The so-called euro stability spawned banking system that caused havoc

In yesterday’s short blog post – Some Brexit dynamics while across the Channel Europe is in denial (January 2, 2019), I noted that various European Commission officials were boasting about how great the monetary union had been over the last 20 years. European Commission President Jean-Claude Juncker had the audacity (and delusion) to claim it had “delivered prosperity and protection to our citizens. it has become a symbol of unity, sovereignty and stability”. I think he was either drunk or in a parallel universe or both. I provided two graph (GDP growth and employment) to show how poorly performed the monetary union has been since its inception. Today, I want to bring to your attention a Bank of International Settlements (BIS) research report which categorically finds that the European banks during the pre-crisis period not only fuelled the massive boom in sub-prime loans and doomed-to-fail assets that were floating around at the time, but also “enabled the housing booms in Ireland and Spain”. Rather than the US banking system being primarily responsible for the pre-crash buildup of private debt, the European banks were also helping the “leveraging-up of US households”. The “European banks produced, not just invested in, US mortgage-backed securities”. This role is not well understood or recognised. And it was because the Single Market mentality of the neoliberal European Union which abandoned proper prudential oversight and regulation allowed it to happen. So much for “prosperity”, “protection” and “stability”.

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Some Brexit dynamics while across the Channel Europe is in denial

It is Wednesday and I am going to stick to my decision to ‘not publish a blog post’ on Wednesdays unless there is some new data (such as the quarterly release of the Australian National Accounts). I want to use this time to attend to other writing obligations. But a few snippets won’t hurt, will they? The first, looks at some extraordinary denial from the European Union bosses. The second, looks at evidence that the Brexit environment is already providing positive dynamics for British workers in low-wage areas of the labour market. And that is being presented by the Remainers as something negative! We move into 2019, just as we left 2018!

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More Brexit nonsense from the pro-European dreamers

What editorial control does the UK Guardian exercise on Op Ed pieces? Seemingly none if you read this article (December 24, 2018) – What Labour can learn about Brexit from California: think twice – written by some well-to-do American postgraduate working for DiEM25 in Athens. But when Thomas Fazi and I sought space to discuss our book – Reclaiming the State: A Progressive Vision of Sovereignty for a Post-Neoliberal World (Pluto Books, 2017) – or when I have sought space to provide some balance to the usual neoliberal, pro-Europe bias, the result has been no response (yay or nay). We never received a response to our solicitation. Even if we ignore the obvious imbalance in experience and qualifications (track record) of the respective ‘authors’, it seems that the UK Guardian only wants a particular view to be published even if the quality of that view would make the piece unpublishable in any respectable outlet. Go figure. Anyway, I now have read the worst article for 2018. And, I thought that the Remain debate had reached the depths of idiocy but there is obviously scope for more if this Guardian attempt at commentary is anything to go by. And I know the Guardian journalists read this blog – so why not allow Thomas and I to formally respond to all this Remain nonsense?

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IMF Euro hitman in denial of the reality that the monetary union has become

The IMF hitman in Europe, one Poul Thomsem recently published a European Money and Finance Forum (SUERF) Policy Note (October 2018) – A Financial Union for the Euro Area – where he basically told us that any changes that the IMF will allow to occur in the Eurozone architecture will be minimal and will not stop Member States “from being forced to undertake large pro-cyclical fiscal adjustments when the next shock or major downturn hits”. The term “large pro-cyclical fiscal adjustments” means harsh fiscal austerity at the same time as the non-government sector spending in those Member States is collapsing. Fiscal policy thus reinforces the non-government spending withdrawal and worsens the outcome for employment, growth, income generation etc. Why? Because “all member countries” must “respect the Stability and Growth Pact”. End of story. Welcome to the Eurozone dystopia – the world where governments must follow rules set by technocrats which are incapable of delivering sustained prosperity for all but clearly suit the top-end-of-town. He then waxed lyrical about a whole set of neoliberal financial market reforms that the IMF is proposing which will further diminish the capacity of the Member States. But, at that point, he just starts to dream. The Member States are already deeply suspicious of the financial reforms that have been introduced to date, ineffective as they are. They are not about to cede more power to Brussels and Frankfurt any time soon.

