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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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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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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Why the Eurozone is destined to fail

Last night I gave a keynote presentation in Melbourne at the – Can the Eurozone survive its Crisis? – which is hosted by the Monash University European Union Centre. The event was well attended and the chaired by the Ambassador and Head of Delegation of the European Union to Australia and New Zealand David Daly. He closed the night by saying that we shouldn’t judge the Eurozone because it is a “work in progress” and the elites are on the case. The question of-course, is – how long must the millions of unemployed and disadvantaged wait? How many more well-catered for Summits in Brussels must the citizens tolerate? The discussant for my paper was a free market self-confessed right-winger who ended up agreeing that the Eurozone is doomed. Along the way he demonstrated a lack of understanding of basic economics and eventually had to raise Weimar as his major attack on government spending. Apparently, he also thought full employment was undesirable. A picture of Von Hayek appeared at one point. The other panel member was Dr Natalie Doyle who is currently acting as the Head of the Centre and an authority on European culture and politics. I have been travelling today and so have had little time to write. But I thought I would just share a few things with you that arose from last night’s seminar.

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The UK government in a race with the Eurozone to ruin their economies

I am in Darwin today – right in the North of Australia. This is the frontier of Australia and merges our nation with Asia to the north. The dry season has just started and so the tropical weather today is glorious – warm and sunny and dry! It is a 6 hour flight from Newcastle and a remote part of our nation despite Darwin being one of our capital cities. But the world is not very far away from anywhere these days in terms of information access and so it is hard to avoid reading the latest data from around the world and analysing it. The news from Europe over the last 24 hours is shocking and the responses by leading politicians is worse. Just as the British Office of National Statistics was announcing that the UK has achieved a double-dip recession for the first time since the 1970s – an achievement that the Government will no doubt erroneously claim is the work of others – Bloomberg published a story (April 25, 2012) – Merkel Pushes Back Against Hollande Call to End Austerity Drive which tells you how far out of touch with reality the Euro leadership is. The UK government is working as hard as it can to undermine its own economy so it can catch up with the Eurozone economies in the race to the bottom of the slime. It beggars belief really. When will the citizens revolt?

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The Eurozone has failed – time for an orderly retreat

The voice from the parallel universe announced that “The euro as a currency is a great success indeed … it is backed by remarkable fundamentals” and harsh fiscal austerity is “the best way to get sustainable growth and job creation”. The only problem is that the voice was none other than the retiring ECB boss Jean-Claude Trichet as he prepared to retire from his post in October 2011. During his term, Trichet was constantly preaching how the introduction of the Euro was a “success”. The only problem is that it is hard to reconcile that conclusion with an examination of the actual data. The Eurozone has failed and an orderly dismantling of the entire monetary system with a return to floating sovereign currencies is the only way that any semblance of prosperity will return.

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The German model is not workable for the Eurozone

I had an interesting meeting in Melbourne yesterday and the topic of the discussion, among other things, was the propensity of the current economic malaise in Europe to invoke associations with its historical past – in particular, the rise of the ugly German. In my blog earlier this week (January 30, 2012) – Greece to leave the Eurozone and become a German colony – one might have been tempted to conclude that I was invoking memories of the Germany’s annexation of Austria (the Anschluss). I even used the word Teutonic – a rather old-fashioned term for Germanic peoples (broadly) – in the phrase “My how audacious our Teutonic friends have become!”. This was in a discussion about the leaked German document which urged the EU Summit on Monday to effectively put Greece into receivership. But in fact, what I have been at pains to bring to the public debate is not an urging that we construct the current nasty statements from German politicians and its press about lazy Greeks etc in terms of these historical enmities but rather see them for what they really are – deeply flawed macroeconomic reasoning. A thorough understanding of macroeconomics would lead to the conclusion that the German model is not workable for the Eurozone. It will not help Germany nor anyone else. It is a deeply flawed economic doctrine that reflects the same neo-liberal ideology that led to the the original design of the European Monetary Union. Whether the “ugly German” is also implicated is another question altogether.

