “burn them if they don’t repent” zeal. ”
Really? Damn, that’s not very encouraging. I’ve mostly avoided reading the commentaries on the web. I stopped years ago because it usually takes longer to read the comments than it does the articles, &c., and, more so, because I’ve always found the majority of comments to be idiotic.
Then again, here I am whining in your commentary. Sorry Yves, hopefully the genuine insights and thoughtful comments of the few make it worth it to read other what people say on your blog.
D Graham Dixon
DGD, no need to worry about Yves. She’s a fast reader with a quick mind.
I would give this comment a 2.7 on a scale of 1 to 10.
The comment ranks high for brevity and concision, but it ranks quite low for temperment. For judgment, it gets a 5 out of 10.
There is room here for improvement, but only through right-minded effort, as is the case with most things.
If AEP’s solution is the one that prevails at the end, Europe politicians would achieve the biggest con ever with US and Asia as the patsies. Dysfunction would then be just a part of the con game.
c2, “Dysfunction” yields exponential rewards to the .01%+.99%Agency.
I don’t see the political will to keep the Eurozone together, neither in the South nor in the North. The European vision has been lost completely for now which is a real shame.
One reason for the lack of political will however is that even if there were, no credible solution is in sight. A transition to full political and banking union was never a real option given the political realities in most if not all EU or Eurozone countries, and lacking that a case cannot be made to send more money down the drain, be it to bail out irresponsible banks (including of course German banks), or irresponsible politicians (see foppe @4:54am).
I do agree that the moral rigidities, biases, and righteousness that we all see and hear from various political leaders are sometimes hard to bear, and definitely are making the political situation worse. But, leave all of that bluster aside – where is a credible solution that would (a) help citizens in hard hit countries, (b) keep the Eurozone in one piece, (c) provides a vision that allows to keep the EU together, and (d), not least, doesn’t destroy democracy in the EU or its member countries ?
Credible solution? There is only one that is viable.
Dissolve the eurozone by reinstating national currencies. Redenominate all debts in said currencies and let them freely float against one another in the initial period, at a minimum. Impose temporary capital controls to limit the inevitable turmoil of the first weeks.
Each country will then be able to: a) break out of the austerity mould that is now leading them on the path to suicide; b) help or if need be nationalize banks with the money and liquidity freely created by the reinstated, fully sovereign and democratically accountable national central banks. .
Then wait for economies to recover.
Insisting on addressing this unmitigated economic disaster with more “aid” cum austerity packages, eurobonds, europe-wide bank guarantees and all the other clever devices emerging from the heads of the eurocracy won’t work and will eventually lead instead to the uncontrolled implosion of the European Union itself.
Better to face reality now and accept that Europe – its institutions and peoples – will never be able to create the full transfer union that could in theory make the single currency work. That being so, the least bad alternative is to dissolve the euro by mutual agreement – and then try to salvage as much as possible from the remains of the single market.
I’d go one step further, assimilate the central banks to each nations own trasuries or equivalents. Why do we have these separate central banks in the first place, that makes no sense.
M “recombinant EuroDNA for new hybrid Zones is the way in C.21.
“has long ago lost its terror”
Well, that’s the case of boy who cried wolf. If talked about long enough, things lose their terror – but it doesn’t mean that when the do eventuate it’s not horrible, because rarely anyone foreseen the whole impact.
“But as Delusional Economics points out, Eurozone leaders are in denial. Draghi predicts a recovery in the next year and said “the country [Spain] will get back on its feet quickly.” That may prove to be his “subprime is contained” quote.”
Right, here is another example of denial, this time from Herr Schauble, on an interview on the 7th of July:
“Spain does not have a problem with its debt, which is lower than Germany’s. Spain will be able to refinance the troubled parts of its financial sector in far better conditions than via the market. It is wrong to see this as additional debt burden on the Spanish public sector. Whomever sees this as an additional burden on public debt is mistaken. In addition, the fundamentals and the drive to reduce the deficit shows that we should not exaggerate the matter. Spain is on the right track.”
In essence Herr Schauble is saying that the market is wrong so everything should be fine.
Meanwhile, on planet Earth, Spanish risk premium last Friday and today escalates to record-high rescue-level as Mr. Rajoy suplications for help from the ECB remain unanswered and his Minister of Economy Mr. Guindos blamed today the markets for their irrationality. Mr. Guindos denied today that a full-blown rescue was necessary with a resounding “Of course not!” which in Statemen parlance means “I’m afraid yes”.
