Options for Europe – Part 3

The title is my current working title for a book I am finalising over the next few months on the Eurozone. If all goes well (and it should) it will be published in both Italian and English by very well-known publishers. The publication date for the Italian edition is tentatively late April to early May 2014. The book will be about 180 pages long. Given the time constraints I plan to devote most of my blog time over the next 3 months to the production of the book. I will of-course break that pattern when there is a major data release and/or some influential person says something stupid or something sensible. I hope the daily additions will be of interest to you all. A lot has to be done! Because the drafting has to be tighter than the normal stream of consciousness that forms my usual blogs, the daily quotient is likely to be shorter.

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Options for Europe – Part 2

The title is my current working title for a book I am finalising over the next few months on the Eurozone. If all goes well (and it should) it will be published in both Italian and English by very well-known publishers. The publication date for the Italian edition is tentatively late April to early May 2014. The book will be about 180 pages long. Given the time constraints I plan to devote most of my blog time over the next 3 months to the production of the book. I will of-course break that pattern when there is a major data release and/or some influential person says something stupid or something sensible. I hope the daily additions will be of interest to you all. A lot has to be done! Because the drafting has to be tighter than the normal stream of consciousness that forms my usual blogs, the daily quotient is likely to be shorter.

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Options for Europe – Part 1

The title is my current working title for a book I am finalising over the next few months on the Eurozone. If all goes well (and it should) it will be published in both Italian and English by very well-known publishers. The publication date for the Italian edition is tentatively late April to early May 2014. The book will be about 180 pages long. Given the time constraints I plan to devote most of my blog time over the next 3 months to the production of the book. I will of-course break that pattern when there is a major data release and/or some influential person says something stupid or something sensible. I hope the daily additions will be of interest to you all. A lot has to be done! Because the drafting has to be tighter than the normal stream of consciousness that forms my usual blogs, the daily quotient is likely to be shorter. I also have some happy new year comments at the end today! But if you get bored before then – Happy New Year!

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The Euro is a spectacular success – growth down, unemployment up …

I am not doing much work today. But I was organising some snippets that I collected last week and I thought I would pass this one on – it doesn’t need much analysis – it is from the chief economist at the European Central Bank, Peter Praet who gave an – Interview with La Stampa – last weekend. While the interview was focused on Italy specifically, he presented the sort of message that we are used to getting from him and the ECB in general. A sort of warped triumphalism – extolling the success of the Euro and the role played by the ECB in achieving that success. And then, as is often the case, straying from the brief as a central banker and lecturing all and sundry on the need for more fiscal discipline (meaning increase the vandalism quotient)! It makes me laugh that when it suits them these central bankers cry that they should be independent from government but then at other times of convenience they assume they can use their “official independence” to lecture governments on how to behave. Anyway, Praet thinks the Eurozone is a big success and the policy makers have some “major” and “enormous achievements” under their belts. The interview was in English but not a dialect I understand.

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Nothing to sing about in Europe

The Euro crisis is over! The Euro crisis is over! I suppose if one says it loudly enough and often enough it might drown out what the data tells us. The most recent data – inflation slowing, real GDP growth slowing, no movement on unemployment – tells us that while the politicians have an incentive to talk up the situation and proclaim the crisis is over, the reality is different. The fact that the bureaucrats are now realising that Eurozone budgets in many nations are not going to come close to meeting the harsh (revised) Stability and Growth Pact requirements tells us that the policy structures in place are not delivering on their promise. When a 0.1 per cent growth rate is celebrated you know something is amiss – that is how far standards have dropped in a region that cannot deliver sustained prosperity to its citizens as long as it ties a massive anchor round its feet! The industrialists and elites talk continually of structural reform – which is code for cutting workers pay and rights and retrenching welfare systems for the disadvantaged, the major structural weakness stares them in the face – unnoticed. That structural weakness is the flawed design of the monetary union. Until that is addressed the situation will limp along, perhaps get a surge of growth here and there, until the next major negative demand shock hits from somewhere (like the US, or China) and then the whole drama begins again.

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Eurozone – what do they propose as an encore?