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Franco-German ‘agreement’ is another European dead-end

The latest ‘reform’ proposals from Europe might be taken as a sick joke if the players were not serious. On Sunday, November 18, 2018, the French President gave a speech at the traditional commemorative ceremony in the German Bundestag to mark the Volkstrauertag (National Day of Mourning), which has been part of German life since 1922 (originally to mark those who died during World War 1). His speech (Jacques Chirac was the last French president to address the Bundestag on June 27, 2000). His speech was two days after the respective finance ministers signed an ‘agreement’ to establish a “Eurozone budget”, which the French finance minister hailed as being a “major political breakthrough”. While that summation is questionable, it certainly is not a major economic breakthrough. It is a dud. As dud as all the reform proposals that have come before it. Just like the fake window dressing in Eniskillen in preparation for the G8 Summit in June 2013. Macron might have felt he was a big player on the world stage but the Germans have his measure as they have had of all French Presidents over the last several decades. The French really were the drivers of the Eurozone and they thought they were destined to restore their prominence in Europe. The Germans knew otherwise. And so it goes with the latest ‘agreement’. There is nothing in it that will save the Eurozone from crisis or restore sustained prosperity. Another European dead end.

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Eurozone fiscal rules bias nations to stagnation – exit is the remedy

It is Wednesday and I am doing the final corrections to our Macroeconomics textbook manuscript before it goes off to the ‘printers’ for publication in March 2019. It has been a long haul and I can say that writing a textbook is much harder than writing a monograph not only because the latter are more exciting in the drafting phase. The attention to detail in a textbook that runs over 600 pages is quite taxing. Anyway, that is taking my attention today. I also plan to write some more about Brexit in the coming weeks and Japan (tomorrow). But today, I have updated some ECB data on household and corporate borrowing and the cost of borrowing to see what sort of recovery is going on. With nations such as Germany now recording negative growth in the third-quarter, it is clear that the Eurozone is stalling again. The explanation doesn’t require any rocket science. It is all there in the behaviour of the non-government sector (saving more overall) and fiscal rules that are too tight to offset that saving desire. The reliance on monetary policy is an ineffective tool to provide the offset in non-government saving overall. Fiscal policy has to be reinstated to the primary position and that means nations such as Italy must consider exiting the dysfunctional monetary union that biases nations to recession and stagnation.

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EU Services Notification Directive will undermine democracy within cities

In a blog post last week – Financial services agreements – the EU as a neoliberal, corporatist project (November 13, 2018) – I wrote about the way the EU compromised the capacity of elected Member State governments to advance the well-being of their nations by the way they negotiate trade arrangements in services, particularly with respect to the financial services sector. For all those Europhiles that regularly deny the core agenda of the EU is to compromise democratic outcomes in favour of capital, that analysis, alone, should be sufficient to discourage those thoughts. Of course, that isn’t the only manifestation of this neoliberal, corporatist bias in the way the EU has developed over the last decades. I mostly conduct my analysis at the macroeconomic level but I am also interested (as my publication record demonstrates) in urban and regional analysis. At the level of the European city, the EU is behaving in the exactly the same way – to curb that ability of city authorities to render their cities favourable environments for the residents who live there.

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EU forecasts are notoriously poor

I am travelling most of today to distant climes. And it is Wednesday, my alleged shorter blog day. Apart from some scintillating music suggestions today, I foreshadowed in Monday’s blog post, which analysed the British national accounts, that I would make some statements about the EU forecasts released in their latest – European Economic Forecast. Autumn 2018 – (published November 8, 2018). The forecasts posited that the UK would be among the two worst performers for 2019 in terms of Real GDP growth, accompanied by the waning Italy. And within seconds of the forecasts being published, social media was a light with those opposed to Brexit, using the forecasts to claim that Brexit would be a disaster – again! Brexit may still turn out to be a disaster. But these forecasts should be treated with a grain of salt – they are ideological in nature and the forecasting performance of the EU has not been good.