Pathetic. When are we going to have Anarky? I so much want the statemen freak show cancelled for good. I’m still young and naive.
R – “problem” = .01% disinclined to suffer any loss.
I wonder which country would benefit most from the destruction of a European rival to the “world currency”? Oh wait. I just answered my own question. Follow the money. When is the rest of the world going to catch on and cooperate to bring down the empire?
SG – “Follow the money.” AND the DNA.
I’m a long observer of the EU. Over time, it appears to me and an apparent majority of Europeans (at least in the Western portion of the EU) that the EU project has some less than admirable motivations driving it. The most damning evidence is the general tendency to marginalize democracy and greatly increase the remoteness and opacity of governing institutions.
In part we fear a proliferating bureaucracy but, more than that, the fact that hidden interests — mostly corporate — are developing governing mechanisms in Brussels that are responsive to their interests and unresponsive to the interests of the people — much as Americans have ceded their sovereignty to extremely opaque and lobbyist-ridden institutions in Washington.
The people within the EU are rightly concerned and have, on occasion, raised objections. But the project continues. And I wonder now whether this crisis has been somehow engineered to, in the end, force closer integration (and opacity and remoteness) quite against the will of the people to “save” the euro zone. Of course, if the euro zone falls apart, I’ll be proved wrong. But if it is saved with greater integration of some sort, that could be another story.
There’s very little “democracy” in the governance of the EU, at least if one understands by democracy some kind of direct responsibility to those governed. The ordinary voter has no way of punishing those governing the EU for their bad decisions, because they aren’t directly elected. It is indirect democracy by bureaucrats, in a system stacked in favor of the interests of Germany and France, and to a lesser extent, Italy and perhaps Spain. No one in Spain knows who his Euro-delegate is, and no one cares. People don’t realize how much legislative/rule-making authority has already been ceded to this centralized body composed of who know who chosen who knows how (not all to bad effect, by the way – sometimes EU rules are better than Spanish ones). Opacity is clearly anathema to democracy, at least to anyone who understands the spirit behind the idea of democracy. The level of transparency in the governance of Europe reminds me of the Wizard of Oz. In Europe, “democracy” is functioning as a way of hiding the restoration of the power of the aristocratic elites that had somewhat disintegrated during decades of instability.
That is precisely my reading of the larger context. Big business on the scale of US corporations has had a much harder time in Europe because of the language fragmentation, residential patterns (limited capacity for suburban malls with the usual branded goods), and more real democracy. The Brussels experiment has been their lever to get inside those defenses. This might not have been the idea behind the EU at the outset, but it is what is driving it today.
On a not totally unrelated topic, as a professional economist of 40 years standing, I would like to know exactly how it works –how reducing working people’s rights to rubble improves competitivity. Competition with whom, exactly? When they stopped teaching real macro in the grad schools, they basically stopped teaching economics.
P – motive dishonorable: to re-establish Global Holy Roman “Nobility” Feudal System globally via Rockefeller’s Courtiers promulgating The Shock Doctrine hatched at the University of Chicago [why else was Lagarde there?] and carried out multilaterally. The Shock Doctrine was implemented via Political/Military Putsch instigated by Puppet Presidents according to PNAC programme; and via the dismantling of Regulatory Infrastructure undergirding the functional Real Economy in America, carried out by Congress and Supreme Court Agents; and via Propaganda Putsch carried forth by MSM and Hollywood; and by dispersion of the Master Plan throughout all “local” government levels, carried out by Agents of the Global Fascist State–which is ruled by:
The .01% NEXUS of DNA Sets of BigOil/Chem/Pharma/Weapons WarProfiteers + Government/Military/Religion PoliticalProfiteers + Banking/Shadow Banking/RealProperty/Insurance FinanceProfiteers.
The Master Planner’s hand was tipped strategically by Plinio Correa de Oliveira in his book: “NOBILITY and Analogous Traditional Elites in the Allocutions of Pius XII: A Theme Illuminating American Social History” (York, PA, 1993), featuring the ultraconservative, reactionary vision of Joseph Cardinal Ratzinger (now Pope Benedict XVI) and a Foreword by Morton C. Blackwell.
This Holy Roman Reich III-IV Daisy Chain Orgy for Power, Glory, and Global Lebensraum has flamed out. Central Bank Viagra just don’t cut it any more.
