It seems that Greece is still in trouble with the Athens Stock Exchange share prices tumbling rather abruptly in recent weeks. In the last 6 days or so the Athens Stock Exchange Composite Index has plunged by around 19 per cent on the back of growing political tension and the strong likelihood that the pro-austerity, Troika surrender monkeys in power at present will be tossed out and a new dialogue with Europe will begin. The snap election call has spooked the markets it seems. But I have also been puzzling about (read: been deeply suspicious of) the growth narrative that is being peddled about Greece by the European Commission and the IMF. There remain unsolved puzzles about the third-quarter 2014 Greek national accounts data, which is another way of saying they don’t quite add up. It may be that the alleged real GDP growth of 0.7 per cent was a statistical artifact – the case of incomes falling less slowly than prices. The evidence certainly suggests that is the case. That is what this blog is about.

The European Commission released its – European Economic Forecast – Autumn 2014 – which is its bi-annual statement of economic outlook. In his editorial to the outlook, Director General Marco Buti admits that “euro area is still projected to have spare capacity in 2016”, which means the Commission is overseeing economic policy choices that will deliberately impose a recessionary bias for the next two years (at least) and deliberately force millions of Europeans to endure joblessness, savings erosion and the march towards poverty and despair for the next two years. Its a statement of monumental policy failure and the Director General Marco Buti should resign immediately just after he sacks his policy advisers.

The battlelines between the European Commission and France and Italy over the – Corrective arm – of the Stability and Growth Pact are firming up after the Italian Government publicly released a ‘strictly confidential’ letter from the Vice President of the European Commission – La lettera della Commissione Europea all’Italia – on the homePage of the Ministry of Economy and Finance late last week. The European Commission expressed hostility towards the Italian government hinting that there was a lack of trust involved. Nothing could be further from the truth. The fact is that the Commission wants to keep its dirty work away from the public eye because it knows that deliberately creating unemployment and poverty is not exactly an endorsement for its common currency model. But this little skirmish last week between the technocrats and the Italian government is just part of a war that is to come over the implementation of the Excessive Deficit Procedure in both France and soon, Italy. We have been here before – 2002-03 – but this time, Germany was in the trenches with France. Now it is playing the role of the enforcer. It all goes to show however, if we ever needed reminding what a sorry, failed enterprise the Eurozone actually is.

Eurostat’s recent publication (October 14, 2014) – Industrial production down by 1.8% in euro area – rightfully sends further alarm bells throughout policy makers in Europe, except I suppose Germany where denial seems to be rising as its industrial production levels fall to performance levels that the UK Guardian article (October 9, 2014) – Five charts that show Germany is heading into recession – described as being “shockingly poor”. The Eurostat data shows that industrial production fell by a 4.3 per cent – a very sharp dip in historical context for one month. Vladmimir Putin and ISIL are being blamed among other rather more oblique possible causes. But the reality is clear – the strongest economy in the Eurozone is now faltering under its own policy failures.

In the last week, several new data releases have shown that the Eurozone crisis is now consolidating in the core of Europe – France, Italy and … yes, Germany. The latter has forced nonsensical austerity on its trading partners in the monetary union. And, finally, the inevitable has happened. Germany’s factories are now in decline because the austerity-ravaged economies of Europe can no longer support the levels of imports from Germany that the latter relied on to maintain its growth and place it in a position to lecture and hector the other nations on wage and government spending cuts. The whole policy approach is a disaster and is exacerbating the flawed design of the euro monetary system. The leaders should find a way to dismantle the whole charade and allow nations to seek their own paths to prosperity with their own currencies. The German experiment has failed.

There was an article in UK Guardian last week (September 26, 2014) – Debt forgiveness could ease eurozone woes – which was interesting and showed how far the debate has come. The outgoing European Commissioner for Employment, Social Affairs and Inclusion, László Andor also gave a speech in Vienna yesterday – Basic European unemployment insurance: Countering divergences within the Economic and Monetary Union – which continued the theme from a different angle. While all these proposals will be positive rather than negative they essentially are not sufficient to solve the major shortcoming of the Eurozone – its design will always lead it to fail as a monetary system because they have not accepted that all citizens in each country have equal rights to avoid economic vulnerability in the face of asymmetric aggregate spending changes. That lack of acceptance means the political leaders will never create an effective federal fiscal capacity and the member nations will always be vulnerable to major recessions and wage deflation, which undermine living standards.