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Financial services agreements – the EU as a neoliberal, corporatist project

I have been reading the new book by Costas Lapavitsas – ‘The Left Case Against the EU’ – which has been recently published. It is solid and clearly explains why the EU is not an institution or structure than anyone on the progressive Left should support or think is capable of reform any time soon. It has become a neoliberal, corporatist state and hierarchical in operation, with Germany at the apex bullying the weaker states into submission. Divergence in outcomes across the geographic spread is the norm. It is also the anathema of our concepts of democracy both in concept and operation. It is more like a cabal of elites who are unelected and, largely unaccountable. By giving their support to this monstrosity, the traditional Left political parties (social democrats, socialists etc) have been increasingly wiped out such is the anger of voters to what has become a massive coup by capital against labour. These are the themes that Thomas Fazi and I also explored in our recent book – Reclaiming the State: A Progressive Vision of Sovereignty for a Post-Neoliberal World (Pluto Books, 2017). I also just finished reading an interesting report – Financial Regulation challenged by European Trade Policy – published by the Veblen Institute and Finance Watch (October 2, 2018), which examines “the impact of European trade policy on financial regulation”. It is essential reading for those progressives who still think that Britain should remain in the EU. If they understand the research findings they would change their minds.

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Italy should lead the Member States out of the neoliberal Eurozone dystopia

The widely read German news site, Spiegel Online, published an amazing article last week (November 1, 2018) – Italy Doubles Down on Threat to Euro Stability – which confirms to me that very little progress has been within the Eurozone by way of cultural understandings since the GFC. That, in turn, tells me that the monetary union will not be able to get out of austerity gear and is now more exposed than ever to breakup when the next crisis comes. The current Italian situation is the European Commission’s worst nightmare. It could combine with the ECB and the IMF to bully Greece partly because of the size of the Greek economy but also because they had the measure of Tsipras and Syriza. They knew the polity would buckle and become agents for their neoliberal plans. But the politicians in Italy may turn out to be a different proposition – one hopes so. And Italy is a large economy and one of the original accessions to the Community. So the stakes are higher. But what the Commission is demanding of Italy in the present situation of zero economic growth and massive primary fiscal surpluses is totally irresponsible. It will not even achieve the stated Commission aims of reducing the public debt ratio. The likelihood is that the Commission’s strategy, if they succeed in bullying the Italian government into submission, will push the ratio up further. And meanwhile, Italy wallows in a sort of neoliberal dystopia. Italy should lead the other Member States out of this neoliberal disaster.

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Italy should prioritise an exit of the Eurozone madness

Last week, the Eurogroup met in Brussels and given all the Macron-Merkel buildup – see my blog post – The Meseberg Declaration – don’t hold your breath waiting (June 26, 2018) – the Europhiles were tweeting their heads off building themselves up into a ‘reform’ frenzy. If we were to believe half of it, then Germany was rolling over and about to agree to reforms that would put the Eurozone on a sound footing. Even progressive Europhile commentators held out hope of some big changes. Well not much happened did it. Like virtually nothing of any substance emerged from the meeting and matters were deferred (again) to December. Ho Hum! This is the European Union after all. At the same time, new voices encouraging an Italian exit appeared in the last week. Regular readers will know that in lieu of some unlikely turn of events in Europe where the elites about face and set in place effective reforms, I maintain that unilateral exit remains the superior option for an individual nation such as Greece or Italy. I am on the public record as arguing that given the size of the Italian economy in relation to the overall Eurozone economy, Italy should demonstrate leadership by finalising a negotiated exit with Brussels that minimises the damage for all parties. That would become the blueprint for other nations to regain their currency sovereignty and escape the Eurozone madness. Another voice joined that line in the last week.

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European-wide unemployment insurance proposals – more bunk!