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Greece to leave the Eurozone and become a German colony

The Euro leaders are having another Summit in Brussels today – another one – the 17th in two years. I think they are getting used to the nice wine and sumptuous food that is served up. Little ever comes from these summits that is of any productive import. This time they plan to set in concrete balanced budget rules to be embedded into the national legislation of EU member states yet at the same time propose job creation and growth strategy. The job creation strategy is allegedly going to focus on the youth of Europe who are becoming unemployed and excluded in increasing numbers as time goes by. The lunacy is that Europe’s youth started losing their jobs some years ago yet the leaders are now expressing concern. Also over the weekend, there was a leaked German proposal for today’s summit detailing how Greece should leave the Eurozone and become a German colony. My how audacious our Teutonic friends have become!

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The Eurozone failed from day one

The current Eurozone crisis is getting worse and has concentrated our minds on the most recent period of European history. As in all these situations where focus is very immediate our memories get a little blurred and we are inclined to accept propositions that closer analysis of the data suggest do not hold water. January 1 was the tenth anniversary of the date when Euro notes and coins began to circulate. It had of-course been operating since January 1, 1999 but only in a non-physical form (electronic transfers etc). If you believe the rhetoric from the Euro bosses in the first several years of the Euro history and didn’t know anything else you would be excused for thinking that it was a spectacular success. The Celtic Tiger, the Spanish miracle, the unprecedented price stability and all the rest of it. But the reality is a little different to the hype. The fact is that the common currency did not deliver the dividends that were expected or touted by the leaders leading up to the crisis. All the so-called gains that the pro-Euro lobby claim were in actual fact a sign of the failure of the design of the union although it took the crisis to expose these terminal weaknesses for all to see. My view is that the Euro was failing from day one and it would be better to disband it as a failed experiment that has caused untold damage to the human dimension.

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Bailouts will not save the Eurozone

We are back onto Greece again today as the crisis deepens. Overnight Spain is appearing to be under bond market pressure and the Germans are calling for even harsher fiscal rules to be applied to keep member states “solvent”. The point is that none of the remedies being proposed will ultimately work. What is needed in the Eurozone is a major boost to aggregate demand. However, the policy direction is to further undermine spending in the member economies as austerity measures are being imposed throughout. This foolish reverence of the Stability and Growth Pact will worsen things. The problem in the EMU is that the basic design of its monetary system is flawed and the accompanying fiscal rules only accentuate those design flaws. None of the remedies being proposed by Euro leaders will work and the bailouts will not save the Eurozone. It has to fundamentally redesign its system or disband.

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The dysfunctional logic of the Eurozone and its downward spiral

A brief blog about the Eurozone today given I am travelling later on in the morning (Thursday, US time). Events in recent days are further exposing the absurd logic inherent in the design of the monetary system arrangements that the EMU member nations signed up for. The sovereign debt crisis that has so far be confined to Greece is now spreading to other member nations (Portugal and Spain). Further, the concerns over sovereign risk are now spreading into the commerical banking system and the logical extension of that are bank runs and a closure of the entire payments system. The reluctance to provide any EMU support for the beleagured Greece and the posturing by Germany is now being overtaken by these events in recent days. The initial “bailout” offer to Greece that took so long for the EMU bosses to make – given it rendered their claims to have constructed a stable sustainable monetary system absurd – now pales into insignificance. Much more support will be required and soon. But even that will not solve the structural flaws in their system. They would be better just abandoning it and maintaining political ties to stop them invading each other. After all, it was the tensions after the Second World War that have, in no small part, driven these flawed attempts at union anyway.

