On December 21, 2015, there was an article on the Social Europe portal – A New Plan for Greece And Europe: A Defining Moment For European Social Democracy – which I found interesting, though very incomplete, given its title. In fact, the ‘New Plan’ is really a series of fairly general statements, which at times, are somewhat inconsistent if you extend them into the necessary detail that they imply. For example, one of their key observations is that within the European Union there is a “wide and growing gap between national control over budgets that people have voted for and the post-national governance imposed on them”. Which would suggest that the solution requires that there is an aligning of the fiscal responsibility and control at the level of the currency-issuing unit. However, there is no hint of that in their ‘Plan’. They talk about an “Enhanced respect for the fiscal sovereignty of Greece” but fail to articulate how that can occur within the common currency when the Greek government has no currency-issuing capacity. Of course, if we want to increase the fiscal sovereignty of any Eurozone nation, then the only sustainable way of doing that is for that nation to re-establish its own currency and exit the monetary union. However, this would appear contrary to their “pan-European” sentiments, which dominate their overall vision. In short, once again the bogey person of the pan-European appears to be taken as a given and then specific matters that might appear inconsistent with that old ‘social democratic’ obsession in Europe are glossed over.

On the Sunday before last (December 20, 2015), Spain conducted a general election, which has left the nation in limbo. Alex Tsipris, the Greek Prime Minister, still trying to hang on to the image that he is a progressive leader in some way, tweeted once the results were known that “Austerity has now been politically defeated in #Spain, as well. Parties seeking to serve society made a strong showing #20D”. I wonder who he is trying to kid … “as well” – as well as where? Certainly not in Greece, which was the implication of his tweet. And, to be clear, certainly not in Spain. While the conservative Popular Party (PP), which has overseen the most recent imposition of austerity and is firmly pro-EU and pro-euro, did not gain an absolute majority, they did win the most seats (123 in the Spanish parliament) and were well ahead of the other major austerity party, yes, the Spanish Socialist Party (PSOE), which won 90 seats). Even the left-wing We Can party (Podemos), who won 69 seats is not planning to exit the common currency. There is no hope of an anti-austerity coalition forming.

Recently, I wrote a blog – Who is responsible for the Eurozone crisis? The simple answer: It is not Germany! – where I contended that Germany was not to blame for the Eurozone crisis. I also wrote that while Germany was not responsible, single-handedly, for the creation of the dysfunctional monetary union, its politicians were surely complicit in making the crisis deeper and longer than it otherwise could have been given the circumstances. A few weeks ago, I read an article in the Italian news (December 15, 2015) – Il piano tedesco su debito e aiuti Ue (The German plan for debt and EU aid) – which I intended to comment on when time permitted. I note that the author, one Carlo Bastasin, is also associated with the American Brookings institution, and that organisation published in English-language version of the article – Mr. Schäuble’s ultimate weapon: The restructuring of European public debts – on the same day, which makes it easier for more people to read. With Germany now the dominant economic and political force in Europe, bullying other nations to support pernicious policies in southern Europe, their latest plan demonstrates clearly that their conception of European integration bears no resemblance to a structure that might allow the common currency to function effectively in the interests of European citizens.

On December 10, 2015, the Irish Central Statistics Office (CSO) released the – National Accounts, Quarter 3, 2015 – data, which showed that real GDP had increased by 1.4 per cent over the last quarter while real GNP had declined by 0.8 per cent. On an annual basis, real GDP increased by 6.8 per cent in the September-quarter 2015 and real GN increased by 3.2 per cent over the same period. I’ll discuss the difference between GDP in GNP later but is clear that Ireland is in terms of real economic growth leading the Eurozone at present. In narrow terms, it is also clear that over the last two years the nation has recorded consistent growth. A question that is often asked is whether Ireland defies those who claim that austerity is flawed strategy. I get various E-mails along those lines, some polite, some rude. My answer to the polite ones is that it is difficult to hold out Ireland as an example of austerity-led growth. Ireland is, in fact, a rather strange Eurozone Member State, and is more firmly plugged in to the Anglo world than other Eurozone nations. It just happens, that while the Irish government was suppressing domestic demand through austerity from as early as 2009, significant trading partners (such as, Britain, the US and China) were maintaining expansionary fiscal positions, which allowed Ireland to resume growth. Further, a narrow focus on the growth cycle misses significant aspects of national prosperity. Even with two years of economic growth, real earnings growth is flat to negative, the rate of enforced deprivation remains around 30 per cent, and there is a rising proportion of people at risk of poverty. On top of that, net emigration of skilled workers continues, which means that the official unemployment rate is much lower than it would have been if these workers had not left the country.

I think the progressive side of politics has a real problem when it is increasingly gazumped in policy insights by politicians and/or commentators from the populist, xenophobic, racist, homophobic, far right-wing. Whether Finland’s Foreign Minister Timo Soini is all of those things or just nationalistic and far right (one of the members of his Finns party wants homosexuals and some foreigners rounded up and sent to some remote Baltic Sea island), he is certainly correct when he told the press yesterday that “Finland should never have signed up to the single currency union” and “could have resorted to devaluations had it not been for its Euro membership” (Source). Earlier this month (December 4, 2015), Statistics Finland published the latest National Accounts data for the third-quarter 2015, which showed that real GDP declined by 0.5 per cent in that quarter and by 0.2 per cent over the previous 12 months. In the past 12 months, both exports and imports declined by 3.4 per cent, the former signalling declining markets and the latter declining domestic income – both bad. Investment spending fell by 3.9 per cent in the year to September, which will further undermine the nation’s potential growth. It is now becoming the basket case of advanced Europe.

Today, the Australian Treasurer will release the so-called Mid-year Economic and Fiscal Outlook (MYEFO), which will reveal that the fiscal deficit has risen on the back of slower economic growth. I will comment about that and the reactions tomorrow, probably. Today’s blog is about the Eurozone, obviously one of my favourite research topics. There was an article in the UK Independent (December 14, 2015) by British economist Simon Wren-Lewis – Who is responsible for the eurozone crisis? The simple answer: Germany. The article largely avoids the question and chooses, instead, to focus on more contemporary influences which have magnified rather than caused the crisis. The article clearly blames Germany for the crisis and exonerates Greece, Ireland and Spain. However, I have argued in the past that France is largely responsible for the mess that Europe is in economically at present and it’s responsibility goes back decades before the Eurozone was even constructed. The causa causans of the Eurozone crisis is the essential design and construction of the Economic and Monetary Union (EMU), which was never going to be capable of operating in an effective manner. Germany set in train policies that would ensure they were insulated from the wreckage that the dysfunctional system would engender. Germany ‘gamed’ a dysfunctional system for its own advantage but they didn’t create that system and in that sense they are only a causa sine qua non, rather than the essential cause.