The Europhiles have been tweeting their heads off in the last week or so thinking that the corner has been turned – by which they mean that Germany is about to get all cuddly with France and agree to fundamental shifts in thinking which will make the dysfunctional Economic and Monetary Union (EMU) finally workable, without the need for the ECB to break Treaty law by propping up the private bond markets. The most recent incarnation of the ‘saviour’ is a few words that the new German Finance Minister, Olaf ‘Wolfgang Schäuble'” Scholz said during an interview with Der Spiegel (June 8, 2018) – ‘Germany Has a Special Responsibility’ – about his support for a new unemployment insurance scheme for the Eurozone. It seems even the smallest things excite those who remain in denial about the long-term viability of the common currency. The proposal that Scholz was advancing has been out in the public debate for some years and is nothing like an effective solution to the terminal design flaws in the EMU. It is just an application of the same thinking that led to the creation of that flawed architecture in the first place and reinforces the conclusion that the main players in Eurozone policy setting have no intention of creating an effective federated monetary system. Just more of the same. Tomorrow, the tweets will be extolling the virtues of some other erroneous plan that some Europhile has come up with to save the system. And so it goes.

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The Europhile Left use Jacobin response to strengthen our Brexit case

Regular readers will recall that Thomas Fazi and I published an article in the Jacobin magazine (April 29, 2018) – Why the Left Should Embrace Brexit – which considered the Brexit issue and provided an up-to-date (with the data) case against the on-going hysteria that Britain is about to fall off some massive cliff as a result of its democratically-arrived at decision to exit the neoliberal contrivance that the European Union has become. There was an hysterical response on social media to the article, which I considered in this blog post a few days later – The Europhile Left loses the plot (May 1, 2018). In recent days, two British-based academics have provided a more thoughtful response in the Jacobin magazine (May 18, 2018) – Caution on “Lexit”. Here is a response which was co-written with Thomas. As a general observation, I noted some prominent progressive voices citing their attack on us enthusiastically, one even suggesting it landed “some good punches” after taking “a while to warm up”. Well, I can assure Andrew that my face (nor Thomas’s) was the slightest bit puffy after reading the critique.

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Die schwarze Null continues to haunt Europe

Last Tuesday (May 15, 2018), the new German Finance Minister Olaf Scholz stood up in the German Bundestag and delivered his first fiscal policy presentation. Not only was “die schwarze Null” (Black Zero) sustained but in his address, the new German Finance Minister made it clear that Germany would not entertain any expansion of the EU fiscal capacity (thus rejecting Emmanuel Macron’s proposals) and wanted to delay other ‘reforms’ that Germany had previously suggested they would support (beefing up the Single Resolution Fund and the creation of the European Monetary Union). For those Europhile progressives who have been hanging their hat on the hope that the takeover of the German Finance Ministry by the SPD would be the deal breaker that the Scholz’s presentation was nothing short of a disaster. He reiterated Germany would not be shifting in any major way and that Member States just had to buckle down and follow Germany’s fiscal example – surpluses as far as the eye can see. None of this was a surprise to me. It has been clear for some time that Scholz is just a continuation of Schäuble. Indeed some pointed statements from Bundestag politicians next day in their responses suggested just that.

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The Europhile Left loses the plot

Regular readers will know that I have delved into social psychology in the last decade or so as a way of educating myself on why ideas survive when their logical consistency is lacking and their empirical content is zero. I have gained a good understanding of this phenomenon by exploring the literature on patterned group behaviour and the work by Irving Janis in the early 1970s on Groupthink. While I usually demonstrate instances of this destructive group behaviour on the part of the Right, it is also clear that that the Europhile Left is riddled with the problem. To the point of not even valuing debate anymore. At the weekend (April 29, 2018), the excellent Jacobin magazine published an Op Ed piece by myself and Thomas Fazi – Why the Left Should Embrace Brexit – which considered the Brexit issue and provided an up-to-date (with the data) case against the on-going hysteria that Britain is about to fall off some massive cliff as a result of its democratically-arrived at decision to exit the neoliberal contrivance that the European Union has become. The article was rather moderate in fact and considered the on-going failure of the apocalyptic arguments that have been introduced against Brexit, both before and after the Referendum. But the social media response (negative) has been at elevated levels of hysteria. Inane claims. Groupthink in action. And it is why the progressive cause is such a push over by the organised Right.