During the late 1980s and into the 90s when the Monetarists (mostly holed up in Britain) were boasting that the widespread privatisation and labour market deregulation strategies they had instigated were containing inflation and setting up their economies for sustained growth with reductions in unemployment my response was “what do they do they do for an encore”. It was obvious that if you scorched domestic demand and pushed up unemployment that the inflation rate would drop and the reduced imports would flatter the external balance. The question then was – what do you do next? Once growth returns in domestic demand rises on the back of increased income growth, imports start catching up and workers start demanding wage rises to make up for lost real income during the deflation and you end up with nothing much being achieved except for a extended period of lost real income, and rising inequality given the lower income groups carry the burden of the recession. The conservatives became slightly more astute in more recent years arguing that the recession provided the opportunity for nations to undergo radical restructuring so that growth could be driven by exports as a result of increased competitiveness. That’s the European model at the moment. Is it working? The IMF doesn’t think so.

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Eurozone nowhere near creating a truly federal structure

I have been trawling through the AMECO database for part of today as a means to learn more about what is happening in Europe as austerity continues into its fourth year for most nations. One of the neo-liberal mantras has been that the enduring crisis has been the result of major imbalances in current accounts (trade in goods and services and associated income flows) between the European nations. This reasoning implicates excessive wages growth in highly regulated labour markets, which also undermines the incentives for productivity growth (hence competitiveness declines and export markets shrink and imports become attractive). Alleged fiscal laxity is also implicated – excessive public employment growth, which apparently is less productive and encourages excess wages growth (stronger trade unions, better job protection). Taken together these claims are made about the peripheral Euro nations, which are in such trouble at present. This discussion has underpinned the policy push for austerity and largely denies the alternative view (which I largely adhere to) that the monetary union was ill conceived from day one and its design was incapable of resisting the major negative aggregate demand shock that arose in 2008. There was no federal fiscal capacity and no uniform banking rules. Any way, I am looking into some of the components of the first story – and examining what has been happening to unit labour costs. This blog reports the early stages of that work.

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Eurozone production and employment still going backwards

There are many pro-austerity commentators who have been pronouncing that the worst of the Eurozone crisis is over. Of-course, they follow these pronouncements with claims that improvement was all down to the austerity. I must live in another universe because my reading of the data tells me that austerity continues to weigh down growth and prosperity in the Eurozone as industrial production and employment fall. I have been updating my Eurozone databases today to reflect recent Eurostat data releases and this blog provides some insights into what the data is currently telling us. The message is consistent with my interpretation that recovery is still not occurring and a major policy reversal in favour of stimulus is desperately warranted. The data tells us that Eurozone production and employment still going backwards = 5 years after the crisis began.

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Fiscal deficits in Europe help to support growth

I read this article yesterday (published August 12, 2013) – The euro area needs a German miracle – among a group of articles that are concluding that things are on the improve in Europe. I expect a wave of articles which will be arguing that the harsh fiscal austerity has worked. I beg to differ. This article agrees that it is too early to “declare victory” because the austerity has to go further yet. My interpretation of that claim is that the author doesn’t think the ideological agenda to shift the balance of power away from workers has been completed yet. But the substantive point is that the fiscal austerity failed to promote growth and growth has only really shown its face again as the fiscal drag has been relaxed. This relaxation is much less than is required to underpin a sustained recovery at this stage but it is a step in the right direction. Governments, with ECB support, should now expand their deficits further and start eating into their massive pools of unemployment.

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Madness continues – macro conditionalities on regional transfers in Europe

When 17 countries together have failed to grow for the last 12 months and each successive quarter has seen the growth rate fall increasingly (-0.1 per cent June 2012, -0.7 per cent September 2012, -1.0 per cent December 2012 and -1.1 per cent March-quarter 2013) and the same 17 countries have seen the collective unemployment rate rise (or remain static) for the last 24 months from 9.9 per cent (May 2011) to 12.2 per cent (May 2013) when is it appropriate to conclude that the macroeconomic policy mix is wrong and substantial changes need to be implemented. Answer: Yesterday! Further, why would those same countries decide to implement further policy changes, which will not only make it harder to grow but go against the whole idea of the collective in the first place? Answer: Besotted by destructive neo-liberalism. Welcome to Europe and macroeconomic conditionality on regional funding.

