European Union – Page 38 – William Mitchell

European Youth Guarantee audit exposes its (austerity) flaws

March 26, 2015
bill
European Union
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On Tuesday (March 24, 2015), the European Court of Auditors, which is the EU’s independent external auditor and aims to improve “EU financial management”, released a major report – EU Youth Guarantee: first steps taken but implementation risks ahead (3 mb). The Report reflects on the experience of the program which was introduced in April 2013. When the European Commission proposed the initiative I wrote that it was underfunded, poorly focused (on supply rather than demand – that is, job creation) and would fail within an overwhelming austerity environment. The Audit Report is more diplomatic as you would expect but comes up with findings that are not inconsistent with my initial assessment in 2012.

Syriza must stay left of the line – more is at stake than Greece

There were regional elections in the autonomous community of Andalusia (Spain) over the weekend which saw the Spanish Socialist Workers’ Party (PSOE) hold onto power. The results showed that the left-wing political party – Podemos – which received nearly 8 per cent of the Spanish vote (5 seats) at the European Parliament elections in May 2014, was third in the Anadulusian election, gaining 15 of the 109 seats. The parallels with Syriza in Greece are now routinely being made. I am forming the view, however, that unless things change rather dramatically in Greece, Syriza may actually end up only undermining progressive agendas in Europe as they self-destruct under the iron fist of the Troika (I do not use the terms “the institutions” or the “Brussels Group”). This is of great interest to me at present because I am sketching out a 2016 book project at present with a co-author, which broadly focuses on the demise of the left and social democratic movements in the World, although we might pare the scope down with more discussion to concentrate on Europe. Of particular interest is the morbid inferiority of the French left relative to the Germans in the Post World War II period and the way in which American Monetarism has infiltrated and built on that inferiority. Much of the design of the monetary union can be understood through that sort of lens. So a broad canvas right now but that is always the case. Of immediate interest, though, is the possibility that Syriza will set progressive causes back rather than become the spearhead for a sweeping change in Europe and the end of this destructive era of neo-liberalism.

March 23, 2015
bill
European Union
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The so-called ‘Informal European Council’ released a document on February 12, 2015 – Preparing for Next Steps on Better Economic Governance in the Euro Area: Analytical Note – which has been used as a background paper to batter the Greeks into submission in the latest round of the Eurozone crisis. It was published under the authorshop of Jean-Claude Juncker (President of the European Commission) with “close cooperation” with Donald Tusk (President of the European Council), Jeroen Dijsselbloem (President of the Eurogroup of Finance Ministers) and Mario Draghi (ECB boss). All that is missing is the Madame from the IMF to complete the Troika. This is a very dishonest document, deliberately framed to advance the austerity agenda and damage the living standards of some of the nations within the monetary union. It is hard how any serious economist would put their name to this sort of analysis.

March 17, 2015
bill
European Union
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There was an article published by a Spanish research group (aligned with the University of Navarro) last week (March 14, 2015) – Spain’s Labor Market grows more dynamic – that reports on a special survey (150,000 respondents in 800 Spanish firms) which purports to show that the “labour mobility maintained its upward march to reach 18.8 per cent in the second half of 2014”. That is, within the sample “nearly one in five workers changed jobs during the period”. The results are unable to confirm whether the increased mobility is the result of better “efficiency” in matching workers to jobs or “higher job insecurity or staff turnover linked to lower retention rates and less training for short-term hires”. There is a world of difference between these alternatives. They also find that job creation rates are still low and falling and only 1.5 per cent higher than job destruction rates leading to the conclusion that “job creation remains tenuous”. I decided to look at another source of data which can shed light on the state of the Spanish labour market – the so-called Gross Flows data, which tracks quarterly movements (in Spain’s case) between the major labour force categories – employment, unemployment and inactivity. The results do not suggest that the Spanish labour market has improved much.

US and Eurozone inflationary expectations diverge

Back in October 2009, the US unemployment rate had climbed to 10 per cent (its seasonally adjusted peak in the recent recession), the fiscal deficit was around $US1.4 trillion (9.8 per cent of GDP), which was the largest since the end of the Second World War (1945) 9.9 per cent of GDP and federal spending rose by 18 per cent with about 50 per cent going to bail out the banks. Meanwhile the US Federal Reserve ramped up its so-called quantitative easing (QE) program and its balance sheet expanded rapidly (as its purchase of government bonds accelerated). A lot of mainstream economists and conservative politicians at the time predicted an economic maelstrom – higher interest rates, an acceleration of inflation in the US and the inevitability of higher taxation. The trends in other nations were similar – higher deficits as the unemployment rates rose and the same shrill predictions of doom from the mainstream. None of the predictions came to be. But what is interesting is that the behaviour of long-term inflationary expectations in the US is now quite different to Europe. The most likely reason is that market participants now consider the drawn out recession and stagnation in the Eurozone to be the result of manifest policy failure and do not consider QE will do anything to alter that. In the US, the policy framework – fiscal stimulus to growth and benign QE appears to be more credible.