I think you hit the nail on the head, Pelham, the EU, if it wasn’t like it in the beginning, most definitely has been hijacked to realise the neoliberal wet dream to devastate europe and to institute a new feudalism. The sooner this insane experiment is brought to its knees and its throat slit, the better. I’m kind of proud of my government for being a bunch of obstinate bastards and refusing to allow ceding of more economic authority to brussels. Even if they are doing it for all the wrong reasons. If they have at least a small part in helping the system self-destruct then I’ll be reasonably happy. Now if only they got the clue and jettisoned their neoclassical disadvisors…
” The most damning evidence is the general tendency to marginalize democracy and greatly increase the remoteness and opacity of governing institutions.
In part we fear a proliferating bureaucracy but, more than that, the fact that hidden interests — mostly corporate — are developing governing mechanisms in Brussels that are responsive to their interests and unresponsive to the interests of the people — much as Americans have ceded their sovereignty to extremely opaque and lobbyist-ridden institutions in Washington.”
I agree. Most of the anti-austerity pieces here seem to advocate the re-creation of the distant American bureaucracy in Europe, complete with Fed.
While austerity may be the wrong approach, it seems clear from the US case that this is not any kind of sure-fire solution either.
It might be nice if we acknowledged that every once in a while.
Being cynical, the grand bargain on offer seems to be “here’s a bailout crumb today so we can screw you better tomorrow.”
Maybe the German nationalists are right to realize that from their perspective this amounts to a “lose-lose” proposition– as opposed to the Greek “win today in order to lose tomorrow” proposition, (which is obviously much better).
If I were a “shock doctrine” pro-banking corporatist theorist this is exactly what I would propose and these austerian conditions are exactly those under which I would propose it. I’m not going to give the dirty canaille leeway to negotiate with me.
There is no way to save the EU. There never was without huge writedowns and since the banksters owned and still own every government in the EU that was never and is never going to happen.
The entire game was saving the banksters and the plutocracy and they have almost done that. Greece has already been sucked dry and will be discarded …
And so it will go, each EU country looted and ransacked to cover the trillions of bankster bets gone bad, EU tax payers everywhere, covering their losses.
The Euro was designed as a weapon of class war against organised labour and a challenge to Europe’s ‘social market’ model. European finanical elites will cling to it until the bitter end. The compulsion to destroy wages and social rights is a political priority above every other consideration. They are perfectly willing to destroy the entire ecoonomy if it wipes out the ‘virus’ of social democracy and organised labour.
But social democratic parties are all compromised and part of the financial elites toolbox already. Where do they need the euro for… unless it’s to intentionally engineer a crisis that allows them to, without much trouble, ratonalise to the public why there must be more income inequality.
But that would be just ridiculous paranoid speculation, wouldn’t it?
You’ve nailed it. The ‘Euro’ was created in New York by Reaganite Robert Mundell, with the conscious aim of subordination or destruction for the Euro area. Europe’s elites bought into it on the hope of disciplining their own populations, and moving the neo-liberal project forward without too much bloodshed. Now the systems unravelling, and we’re in a race between revolution and right wing nationalism. Thanks Robert!
AF, thanks for the detail. The Euro .01% took the bait, the same way the German .01% took the bait at Versailles. As Veblen recognized, Versailles divided the spoils among the .01% Elites of the West, leaving the .99% “German” Volk to pick up the tab. It’s still class warfare betweeen the “NOBILITY and Analogous Traditional Elites in the Allocutions of Pius XII” and “the rest” du jour, but the plan always was to keep the Anglo-Americans in supreme dominance of the West (including Japan).
GS delivered a fatal wound to the Eurosystem by aiding and abetting the insertion of Greece into the system by hook and crook. JPM delivered the contagious disease of “derivates mania” to Euro states and municipalities (Muppet Government) with the complicity of DB, via the corruption of the bond markets. The EU fell on its death bed, but remained on life support until Anglo-American “banks” could extract themselves from the bedside to a significant degree. But the whole system is incurable, the disease carried to every part of the body by naked derivates compounded unto infinity, HFT skimming unto infinity, the “fixing” of crucial indices, front-running, looting, Liar’s Loans meant to go bad, “stings” of various kinds, and fraud on meth.
The Anglo-American Grifters weren’t as smart as they thought the were. But, then, this quality of hubris is a “tell” of psycopathic thinking/behavior.
You mean the Euro project wasnt created to further peace on earth and good will toward man?!! (and make tourism more convenient) Oh how could you even THINK of such thing?!!Heretic!! blashpemy!! blasphemy!! liar!! liar!! liar!!
