Category Archives: Eurocrisis

Eurobonds: what they are, and why they won’t work

The Eurobond scheme only works effectively if taxation and spending powers are transferred to a central authority – “fiscal union”. But bar a series of truly extraordinary backflips by Europe’s divided rulers, spontaneously agreeing to settle their deep differences, this will not happen. Should anything resembling a “Eurobond” eventually be summoned up, it is liable only to be a feeble stop-gap measure. The underlying causes of Europe’s financial crisis will not have been addressed.”

Very good analysis by senior economist James Meadway on the New Economics Foundation blog.

Here is Meadway’s solution:

The first steps to ending the crisis are to end austerity, halting and reversing the suicidal programmes of expenditures that have been launched; to write off debts that are now unpayable, whether owed by states (like Greece) or individuals and firms (as in Spain); and to allow the failure of private banks, nationalising and recapitalising them as needed. Tight restrictions on the movement of capital will be necessary to prevent financial panic spreading, and serious, radical efforts must be made to reverse the growing concentrations of wealth in Europe. For countries in the south, most especially Greece, this will not be achievable without abandoning the euro.”

Question the Euro Crisis

After more than 18 months, a dozen and a half summits, multiple rounds of austerity, a trillion dollars of liquidity, and now elections in Greece and France that threaten to overturn the fragile policy consensus in Europe, the Euro-crisis rumbles on.”

Good critical analysis of the Eurocrisis in Harvard Business Review Blog. Why Europe’s elites are trying to save the Euro and will end up losing the European project and, in several countries, democracy.

Mumbo Jumble: The underwhelming response of the American economics profession to the crisis

"In this extract from his forthcoming book, Never Let a Dire Crisis Go to Waste (Verso), the philosopher and historian of economics Philip Mirowski seeks to explain how the American economics profession has successfully avoided culpability for the economic crisis." 

Another must-read contribution in Open Democracy’s great series Uneconomics.

One particular quote is worth extra highlighting as it explains more than the financial crisis:

Whether it be in the context of global warming, oil depletion, ‘fracking’ for natural gas, denial of Darwinism, disparagement of vaccination, or derangement of the conceptual content of Keynesianism, one unprecedented outcome of the Great Recession has been the redoubled efforts to pump massive amounts of noise into the mass media in order to discombobulate an already angry and restive populace. The techniques range from alignment of artificial echo chambers and special Potemkin research units, to co-opting the names of the famous for semi-submerged political agendas; from setting up astroturfed organizations, to misrepresenting the shape and character of orthodox discourse within various academic disciplines.”

Financing the transition to a green economy

"The ‘next’ great transformation of capitalism needs to be focused with laser-like precision on changing the energy markets (from fossil fuels to renewables), the resource and commodity markets (from resource intensity and waste disposal to circular economy resource-linkage), and above all the finance markets to drive the transformation. Until the bond markets are seriously involved, at the scale of tens of trillions of dollars, the transition cannot be said to be seriously under way."  

Very good analysis in OpenDemocracy on the need for a radical rethink of eco-investment finance. Are "climate bonds" or "ecobonds" not a better instrument than the proposed Eurobonds?

Greece should reject the Troika and default on its own terms

“It’s national debt is unpayable – why tear apart the country in a futile attempt to repay?”  (Source: New Economics Foundation)

Excellent alternative analysis of the Eurozone crisis by the New Economics Foundation.
Interesting quote from this article:

For months, the lie has been peddled that Greeks are lazy, spendthrift, and have brought the crisis on themselves. This is xenophobic garbage. Greeks work the longest hours in Europe – half as much again, every year, as the Germans. They retire, on average, later than Germans. The Greek government spends less than the EU average, as a share of GDP. “

Europe’s Failed Course on the Economy

Austerity measures clearly are not working, so why are leaders still forcing it on Greece and others?”  

Very good opinion piece on Europe’s myopic austerity policies in the NY Times. "Why are Europe’s leaders so determined to deny reality?"

Stronger Europe or democratic sovereignty? Yes please

Great analysis in Open Democracy about the false choice between EU federalism and intergovernmentalism and the need for genuine European politics.

