European Commission forecasts – a denial of their only effective policy tool

In Greece, the national unemployment rate has been around (or higher) than 25 per cent since 2013 so it is little surprise that mortgage defaults has spiralled and people are selling of family heirlooms to wealth antique dealers in Switzerland to cover daily costs. A Geneva-based dealer told the Financial Times in June (Source) that “For buyers there are opportunities that only come along when there’s a real economic upheaval . . . in Greece it hasn’t happened since the second world war”. So the vultures are enriching themselves as a result of peoples’ misery. Its the market! No it isn’t. Its an incompetent government looking after themselves and allowing their citizens to go down the drain. Just yesterday, the Greeks have agreed to tougher foreclosure measures (as part of the bailouts) which will see impoverished Greeks lose their last vestige of dignity – their homes. And the latest European Commission – Autumn Economic Forecasts – (released November 5, 2015) portend a very sorry future for Greece and the Eurozone generally.

Read more

European Left face a Dystopia of their own making

Last week, I re-read an article from May 1, 2012 by Abraham Newman – Austerity and the End of the European Model – that was published in Foreign Affairs. The article carried the sub-title “How Neoliberals Captured the Continent”. The author is a US political scientist and observed that given the unprecedented austerity that the European politicians have inflicted on their nations with such damaging consequences, the “Tea Party loyalists in the United States should be green with envy”, The hard-line US Republicans don’t go close to their European brethren. The thrust of the article was that independent of the short-term effects of the austerity it “will transform Europe’s political economy in the long term, lending credence to neo-liberal ideas of limited government and loosely regulated markets. The irony of this transformation is that it reinvigorates the very ideas that helped cause the financial crisis in the first place …” This is a theme that I share. It is also a starting point for a very interesting essay I read last week by Slovenian lawyer Bojan Bugaric – Europe Against the Left? On Legal Limits to Progressive Politics – published May 2013. I have been seeking to understand these perspectives more deeply as part of my larger book project concerning the demise of the European left.

Read more

Italian government is walking into the trap of its own making

On September 19, 2015, the Italian Prime Minister, Matteo Renzi and the Minister of the Economy and Finance, Pier Carlo Padoan presented to the Italian cabinet (Consiglio dei Ministri) an updated fiscal (‘budget’) document – Nota di Aggiornamento del Documento di Economia e Finanza 2015 – which has received widespread attention in the media. The response to the update can be summarised in two statements: (a) the Italian government is abandoning austerity in the coming year and running an expansionary fiscal policy; and (b) the European Commission through the Ecofin (Committee of Finance Ministers) is showing admirable flexibility in allowing the Italian government to ‘relax’ their previous fiscal adjustment plan in order to safeguard economic growth. However, some commentators have challenged the notion that the September changes are indeed expansionary, pointing out that the fiscal deficit projected for 2016 might be higher than the earlier projections but is still smaller than the 2015 outcome. What should we make of all that? Well, neither assessment conveys what is actually happening.

Read more

The Eurozone – being ‘trapped in a dysfunctional monetary system’

On November 6, 2000, the Financial Times correspondent Wolfgang Münchau wrote in his article ‘Weak euro reflects uncertainty of euro-zone’ that “structural reforms alone will not determine whether the Emu is viable … The Europeans have no system of transfer payments and the EU budget is too small for this purpose … the euro-zone countries cannot remain as they are: they must move towards full economic union”. He also observed that the “current is clearly flowing in the opposite direction: EU governments increasingly emphasise inter-governmental co-operation as opposed to a wider role for supra-national institution”. I examined that ‘current’ extensively in my current book – Eurozone Dystopia: Groupthink and Denial on a Grand Scale (published May 2015) – as it was (and is) a major reason the monetary union has failed. And, further, the cultural and national barriers which prevented the creation of a system-wide fiscal union are still insurmountable. Münchau is one of several journalists and commentators who have shifted their positions on the desirability of the common currency yet remains wedded to the idea of retaining it – as if returning to national currency sovereignty would be a disaster. I opposed the Maastricht proposal when it was made public and remain opposed. Restoring national currencies, while initially disruptive will not in the long-term prove to be worse than what Münchau admits is a state where nations are “trapped in a dysfunctional monetary system”.

