{"id":12176,"date":"2010-11-02T17:48:53","date_gmt":"2010-11-02T06:48:53","guid":{"rendered":"https:\/\/billmitchell.org\/blog\/?p=12176"},"modified":"2010-11-02T17:48:53","modified_gmt":"2010-11-02T06:48:53","slug":"the-euro-bosses-ignore-all-the-lessons","status":"publish","type":"post","link":"https:\/\/billmitchell.org\/blog\/?p=12176","title":{"rendered":"The Euro bosses ignore all the lessons"},"content":{"rendered":"

\t\t\t\tI was thinking about the recent European Council meeting today which was held in Brussels over the weekend. It is clear that the Eurozone bosses are choosing to ignore all the lessons that the current crisis has provided to them about the basic design flaws of their monetary system. They think the solution to their problems is to make it even harder for member governments to provide net spending to their economies at times of stress. They fail to articulate the most basic macroeconomic fact that confronts them – unemployment is rising across the zone and production generally is stagnant because there is not enough demand for sales of goods and services. If the private sector won’t provide that demand then the government sector has to given that they cannot rely on net exports to cure the deficiency. By deliberately restricting governments and effectively forcing them to engage in pro-cyclical fiscal responses the Euro bosses are not only prolonging the agony the citizens are facing but are also engaging in a self-defeating strategy. As we are seeing budget deficits are rising as austerity is imposed. The solution to the Eurozone problems is to disband the zone and restore individual currency sovereignty at the national level. It would be painful to do that but in the medium- to long-term it will be less painful than the trajectory they are following.
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\nThe recent developments in the Eurozone are pretty depressing.<\/p>\n

As I reported yesterday, Eurostat (October 28, 2010) released their latest – Labour Force data<\/a> – which shows that unemployment continues to rise and is now above 10 per cent.<\/p>\n

The Report says that there are:<\/p>\n

\n… 23.109 million men and women in the EU27, of whom 15.917 million were in the euro area, were unemployed in September 2010. Compared with August, the number of persons unemployed increased by 71000 in the EU27 and by 67000 in the euro area. Compared with September 2009, unemployment rose by 0.656 million in the EU27 and by 0.424 million in the euro area.\n<\/p><\/blockquote>\n

The following graph is taken from Eurostat’s publication and shows the distribution of unemployment rates across the EU. Note those out to the right.<\/p>\n

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<\/div>\n

So this is a system that knows how to get the potential out of its workforce!<\/p>\n

Further, Eurostat report (October 28, 2010) that – Quarterly Sector Accounts<\/a> – for the second-quarter that household saving ratios and real household disposable income continue to fall in the Euro area. This is not the sign of a healthy economic block.<\/p>\n

Eurostat also published their latest Government deficit and debt figures for 2009<\/a> on October 22, 2010. If you examine it closely you will see that the nations that have already adopted austerity saw expanding deficits in 2009 contrary to their plans. The nations with very large changes in their fiscal positions (larger deficit to GDP ratios) are typically those out to the right of the unemployment rate graph above.<\/p>\n

The Euro wannabees like Estonia and Latvia are particularly problematic and their governments have lost the plot with respect to maximising the potential of their citizens. The politicians seem content to trash the living standards of their citizens so they can get to more sumptuous dinners down at Brussels.<\/p>\n

But the increases in deficits etc just tell me that the automatic stabilisers were working hard to provide some fiscal support for their economies as private spending continued to collapse and discretionary net spending by the governments fell. The reaction of the budget bottom line is totally predictable and to think otherwise reflects a total ideological blindness.<\/p>\n

The governments knew it too but lied. They are trying to “finish” off the neo-liberal smashing of the welfare state and taking this opportunity to do it under cover of a crisis.<\/p>\n

As an aside, the 2009 data for the UK shows a deficit equal to 11.4 per cent of GDP. This will rise as its austerity programs undermine growth and drive the automatic stabilisers into providing more fiscal support for the economy.<\/p>\n

That is all background to the latest “reform” proposals from the EU bosses.<\/p>\n

The Economist Magazine reporting from Brussels (October 28, 2010) where the European Council meeting was held conclude that the result is – Game, set and match to Angela<\/a>.<\/p>\n

You can read the full concluding statement of the EU Council meeting HERE<\/a>.<\/p>\n

The Council conclusions were (chopped up a bit to save space):<\/p>\n