We had news this week that the annual rate of real GDP growth in Greece is finally positive after two quarters of positive growth. The austerity merchants are out in force congratulating themselves on a victory. Some victory. What the official data doesn’t publish are the long-term implications of the Depression that Greece has been locked in for the last six years. I look at that question in this blog (a little). Further, despite the claims by the European Commission and the lackies that it relies on to spread its distorted economic news that Greece has achieved a primary fiscal surplus, nothing is further from the truth. The fact is that the Greek fiscal deficit expanded considerably last year and despite all the austerity is still pumping public euros into the Greek economy and therefore supporting growth. The slight return to growth is not a victory for fiscal austerity but a demonstration that if large deficits are maintained for long enough growth will eventually rear its head.

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.

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.