Friday lay day – Faut-il donc haïr l’Allemagne?

Its my Friday lay day blog where I plan to write less here and more elsewhere. Today, a brief discussion of two interesting articles that I read recently. The blog title – Faut-il donc haïr l’Allemagne? (must we hate Germany?) – was the question posed recently by the French economist – Jacques Sapir – as a reaction to the way Germany (particularly its Finance Minister) handled the Greek request for less austerity and more flexibility in the recent Eurogroup encounters. His February 20, 2015 article (in French) – Haïr l’Allemagne? – concludes that the actions of Angela Merkel and Wolfgang Schäuble towards Greece have “repeated the sins” (“Les péchés répétés”) of the past and opened up old wounds that will further undermine the democracy in Europe. Sapir concludes that “Alors, disons-le, cette Allemagne là est haïssable”. What does that mean?

Never impose austerity in a slump

In September 2013, when the current Conservative government took office in Australia we were told that “At last, the grown-ups are back in charge” (Source). It was the arrogance of the victors who also presumed a sort of divine right to rule as conservatives. They strutted around the media and public events claiming that now was the time to sort things out and to impose fiscal austerity. The economy was already slowing and unemployment had started to rise again as the Labor government had gone back to their now neo-liberal orthodoxy after the success of the fiscal stimulus in 2008 and started cutting into discretionary public spending. They lost office but left an economy that was faltering again and heading towards slump not boom. The conservatives took over with a mission to achieve a fiscal surplus and unleash private spending on the back of the confidence they claimed would accompany the fact that the ‘adults’ were back. They should have read John Maynard Keynes who worked out long ago that a government should never impose austerity in a slump. They didn’t and things have got worse. It was obvious they would. Keynes was right.

Greece goes back into depression – having never left it

Last Friday (March 6, 2015), Eurostat unveiled the latest – National Accounts estimates for the fourth-quarter 2014. All the Greek news this week will be about the – Letter – that the Greek Finance Minister sent to the president of the Eurogroup, in which he outlined 7 reform proposals. But it should be firmly focused on the fact that the Greek economy is back into depression having recorded two successive quarters of negative real GDP growth (despite the September-quarter data suggesting otherwise). The latest National Accounts data for Greece shows it contracted in the December-quarter 2012 significantly and the accompanying Labour Force data confirms that the unemployment rate is rising again and participation is falling. That is the disaster that the Eurogroup should be addressing. While they claim that internal devaluation will spawn growth through a burgeoning exports sector, the December-quarter 2014 data shows that exports contracted over the last three months of 2014. How long do the Greek people have to wait before the trade-led recovery nonsense is consigned to the nonsense bin?

Germany is not a model for Europe – it fails abroad and at home

Some time ago I wrote a blog – The German model is not workable for the Eurozone (February 3, 2012) where I outlined why Germany’s export-led growth strategy could not be a viable model for the rest of the Eurozone nations. More recent data shows that Germany is not even working very well in terms of advancing the prosperity of its own citizens. A recent report (in German) – Der Paritätische Gesamtverband (HG): Die zerklüftete Republik (The Fragmented Republic) – shows that poverty rates are rising in Germany and there is now a dislocation emerging between unemployment and growth and poverty rates. The reason is clear – too much neo-liberal labour market deregulation and ridiculously tight fiscal policy. Both failing policies that Germany continues to insist should be adopted throughout Europe. It would do the other Member States a service if they banded together and rejected the ‘German poverty model’.

Don’t mention the war! er the Troika …

“Don’t mention the war”! was a classic line from the episode – The Germans – in the comedy Fawlty Towers. Basil Fawlty implored his meagre staff to stay silent in case they offended some German tourists staying at his hotel. His attempt at self-censorship failed and led to hilarious consequences. I was reminded of the sketch (see it below) when I was reading the – Greek finance minister’s letter to the Eurogroup (February 24, 2015). Apparently, it is now a case of ‘Don’t mention the Troika’, ‘Don’t mention the Memorandum’ and never ever talk about the ‘Lenders’. The bullying threesome (European Commission, ECB and the IMF) are now known as “the institutions” and the “Memorandum” (the bailout package) is now to be called “The Agreement” and the “Lenders” have been recast as the “Partners”. Okay, and that is progress. The Reform package surely lets the Greeks choose which nasty policy they will implement but it is still nasty. Yes, it “buys them time”. The damage from massive unemployment and poverty eats into people every day. 4 months is a long time when you are on the street starving. And by the time this agreement is done – will the Germans be happy to unleash billions of euros via the European Investment Bank to allow the Greek government to continue running fiscal primary surpluses and keep pumping interest income on outstanding debt into ‘foreign’ coffers? Pigs might fly.