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Towards a progressive rebuttal of the far Right narratives

I saw a clip from John Stewart’s Daily Show yesterday where he showed some Fox News commentators (I think) talking about how they hate ‘woke’ and how they now have to put up with public events featuring “half naked men” (their slight against the gay community). Stewart then showed the next clip – the cage fight at the White House where two half naked men were featured. The way he presented it was (as usual for the show) very funny. Yesterday (June 17, 2026), the leader of the far Right party in Australia (One Nation) gave her first ever – Speech – to the National Press Club in Canberra and apart from several outrageous statements (such as “Businesses also tell me you can’t sack people these days, they’re on their phones, they don’t work, they don’t turn up, they actually are lazy” and the “hoax of global warming”), she announced that Australia cannot be a multicultural society and that “we must be monocultural”. The fact checkers have already exposed her lack of honesty with respect to the actual data surrounding many of her assertions. But the question of culture and national cohesiveness is a subject that I am working on as part of my aim to publish a sequel to my 2017 book – Reclaiming the State: A Progressive Vision of Sovereignty for a Post-Neoliberal World – which I co-authored with Thomas Fazi. The question that the sequel begins with relates to what defines a viable currency area and what legitimates government fiscal policy. I see this issue as a central extension of the work on Modern Monetary Theory (MMT) because it provides a sociological basis for currency sovereignty. One needs to develop a concept of the – Demos – to answer that question. I use that concept in the original sense.

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Interest rate hikes will not get ships moving through the Strait of Hormuz more quickly

Regular readers will know that I hate the term NAIRU – or Non-Accelerating-Inflation-Rate-of-Unemployment – which is a concoction invented by mainstream economists to maintain unemployment at elevated levels (to keep the working class in its place) and give cover to central banks to run monetary policies that redistribute income from poor to rich. If you search through my archives you will find many posts about this abomination. I am guessing with all the supply disruptions at present as a result of the illegal invasion of Iran, central bankers will start claiming interest rates will have to rise to curb the inflation. They will dress these claims up in some economic sophistry and the official speak will talk about NAIRUs and excessive demand pressures. Yet, in reality, there is no such justification. The rate rises will not get ships moving through the Strait of Hormuz more quickly, just as they did not get factories back to work during the early COVID period. Here is some analysis to support my point.

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My current number one candidate for the worst economics article of the year

Unfortunately, the so-called progressive UK Guardian has an Australian economics editor who is anything but if his economic analysis is anything to go by. The economic news for this week started with the release of the – Final Budget Outcome – (FBO) for the 2024-25 fiscal year for the Federal government (released September 29, 2025). It showed the actual fiscal deficit for the year just gone was slightly lower than had been predicted in earlier official statements. The government celebrated claiming a lower deficit was a sign not only of its good management but was also virtuous. The journalists, however, had a different spin, claiming that while the situation could have been worse, it was still bad. The discussion in the media and the official statement from the Treasurer seemed to omit one rather important fact. The context. This allows us to understand the distinction between ‘good’ and ‘bad’ fiscal deficits, a distinction that the commentariat seems unable to grasp. Anyway, this UK Guardian article is my current number one candidate for the worst economics article of the year. Why discuss it? Because it helps illustrate the essentials of macroeconomics that people need to understand.

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What does it mean for a nation to become bankrupt?

The reason I ask that question is because I read in the UK Guardian article yesterday (published August 11, 2025) – As dark financial clouds gather, Labour has to heed its past: when it chooses austerity, it loses elections – that “Britain is in danger of going bankrupt. It may happen slowly or quickly, but since Labour took office this possibility has increasingly been promoted and discussed in the press, by opposition parties and in the City of London”. And when the author of that article poses his own question: “What exact form will this bankruptcy take?” – he offers the rather tepid response that it will happen because the government is “spending too much, generally on people who have little”, which offers nothing by way of clarification or definitiveness. So it is useful to interrogate the notion of a nation going broke. Can it happen? Can Britain become insolvent?

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The British government’s obsession with the fiscal rules is driving the economy towards recession

The UK economy is heading into a malaise. The latest news – UK construction activity in July falls at steepest rate since Covid (August 6, 2025) – and – UK services sector has biggest fall in orders for nearly three years (August 5, 2025) – confirms that there is a slowdown underway. That was prefaced by rising unemployment and falling overall GDP growth in previous data releases. However, when we examine statements coming from the Labour government, the Prime Minister is hinting that there might be tax rises in the Autumn Statement because a neoliberal oriented ‘think tank’ has told it that there is a £40 billion gap in the fiscal outcomes, which will breach the self-imposed limits specified in their fiscal rules. So the Government is contemplating more austerity and contractionary policy at a time when private spending is subdued and the economy is going backwards. It just demonstrates how the obsession with these fiscal rules grossly distorts fiscal decision making and focuses government eyes on all the wrong things. I am still amazed when I think how stupid we all have become for thinking that any of the stuff is acceptable.