”So the surplus countries, unwilling to see that rescues of periphery countries are rescues of their banks and export markets, continue to punish the supposed wastrels, unable to see that their economic morality play will visit retribution on all the actors”
this is a misrepresentation of the position of the surplus countries, they are not that stupid. Otherwise they would have left the sinking eurozone already.
The problem the surplus countries face is that their taxpayers don’t want to write a blank cheque to the periphery. In return for more money they want political control.
However, that plan failed with Greece. Some claim because of austerity, but I think more because Greece has proven to be ungovernable. Without a functioning state, any plan would have failed.
The problem with Spain is that they do not want to end up in the ESM, because they do not want to give up control.
The same criticasters of austerity will say Spain is right not to want to give up control as austerity will fail anyway. But do these criticasters expect that Northern taxpayers are going to send money to Spain without any control over Spanish politics? They would be crazy. Revolutions have been started because of this (no taxation without representation!).
It seems to me the North and South got stuck, and I do not see an easy solution. But it’s too simple to accuse them of stupidity.
Eric, “Spain” exists in the Eurozone as “The Republic of Spain” AND “The Kingdom of Spain.” This is a TELL of the duplicity fundamental to the “European Project” of the .01% “NOBILITY” in search of a “European Empire” of “might and right.”
Why wouldn’t there be a division between a European Union of Monarchies and a European Union of Republics/Democracies? When you see how many Dynastic Despots claiming Divine Right of Rule in their “states” have been determined to call the shots in “Europe,” the picture of potential progress towards a valid “European Union” (and its purpose) might become clearer. Really, what was it all about from the start? Wasn’t it meant to effect the European Fourth Reich?
Nonsense: there’s no “Republic of Spain” and there has never been (it was “Spanish Republic”, notice the difference, between 1931 and 1939 and earlier for less than a year and with three different regimes, and two different opposing armed uprisings, in 1873-74).
Leonova: you write a lot of low quality inconsistent comments that I mostly do not read but this one stroke me as particularly foolish.
Another European averred that my claim was correct, that the Republic version of Spain was included by special dispensation, as kind of an honorable mention. Both of these do indeed appear in charts listing members of the European Union.
I said that (for the context of the commemoration of the liberation of Paris in 1944). But that’s not any sort of official recognition except in a historical sense (and only by France or a French committee).
Ambrose Evan-Prichard keeps pushing his latin euro.
Again: if ”club med” would think this was such a good solution they would have left the current euro already.
Ambrose Evan-Prichard doesn’t seem to understand why ”club med” joined the euro in the first place: to escape devaluations (the supposed miracle cure by Ambrose Evan-Prichard), to escape inflation, and for cheap borrowing.
They don’t get the cheap borrowing anymore at this moment, but it’s not that different from the rates they paid with their own currencies.
People who think a latin euro will give them cheaper borrowing than with the current euro need a reality check.
”Club med” is not the USA or UK, with a latin euro I predict they would at least pay the same rates for borrowing as now.
And regarding the idea of devaluating yourself into prosperity: it hasn’t worked for the UK, it won’t work for the ”club med” either.
So what the latin euro would really bring the ”club med” is inflation, not such a good deal.
There are no easy solutions, but they make nice writing for Ambrose Evan-Prichard and his ”I told you so” readers.
Are the Germans really this stupid? I think they have to know what they’re doing and are playing hardball politics. Greece will be destroyed so that when the push to the USE begins nobody dares challenge German hegemony. Meanwhile the TINA brigades work to quell the popular rage of national citizens against their political betters by saying “if we don’t we’ll starve like the Greeks!”
Or maybe I’m just fantasizing evil competency because the alternative (that they really are in denial) means they’re utterly unprepared for the charybdis of global depression.
From a kleptocratic perspective, European elites are going to back policies favoring the kleptocratic 1%s and disfavoring the 99%s. By now this should be just accepted as a given. With regard to Spain, the interests of Spanish and German kleptocrats are aligned. Both want strong Northern banks to protect their deposits and the bonds they hold. Both want Spain weak so that the government is forced to sell the commons at fire sale prices. Both would like to see Spain’s 99% poor and disempowered because their power increases correspondingly. And because the kleptocratic 1%s want this, the elites they own want this too.
We tend to be very resistant to seeing anything in class terms, but kleptocracy is all about class: a class of looters, a class that enables looting (the elites), and the lootees, you and me. In Europe, nationality and North/South distinctions are really nothing more than distractions. And as I have pointed out many times, distraction is the primary weapon in class war. It divides Europe’s 99% and sets it against itself: a virtuous North and a profligate South, Greek against German, Germany against Spain, etc.