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Forget European reform – the Germans have anyway

For readers who follow my Twitter account, you will be aware that occasionally I have have brief interchanges with various Europhiles who have an abiding faith in the capacity of the Eurozone to reform itself along progressive lines to make it resilient against economic cycles and capable of advancing the prosperity of all the citizens who share the currency. They were particularly incensed when my latest book – Reclaiming the State: A Progressive Vision of Sovereignty for a Post-Neoliberal World with Thomas Fazi was published in September last year. Our argument has always been that Germany is Germany and as such there is little hope that the basic flaws in the EMU will be resolved any time soon. Well in the last week, the Europhile bubble has been well and truly pricked by the decision of new German finance minister Scholz to retain the hard-line order-liberal Ludget Schuknecht as the chief economist in the Finance Ministry. Signal: nothing is going to change in the EMU that matters.

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The facts suggest Britain is not as reliant on EU as the Remain camp claim

I have been doing some analysis of British and European Trade patterns over the Post World War 2 period. They reveal some very interesting insights that are seemingly lost in the on-going war by Europhiles against Brexit. One of the recurring themes in the Brexit debate is the so-called importance of membership of the European Union to on-going prosperity of Britain through trade. What the data reveals is that British exports growth did not accelerate with accession to the EU in 1973 and after the introduction of the ‘Single Market’, British exports to the EU started to level off and then decline rather sharply. In other words, Britain has been diversifying its exports and is less reliant on the EU than it was say in the early 1990s. The data also shows that the creation of the Single Market hasn’t even boosted intra-EU or intra-Eurozone trade. Additionally, and laterally, the data suggests that the introduction of the euro has not expanded intra-EMU trade. The claims by the Euro-elites that it would were a major part of their justification for pushing through to the common currency. I consider this sort of evidence has been largely ignored by those in the Remain camp, who prefer to base their assertions on the highly questionable ‘forecasts’ coming from neoliberal-inspired ‘models’, which have so far demonstrated an appalling record of accordance with the facts. The data I have shown here doesn’t provide an open and shut case for Brexit. But it does show that the importance of EU membership to Britain’s prosperity is probably overstated and that Britain will prosper if its own policy settings are appropriate.

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Latest Europhile advocacy beggars belief – surrender sovereignty to regain it

Today, I have a lot of travelling coming up. So time is tight. Regular readers will know my views on the Eurozone. I have held those views since the late 1980s when I was a young lecturer. Nothing has changed to change my opinion. It is an unmitigated disaster. And, in the face of all evidence to the contrary, the Europhiles on the Left and the Right continue to put out propaganda trying to defend their monstrosity. Here is a selection of the latest input from the elites on how the EU is the salvation of democracy and sovereignty and yet Eurozone Member States are to be treated like high risk car drivers – paying more for a pittance of fiscal protection from the technocrats. It really beggars belief.

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Neoliberal economic Groupthink alive and well in Europe

It is Wednesday so only a couple of snippets today. I was going to write about the BBC’s ridiculous attempt to portray Jeremy Corbyn as a sort of Russian-spy-type-dude in its Newsnight segment last Thursday (March 15, 2018). They manipulated his peaked hat (via Photoshop or through lighting) to make it look like a typical Lenin-type “Soviet stooge” hat and presented him against a red Kremlin skyline of Red Square (Source). The BBC denied they had altered the hat but then admitted the BBCs “excellent,hardworking) graphics team … had the contrast increased & … colour treated) but it was only accidental (not!) that he was made to look as Leninesque as possible. Amazing how deep the anti-neoliberal Groupthink has penetrated. This is the public broadcaster! But Groupthink is alive and well in Europe and doing its best to pervert, distort, stifle and suppress debate on important matters relating to democratic freedoms and the failure of the EU.

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