Links. Schauble lets bankers loot the German public, dynamic multipliers.
1) On the Slack wire blog Josh Mason states, in a post about how restraining domestic demand led to current account surpluses in Europe (emphasis added): “Personally, I don’t think that the masters of the euro care too much about the outcome of the struggle for competitiveness; it’s the struggle itself — and the constraints it imposes on public and private choices — that matters. But insofar as the test of the success of austerity is the trade balance, I suspect austerity can succeed indefinitely“.
2) About these constraints: Schauble, the German minister of finance, blocks endeavours of the European Investment Fund to issue bonds and raise money to lend to small and medium enterprises in southern Europe, companies still have to pay interest rates which are way higher than northern European and French companies have to pay.
3) While at the same time, according to Norbert Häring, he backs a German committee, with a lot of bankers in it (Deutsche Bank, Allianz (a bank and insurance company), Ergo (an insurance company) as well as former central banker Marcel Fratzscher), which is preparing and advise to establish a ‘Bundesfernstraßengesellschaft’, a government owned company which will build and repair highways but which will not be funded by the government but by… companies like Deutsche Bank, Allianz and Ergo. And which will have to pay a higher interest rate than the government has to pay. At the same time, Schauble defends a ‘schwartze Null’, a small public surplus for the government, which in Germany is enabled by cutting public investment… Public risks, private gains. By the way – some highways built by public-private partnerships in Germany were pretty expensive…
4) Sebastian Gechert and Ansgar Rannenberg calculate the macro-economic effects of the 24,5% of 2009 GDP government cuts in Greece. No surprises there… But, interestingly, they have made a meta-analysis of 98 estimates of multipliers, which enables them to gauge ‘typical’ multipliers for different kind of government expenditure cuts/tax increases during different phases of the business cycle. Tax increases have a stable multiplier of 1,0 but government transfers have during downswing but not during upswings a multiplier larger than 2 (a cut in transfers of a billion will during a downswing cause a GDP contraction of 2 billion). Government consumption (most education, parts of health care) and investments have very high multipliers, too. Increasing taxes during a crisis is, though not smart, smarter than cutting expenditure.