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Ireland still located in the Irish Sea despite multibillion-euro austerity drive

I get several E-mails a month telling me to pull my head in that because, apparently, Ireland is clearly demonstrating my claims that fiscal austerity will kill growth and cause even higher unemployment is plainly wrong – “just look at the data” – is a regular claim by these phantom contact form types. Heroic indeed. They should have realised by now that I love to “look at the data” and are also circumspect about data that will be revised in the course of time. Last week (June 27, 2013), the Irish Central Statistics Office (CSO) released the March-quarter 2013 National Account estimates – GDP decreased 0.6% (Q1 2013 compared with Q1 2012) – which also revised the December-quarter real growth estimates down to show a contraction. That is three consecutive quarters of negative real GDP growth. That should demonstrate some 4.5 years into their fiscal austerity experiment that it isn’t working. Time for change. So, all you phantoms, save your comments until you have something to say that transcends your blind free market ideology. And perhaps, get a life.

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What part of the word failure don’t the Euro elite understand?

The – Eurostat homePage – today (May 1, 2012) told the story of policy failure. On April 30, 2013 there were two major data releases – Euro area unemployment rate at 12.1% and Euro area annual inflation down to 1.2%. Record unemployment and a contracting and very low inflation rate. That is recession. That is the average. Some nations are now experiencing the Great Depression Mark II. And still the policy leaders make public statements that things are easing because borrowing rates are down and fiscal consolidation is bringing deficits down. On May Day 2013 it would be appropriate for a major workers’ revolt throughout Europe to protest over the continued rise in unemployment and the failure of the elites to deal with it. The question that the riot could pose is: What part of the word failure do these leaders not understand?

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Differences on the Eurozone periphery

This will be one of those blogs that lays out what a researcher does in a day as opposed from the blogs I write that use what I do in a day as an evidence base for advocacy. The former type of blog is based on data digging and observing some interesting patterns. In the current context, the “digging” is not finished and so the story presented is incomplete. But if you have a penchant for statistics and data patterns like me, then you will find the following story interesting. This work is part of a larger work I am pursuing that considers the question of cyclical labour market adjustments. That will become a completed book in a few years (there are others in the queue ahead). But today I was examining the relative responses of real GDP and employment over the course of the economic cycle and some interesting patterns certainly emerged. What we find, among other things, is that the Eurozone nations on the periphery have behaved quite differently to each other over the crisis (and prior to the collapse).

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Eurozone policy makers destroying prosperity

In the last week, several major data releases have been published by Eurostat, culminating in yesterday’s release of the September unemployment which shows that the jobless rate has risen to its highest in the currency union’s history. There are now 18.49 million people in the Eurozone without work and that is the tip of the iceberg when it comes to assess the wasted production and lives that the fiscal austerity is creating. Just in the last month, a further 146,000 became unemployed. More than 25 per cent of available workers are unemployed in Greece and Spain. We have moved from describing this tragedy as a recession. This is now a full blown Depression of the scale of the 1930s travesty and, once again, its depth is a direct result of policy failure. All the indicators are coming together and providing an unambiguous verdict – that the Eurozone policy makers destroying prosperity and have relinquished any sense of capacity to govern, where that term means the capacity to advance public purpose and improve welfare.

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A lost generation in Europe is being deliberately created by the elites

I am “on the road” again today so short of time (as usual). But yesterday, Eurostat released the latest labour force data from the EU and the Eurozone for the month of August 2012. It showed that the labour market continues to deteriorate and youth unemployment in some countries is heading into unprecedented territory. I have examined various speeches that representatives of the Troika have made when discussing fiscal austerity over the last few years and I have failed to find any specific reference to the the labour market collapse. There is lots of talk about fiscal consolidation and the need to maintain confidence with the “investors” (the bond market recipients of corporate welfare). But very little focus on the real human tragedy – which is epitomised by the rising joblessness. There is a huge disconnect operating between the policy makers and the people. I saw something of the way the European policy makers live and interact during my recent trip to Brussels. They should get out more and travel to Greece and see what is happening on the street where there are now more than 55 per cent of the 15-24 year olds unemployed – and without very many future prospects.