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US cars don’t sell in Japan because they are inferior and ill-suited to the market

It’s obviously becoming difficult to keep track of where the US government policy is on any particular day. Last week, it was ‘Liberation Day’, which included tariffs being imposed on remote penguin colonies in the back of nowhere, then Musk labelling the Trump’s trade adviser ‘dumber than a sack of bricks’, then tariffs on Chinese goods rising to 124 per cent (which will make then uncompetitive), then the ‘pause’ on reciprocal tariffs beyond the 10 per cent level … what will be next. These shifts and decisions are not exactly benign and the US Administration is displaying the sort of incompetence, capriciousness, flippancy – whatever you want to call it – that hardly befits the largest economic nation in the globe which has its tentacles spread far and wide. I was particularly interested though in the now infamous ‘Rose Garden Liberation Day’ speech Trump made last week (April 2, 2025) where he made claims about Japan, which were used to justify the imposition of 24 per cent tariffs on that nation. According to the President, Japan is among a host of countries that have “looted, pillaged, raped and plundered” the US. His evidence? None is available. The reality is that US cars don’t sell in Japan because they are inferior and ill-suited to the market. We explore that theme in this blog post.

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The Far Right opposition to the euro in Germany has nothing to do with MMT

Edward Elgar, my sometime publisher, is interested in me updating my 2015 book – Eurozone Dystopia: Groupthink and Denial on a Grand Scale (published May 2015). I have held them off for a few years because there have been notable developments such as Brexit, COVID-19, and more since I finished that work, which are still playing out and difficult to disentangle in such a way that definitive analysis can be made. One of the striking things about Europe, from my perspective, is that voters appear to have separated the growing economic stagnation and the insecurity it brings from their view of the euro as a currency. The most recent – Standard Eurobarometer Survey 102 (conducted in November 2024) – conducted by the EU itself, “has registered the highest support ever for the common currency, both in the EU as a whole (74%) and in the euro area (81%)”. (85 per cent support in Germany and 76 per cent in France). Given the circumstances that is a pretty stunning result. And more respondents thought the EU economy was ‘good’ than those who thought it was ‘bad’, although in Germany and France, the outlook in that regard is highly pessimistic (40 per cent good Germany, 29 per cent France). Yet, the Far Right party in Germany – Alternative für Deutschland (AfD) – which as a result of the national election on February 25, 2025 gained the second highest number of votes (20.8 per cent of total) and improved its voting outcome by a staggering 10.4 per cent. Interestingly, from my perspective, AfD is now the leading voice in Europe against the euro, while other Far Rights voices are no longer (Rassemblement National) or never have (Fratelli) advocated abandoning the euro in favour of a return to national currency sovereignty. So while most Germans like the euro, more are voting for AfD who want it scrapped. That tension is what I am researching at the moment among other things.

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ECB should take over and repay all the joint debt held by the European Commission after the pandemic

There are repeating episodes in world macroeconomics that demonstrate the absurdity of the mainstream way of thinking. One, obviously is the recurring debt ceiling charade in the US, where over a period of months, the various parties make threats and pretend they will close the government down by failing to pass the bill. Others think up what they think are ingenious solutions (like the so-called trillion dollar coin), which just gives the stupidity oxygen. Another example is the European Union ‘budget’ deliberations which involve excruciating, drawn out negotiations, which are now in train in Europe. One of the controversial bargaining aspects as the Member States negotiate a new 7-year deal is the rather significant quantity of joint EU debt that was issued during the pandemic to help nations through the crisis. How that is repaid is causing grief and leading to rather ridiculous suggestions of further austerity cuts and more. My suggestion to cut through all this nonsense is that the ECB takes over the debt and insulates the Member States from repayment. After all, the debt wasn’t issued because the Member States were pursuing irresponsible and profligate fiscal strategies.

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