At the heart of our dilemma is the historical failure of the European Union to legitimate the grounds for its own political existence.  In the past, Europe has relied almost exclusively on what Hauke Brunkhorst calls ‘output legitimacy.’ Europe’s citizens have supported supra-national integration because of what it tangibly promised them and, partially, delivered: reduction of barriers to trade, a unified market economy, higher rates of productivity, opportunities to travel freely, greater global influence.  We have, however, substituted the practical benefits of closer union for any real debate about the political grounds upon which that union must, in the long-run, firmly stand.  We have achieved a Europe of coordinating institutions and open markets but we lack a European citizenry, a pan-European, supra-national public sphere.”…  

"The incumbent task for citizens is thus clear: to confront the political question directly. The era of ‘output legitimacy’ is over. How boldly Europe embraces new forms of input legitimacy – in which we will have to supply the ideas and the future of Europe ourselves, democratically as citizens – will determine whether and how we overcome the current sovereign debt crisis, as well as our deeper democratic malaise."

How Democracy Can Save Europe

"… the solution must be a new Constitutional Convention, whose members are invested with the authority to begin again from the foundations and produce a lapidary statement of basic institutions and rights—rather than the ponderous EU treaties Europeans tend to vote down when given the chance in national referendums."  

Absolute must-read article by Timothy Snyder in The New York Review of Books on the need for Europe to re-invent EU democracy if it is to prevent further meltdown of the European project.

Some of the ideas developed in this article seem to go in the same direction as ideas I have developed earlier on this blog about the need for a Phoenix Europe project.

A few quotes worth highlighting from this amazing essay:

“… the European financial crisis is but a symptom of a deeper malaise of European political culture. Europe is troubled, he says, by insecure majorities, the national populations of EU member-states who believe themselves to be threatened both by globalization in the streets (immigration) and globalization in the law (Brussels). As Krastev puts it, national governments have politics but no policy, since important decisions are made by the EU; the EU has policy but no politics, since decisions are not made by elected representatives.”

European integration has always depended upon a certain kind of historical brinksmanship. Each major step forward has contained the seeds of a future problem, which can only be solved at some future point by another step. Krastev likens this gradualist approach to crossing a wild river by jumping from rock to rock, with the next rock only becoming visible after each jump. But what, he asks, if the rocks only go halfway across the river?”

“At the moment Greek voters can change the parties who rule them, but cannot change fiscal policies. These are decided in Berlin. Thus we have the emergence of pantomime republics.”

“Since it would be a new beginning rather than just another treaty, however, it would have to start with Berlin. The German lead would have to be followed by other countries that are fiscally sound and growing, which at this moment means a new core around the Baltic Sea. Countries that vote it down would simply be left out, with the option of revoting later, rather than being allowed to torpedo the entire project.”

Uneconomics: a challenge to the power of the economics profession

"It is time to acknowledge an uncomfortable truth about the public status of economics as an expert discipline: it has grown to be far more powerful as a tool of political rhetoric, blame avoidance and elite strategy than for the empirical representation of economic life. This is damaging to politics, for it enables value judgements and political agendas to be endlessly presented in ‘factual’ terms. But it is equally damaging to economics, which is losing the authority to describe reality in a credible, disinterested, Enlightenment fashion."  

Brilliant analysis in Open Democracy on the perverse power of economic technocrats on our democratic institutions.

This text is the first of a series of articles under the heading “Uneconomics” which aims to “challenge the dominance of orthodox economics in public debate, highlighting alternative perspectives on the economy and the benefits that they might bring to informing policy and raising public understanding of the current crisis.”

The culture of debt

"The global debt crisis is not just about the growing government debt burdens of economies, nor about the financial liquidity crisis plaguing banks. The true debt crisis is much deeper than that. It involves entire economies and societies evolving towards a mind-set in which more and more benefits are expected today – but any costs are either increasingly postponed to the future, or preferably, dumped on others." (Source: Triple Crisis blog)  

Very good short essay by economics professor Ed Barbier on how the "culture of debt" has created our current financial and economic chaos as well as our ecological debt crisis.

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