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Why would any nation want to join the Eurozone?

The Wall Street Journal carried an article on Wednesday (September 12, 2012) – Latvia Remains Keen on Euro – which reported that the queue to enter the Eurozone remains healthy. I immediately asked why? There is a queue of nations (east and Baltic) who desire to join the Eurozone. The public debate in those countries must be so distorted by the elites for the public to go along with that. The very small gains that a nation might enjoy by joining the common currency (for example, lower transaction costs) will be dwarfed by the economic damage that membership will bring. Nations that join the Eurozone in its present structure are effectively signing a death warrant. The speed of the death will be a direct function of how competitive they are in relation to Germany. There is no case to be made for Latvia or any other nation to enter a monetary system that is incapable of effective functioning. Major changes would need to be made to the basic design of the system for it to be viable. I sense that there is no will in Europe to make the necessary changes and the zone will continue its slide down into further malaise. Why would any nation want to join the Eurozone?

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European Commission – Jobs for Europe Conference

I have been in Brussels this week as an invited speaker at the – Jobs for Europe: The Employment Policy Conference – being staged by the European Commission (September 6-7, 2012). One of the five main topics is “Pathways to full employment: job guarantee, social economy, welfare to work”. I gave a presentation yesterday on the Job Guarantee. The video of the presentation is available below.

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Europe is really having a lost decade

I am sick of reading about Europe’s lost decade. For example, in the UK Guardian article (July 27, 2012) – Spanish recession to last until 2014, IMF warns – the economics editor Larry Elliot says that the IMF is “Predicting a lost decade of growth for the eurozone’s fourth biggest economy”. The lost decade terminology emerged to describe the experience of Japan in the 1990s after its spectacularly damaging property crash. But I think it is offensive to use the term in relation to the Eurozone crisis. We are not seeing a lost decade emerge Japanese-style. Rather, we are witnessing a self-imposed humanitarian disaster driven by the ideological arrogance of the Euro elites (aided and abetted by the OECD and IMF). The experience of Japan in the 1990s was nothing compared to what these elites are doing in the name of neo-liberalism. Journalists should stop making the comparison and, instead, call the current crisis in Europe for what it is.

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Europe – one step forward … but so many backward

I am in transit most of today and so have very limited time to write. An ECB Executive Board member, one Jörg Asmussen, gave a speech at the European Policy Centre in Brussels on July 17, 2012 – Building deeper economic union: what to do and what to avoid – where he admitted that the European policy leaders “had made mistakes in the way economic policies and governance were managed inside the monetary union”. I thought that was an understatement but credit for the admission. However, his speech was then steered towards “how best to” strengthen “(p)olicies and governance” – “(w)hat to do and what to avoid”. When he mentioned that the “six pack” and the Fiscal Compact constituted “significant progress” towards what to do and what to avoid I concluded he hasn’t learned much at all from the huge mistakes that the policy elites in Europe have made. The suggestion for a fiscal union is definitely a step forward but the way in which this idea is being constructed represents several steps backwards. The Europeans seem intent on extinguishing their democracies.

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The Eurozone is both a spectacular failure and a spectacular success

One of the ways I judge whether an economy is working is whether it is able to provide enough work for those who desire it (both in number of jobs and hours of work). That is, an economy that generates purely frictional unemployment with underemployment eliminated. I know that there are many that think that emphasis is old-fashioned but those opinions are mostly provided by those that have secure, well-paid jobs. The latest Eurostat European Labour Force data, May 2012 shows that the policy framework in Europe is failing dramatically against my benchmark with the unemployment rate is now at its highest level in the Eurozone since the currency union began. I judge the Eurozone to be a failed “state”, in need of a dramatic change in policy approach. At the same time I consider it to be spectacularly successful. Time to explain …

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