Read more

The tale of two nations – democracy dies in Portugal and lives in Canada

The tale of two nations – two monetary systems – two continents – Canada and Portugal. It is reasonable to assume that when voters in so-called free democracies elect members to their parliaments who then freely coalesce across ‘party’ lines to form an absolute majority that they will be given the right to govern irrespective of the ideology they represent and the policies that they have put forward to the voters to win their approval. That seems to happen in Canada. It definitely doesn’t happen in Portugal. The Portuguese President dropped his so-called “bomba atómica” last week when he refused to endorse the coalition of parties that held the absolute majority of seats in the Assembly as a result of the recent national election. He indicated that he would not allow a government that would relax the fiscal austerity and consider exiting the Eurozone. His motivation was that financial markets had to remain appeased. It was an extraordinary intervention and will come back to haunt the nation given that the conservative austerity government will lose its authority as soon as it puts its platform to the new Parliament for endorsement (within the next 10 or so days). Then the nation is in chaos and the President will be compelled to accept the anti-austerity left coalition or something worse will happen. But, happily, in Canada, the election of the Liberal Party is a rejection of the obsession with fiscal surpluses – at least for now.

Read more

Public R&D austerity spending cuts undermine our grandchildren’s future

Growth in material living standards, which is just one measure of overall (average) prosperity and contestable at that, depends on productivity growth. How national income is distributed, real wages growth in relation to productivity growth, and the employment rates also impact on how this average is reflected in the fortunes of individuals. Strong productivity growth is only a necessary condition for improved material living standards. In this period of fiscal austerity with suppressed overall growth rates and labour market deregulation that undermines working conditions and reduces the incentives to invest in best-practice technology labour productivity is falling – as will living standards in the coming years. The world is locked into an idiotic race-to-the-bottom. It is a curious period really. The hypocrisy of governments, aided and abetted by the right-wing think tanks, who claim they are cutting into public spending to reduce the drain on living standards of our children and grandchildren, is clear to see. What they are really doing is undermining the future prosperity of the next several generations at the same time that they push millions into unemployment and poverty now. Why are we so stupid that we tolerate this nonsense?

Read more

The Eurozone Groupthink and Denial continues …

I have been going back through my snippets library looking at what economists and politicians said back earlier in the crisis and comparing the predictions with reality to try to understand better why Europe is lagging behind. I have been compiling national profiles for various nations lately to ensure I remain cogniscant of the detailed developments that have been occurring. It takes some organisation. I have been concentrating by interest on Finland, Spain and Portugal lately. It astounds me when I read or hear that the Eurozone has been a success because the currency is stable. Even that last statement is false given the monetary union is fighting deflation at present with recessed output levels and entrenched mass unemployment. The current statements coming out of European leaders accord almost directly with the same sort of things they were saying in 2010 as the region was plunging deep into recession. It seems that they have learned nothing. Some of the past leaders have retired with handsome pensions and will not be held to account for their policy incompetence. Others remain in office and their public statements demonstrate that they cannot see beyond the blindness of the Groupthink that defines the patterned behaviour of the elite European policy-making institutions.

Read more

Full video – University of Helsinki lecture, October 9, 2015

Here is the video of the lecture I gave at the University of Helsinki on Friday, October 9, 2015. There were around 450 people in attendance, which the organisers indicated was an exceptional turnout for a cold Friday late afternoon (the presentation started at 17:00). The size of the audience was a demonstration of the concern that Finnish people have for the future of their nation given that the conservative government is signalling it wants to impose an extreme form of economic austerity in an economy that is already in recession. The economics profession in Finland is ultra conservative and as far as I can detect supports the austerity despite, of course, their own jobs not being in the direct firing line of the public spending cuts.

Read more

Friday lay day – the Unit Labour Costs obsession in Finland

Its my Friday lay day but today is going to be anything but. I am in Helsinki at present and it has been a busy few days so far. The concept of Unit Labour Costs (ULCs) is being used by the right-wing government in Finland to bash the population into submission so they can impose the nonsensical austerity. The Finnish government is trying to get rid of some public holidays and reducing wages for sick leave, overtime and working on Sundays. This is the starting point for a broader austerity attack on the public sector and the prosperity of the people. They are calling for a decline in ULCs of at least 5 per cent. The rationale is that with growth flat to negative for five years or so and the massive export surplus they had disappeared the only way to stop unemployment going through the roof is to cut labour costs relative to productivity – that is, cut ULCs. They have been caught up in the ‘dangerous obsession’ that prosperity can only be gained through ‘export competitiveness’ (whatever that actually is) and the domestic economy has to be sacrificed at the net exports altar. International competitiveness is a slippery concept at best but so-called internal devaluation is rarely a successful strategy.

Read more
Back To Top