The line goes that German taxpayers shouldn’t have to bail out lazy Greeks and stupid Spainards, but this is doubly dishonest. First, German taxpayers aren’t bailing out Southerners. They are bailing out their own banks, and more specifically the kleptocratic 1% bondholders of those banks. Second, while the euro acts as a gold standard at the national level, at the European level it is a fiat currency with all that entails. A real European central bank, not a pale kleptocrat controlled version of one like the ECB, could back the Southern Tier/Belgium/Ireland without recourse to anyone including German taxpayers. The only constraint on its money creation is inflation, and that could be managed by increasing bank reserve requirements and taxing wealth away from the kleptocratic 1%.
Hugh, precisely so. The .01% Global Elites are still at it, generation to generation.
You’ll see “How It Works,” your claims confirmed, in: “Chapter 2: The Veblenian Prophecy. From the Councils of Versailles by Way of Russian Fratricide, 1919-20” in the book, “CONJURING HITLER: How Britain and America Made the Third Reich” by Guido Giacomo Preparata (Ann Arbor and London, Pluto Press, 2005).
See also: “THE BUBBLE THAT BROKE THE WORLD” by Garet Garrett (Boston, Little, Brown, and Company, 1932).
The Ever Conspiring .01% Elites, via their financial and political .99% Co-conspirators, spare and enrich themselves always, and always at the expense of the 99%, from era to era. You can see clearly that “This time really isn’t different,” when you consider the eternal frame of class warfare, and of internecine warfare moreover within that frame. It’s still Darwin’s War: “My DNA in perpetuity v. Your DNA in perpetuity.”
See: “ADAM’S CURSE” by Bryan Sykes. It’s BASIC, “to the last syllable of recorded time” (Shakespeare’s “Macbeth”).
“… this should be just accepted as a given”.
Sounds like resignation to me. It’s simply not acceptable in a regime that claims to be “democratic” (meaning “ruled by the people”, just in case someone forgot what “demokratia”, democracy, means in Greek).
“… German taxpayers aren’t bailing out Southerners. They are bailing out their own banks”…
Indeed. Only that German banks are not German, i.e. of the German people and that banks with other flags like Britain, France, Netherlands or even North American, are also being bailed out.
The rally point for Germans and Spaniards alike should be: stop bailing out the banks, bail out the people and the economy instead. Spaniards are already marching with that protest cry, when will Germans do?
And what about the French? Because I am persuaded that the only way to make a European Revolution is to make a new French Revolution. It’s the only country central enough for that. But French workers were in a month-long general strike less than two years ago. Most have forgotten but France was actually paralyzed and the unions forced to follow what workers’ committees demanded.
“A real European central bank”…
Even if that would happen, it’d be four years too late – if not eight.
Now the only solution is to go on collectivization rampage because the banks are killing the real economy by asphyxia, and only a centrally planned economy, with a good deal of collectivized companies, can work without credit and your usual notion of money.
It’s too late for Keynesian solutions, I believe.
“Yet even thought the rolling crisis has inflamed national passions and stereotypes”
Oh thank goodness the EU is here to preserve “peace”
It’s hard for me to understand why others don’t see the inevitableness of collapse. I mean, there’s never been a society that’s never collapsed before, and it’s always seemed to me that the EU, and especially the Eurozone, is much more rickety and non-durable than most societies.
All I can say is that it’s about time. Delaying the inevitable just prolongs the agony.
“An unnamed EU source told Der Spiegel won’t reach its goal of lowering government debt to 120% of GDP by 2020 (quelle surprise!).”
How do you decrease a ratio by decreasing the denominator? If that is the goal, the natural means would be to increase GDP, right? Yet the Troika seem intent upon decreasing the GDP of Greece! (Yes, increasing the GDP may mean also increasing the debt, but the GDP is more variable, isn’t it?)
The denominator can not be increased. Although I can see why this is hard to understand for the Eurocrats, since by and large everyone loves confusing the models of neoclassical economists with reality.
In reality, we hit peak oil in 2005 or thereabouts and no one bothered to develop an alternative that can replace oil. Therefore the only thing that’s gauranteed from here on is a shrinking denominator.
However austerity is a very good way to decrease the numerator, as a function of the population, in conjuction with the shrinking denominator, and is therefore overall and effective policy for making sure that the well-off get their share of the swag first, while the less well off simply sort of dissappear.