A recent twitter exchange with some Europhiles who believe that it is better to wait for some, as yet unspecified, incremental reform process for the Eurozone rather than precipitate exit and the restoration of currency sovereignty was summed up for me by one of the tweets from Andrew Watt. In trying to defend the abandonment of sovereignty and make a case for continuing with the so-called reform dialogue, he wrote (October 27, 2017): “Unemployment in “periphery” was v hi before €. Fell rapidly. Then rose sharply, has now fallen somewhat. So picture very mixed.” I found that a deeply offensive claim to make and responded: “It is not a mixed picture at all. Youth unemployment has never been as high. Greek unemployment was never > 12%. Now > 20% indefinitely.” I also attached a graph (see over). I think this little exchange captures the essence of the delusion among many in the Left that we document in our new book – Reclaiming the State: A Progressive Vision of Sovereignty for a Post-Neoliberal World (Pluto Books, 2017). The Europhiles maintain a blind faith in what they claim to be a reform process, which when carried through will reduce some of the acknowledged shortcomings (I would say disastrously terminal design flaws). They don’t put any time dimension on this ‘process’ but claim it is an on-going dialogue and we should sit tight and wait for it to deliver. Apparently waiting for ‘pigs to fly’ is a better strategy than dealing with the basic problems that this failed system has created. I think otherwise. The human disaster that the Eurozone has created impacts daily on peoples’ lives. It is entrenching long-term costs where a whole generation of Europeans has been denied the chance to work. That will reverberate for the rest of their lives and create dysfunctional outcomes no matter what ‘reforms’ are introduced. The damage is already done and remedies are desperately needed now. The so-called ‘reforms’ to date have been pathetic (think: banking union) and do not redress the flawed design. And to put a finer point on it: Germany will never allow sufficient changes to be made to render the EMU a functioning and effective federation. The Europhile Left is deluded if it thinks otherwise.

There was an interesting article (July 18, 2017) – The Political Fiction of Economic Control – that has, seemingly, been the motivation for people sending me heaps of E-mails, some, demanding that I admit that Modern Monetary Theory (MMT) is bereft in this specific area of discussion. The article was allegedly written by a Polish journalist with a past that included working at the “Adam Smith Research Centre”, a ‘free market (not!)’ think tank in Warsaw, and a Hungarian economist Lajos Bokros who was formally a Socialist Minister of Finance from 1995 to 1996. But there is a lot of first person in the article (I’m, My, I etc) and only Bokros’ picture and bio is featured. Bokros is best-known for implementing the controversial Bokros Package, which was a “a series of austerity measures” described as “neoliberal shock therapy” based on the erroneous assumption that the Hungarian government would run out of money and have to declare bankruptcy. So it is no surprise that these characters (or Bokros, if he really wrote the article) would support the Eurozone and claim that surrendering a national currency in the case of Hungary and Poland was inevitable if these nations were to progress. The arguments used to make their case, reappear over and over again. They are always incorrect no matter what form they appear.

On May 11, 2017, the European Central Bank (ECB) released its third Economic Bulletin for the year, the release date comes two weeks after each of their monetary policy meetings. In Issue 3, there is some interesting analysis on both the state of youth unemployment and the degree of labour market slack in the Eurozone. It doesn’t paint a very rosy picture despite the constant claims that the Eurozone is recovering well. The reality is that while the official unemployment rate is bad enough (still above the pre-crisis level and stuck at around 9.5 per cent), the broader measures of labour slack indicate that around 18.5 per cent (at least) of the productive labour resources in the Eurozone are lying idle in one form or another. The broad slack has also risen during the crisis in most nations – particularly underemployment. In other words, the Eurozone remains in much worse shape than some official statistics might suggest. And we are nearly a decade into the crisis (and so-called ‘recovery’).

It is fiscal statement (aka ‘budget’) frenzy in Australia at present, with the Treasurer about to bring down the annual policy strategy tonight. There is so much claptrap in the press and electronic media that I have tried to avoid saying anything about it. I may stick to that. I have been trying to understand the French election results though. That has occupied my attention a bit given the success of Macron (where a record number of voters stayed away and he barely scraped through the first round). He will be proven to be duplicitious I think. He is a Eurocentric neo-liberal who is anti-union, largely, anti-regulation and state intervention and believes the ‘market’ and an incentivised middle-class will do the trick for France. He is caught up in the Europe thing and so cannot see that the Eurozone straitjacket will ensure a growing underclass is retained. There was some interesting research published by a private investment bank (BOAML) – Job Quality and Escape Velocity – which provides a rather sombre view of the much-touted Eurozone ‘recovery’ over the last three years.

One of the various smokescreens that were erected by the European Commission and the bevy of economists that it either paid or were ideologically aligned to justify the design of the monetary union around the time of the Maastricht process was the concept of subsidiarity. In 1993, the Centre for Economic Policy Research (a European-based research confederation) published its Annual Report – Making Sense of Subsidiarity: How Much Centralization for Europe? – which attempted to justify (ex post) the decisions imported from the 1989 Delors Report into the Maastricht Treaty that eschewed the creation of a federal fiscal capacity. It was one of many reports at the time by pro-Maastricht economists that influenced the political process and pushed the European nations on their inevitable journey to the edge of the ‘plank’ – teetering on the edge of destruction and being saved only because the European Central Bank has violated the spirit of the restrictions that a misapplication of the subsidiarity principle had created. It is interesting to reflect on these earlier reports. We find that the important issues they ignored remain the central issues today and predicate against the monetary union ever being a success.

On March 24, 2017, the Portuguese government (via Instituto Nacional de Estatística or Statistics Portugal) sent Eurostat its – Excessive Deficit Procedure (1st Notification) – 2017 – which is part of the formal process of the EU surveillance on the fiscal policy outcomes for Member States. The data submitted to the EU showed that the Government had reduced its fiscal deficit from 4.4 per cent in 2015 to 2.1 per cent in 2016, thus bringing it within the Stability and Growth Pact rules (below 3 per cent). However its public debt to GDP ratio rose modestly over that time from 129 per cent to 130.4 per cent. The other stunning fact presented, which hasn’t received much attention in the media, was that government spending on gross fixed capital formation fell from 4,049.3 million euros in 2015 to 2,879.6 million euros in 2016, a 29 per cent decline. Further, real GDP growth has been positive for the several quarters now and this has boosted tax revenue. The popular press has been claiming this is a Keynesian miracle – spawning growth and cutting the fiscal deficit. There is some truth to the statement that the ‘Socialist’ government has reversed some of the worst austerity policies introduced by the previous right-wing government, acting as puppets of the Troika. But what has been going on in Portugal highlights the myopia inherent in the restrictive Eurozone fiscal rules, which promote very short-term behaviour on the part of the Member State governments. As Portugal is currently demonstrating, it is prepared (and is motivated by the fiscal rules) to sacrifice sustained prosperity for short-term appeasement of Brussels. Short-term growth can occur within limits at the expense of long-run potential.