Archive for the ‘Eurozone Crisis’ Category

Why won’t the Eurozone disintegrate?

November 22, 2012 24 comments

from Deniz Kellecioglu

About a year ago, while having coffee with friends in Addis Ababa, I postulated that the Eurozone would break up, probably by May, but certainly by September. Of course, I was not the only one offering such projections. But why did we miss the mark (so far)?

Economically, it does not make much sense to go on with the Euro, especially if we have the general populace at heart. Last Thursday, statistics from Eurostat confirmed that the Eurozone remains in recession. The day before that, millions of people across Europe, but predominantly in the most affected countries Portugal, Spain, Italy and Greece, took to the streets against austerity. As you already know, the unemployment figures are at record heightsRead more…

Manifesto: Econonuestra´s proposal to all people and interested groups to promote the debate on the crisis

November 20, 2012 5 comments


Peripheral countries within a fracturedEurope

  1. 1. Promoting social debate

It is more than four years that the crisis began and far from improving, the economic and social situation has further deteriorated.

The political management of the crisis has been limited to a one sided diagnosis of the roots of the problems while the European institutions and the national governments continue to implement a strategy based on massive cutbacks in public spending and investment, pressure on labor costs, and reforms that reduce social rights and privatize areas that had so far been preserved as public goods.

However none of the established goals have experienced significant progress. Cutbacks have led to neither a rapid nor a substantial reduction in budget deficits, whereas efforts to improve the competitiveness by reducing real wages have proved to be both ineffective and insufficient. Far from reducing the public accounts imbalances, the implemented measures have prompted a collapse in domestic demand which, despite a drop in imports thereby reducing temporarily the current-account deficits, have simultaneously led to a decline in economic activity and employment. Such a decline has made impossible balancing the public and external accounts.   Read more…

The Euro as the SDR of Europe?

July 26, 2012 13 comments

from Steve Keen

The Euro is the national currency of a country that does not exist. Though there is a continent of Europe, as there is of America, there has never been a country of the United States of Europe, and there probably never will be.

The Euro is therefore not a currency as is the American dollar, and yet it is forced to masquerade as one—badly—by the Maastricht Treaty, in which the countries of Europe abandoned the right to produce their own genuine national currencies.

With the volume of the Euro being controlled by a supra-national authority (the ECB), and member states punished for breaching rules on government spending (the 3% maximum deficit and 60% accumulated deficit rules), the Euro is closer in function not to a currency, but to Special Drawing Rights as they were conceived of by Keynes at Bretton Woods. In his plan for a post-WWII international monetary system, Keynes proposed that common supranational currency be used for international trade (the “Bancor“), while domestic currencies should used for internal trade. The exchange rates between national currencies and the Bancor were to be fixed, with persistent trade deficit countries being forced to impose austerity and devalue, while persistent surplus countries were taxed Bancors, and required to stimulate their economies to increase imports. Read more…

Categories: Eurozone Crisis, Keynes

The Premonitory Five: Godley, Wray, Forstater, Mosler and Bell

from Edward Fullbrook

The neoclassical mainstream won infamy for remaining oblivious of the impending Global Financial Collapse, whereas Keen, Roubini, Baker and Hudson won fame for analytically foreseeing it and giving ample warning.  Now a “policy note” from the Levy Economics Institute documents analytical warnings of the European Union’s current debt crisis given separately a decade or more ago by five economists:  Wynne Godley (1997), L. Randall Wray (1998), Mathew Forstater (1999), Warren Mosler (2001) and Stephanie Bell (2002).  Below are relevant passages from each of the five.  These two huge examples illustrate how economics could serve, rather than dis-serve, society if the profession were to become in the main science-based rather than faith-based.  Read more…

Austerity was the big loser in the Greek elections

May 10, 2012 7 comments

from Dean Baker

Austerity was the big loser in the Greek elections on Sunday. The two main Greek parties, who endorsed the austerity pact signed last year, together got just over one-third of the vote. This is an extraordinary rebuke given that between them, these parties have governed Greece since the end of the dictatorship in 1976.

On the anti-austerity side, a left-wing coalition came in second with around 17 percent of the vote. More ominously, a far right anti-immigrant party, which is also anti-austerity, received almost 7 percent of the vote.

It is important for people elsewhere in the world, and especially in Europe, to understand that the Greek voters were not just being cranky kids who refuse to take their medicine. There is no doubt that Greece’s government and economy were poorly managed in the years leading up to the crisis.

However the current path of austerity does not offer the country a path to a better future. The current path of austerity is simply a path of pain as end in itself. This can be seen from examining the official projections. Read more…

Categories: Eurozone Crisis

The Second Great Depression—in Europe

from David Ruccio

Read more…

Categories: Eurozone Crisis

Austerity, democracy, and economics

April 16, 2012 13 comments

from David Ruccio

Here’s Amartya Sen, from an interview with Olaf Storbeck and Dorit Heß.

Question: Professor Sen, do you have the impression that economists and economic policy makers are learning the right lessons from the most severe economic and financial crisis since the Great Depression?

Answer: I don’t think that at all. I’m quite disappointed by the nature of economic thinking as well as social thinking that connects economics with politics.

What’s going wrong? Read more…

The new political economy of the Eurozone

March 17, 2012 25 comments

I might be boring the pants off you with my European Central Bank Posts – but what’s happening in Europe is going very fast and it’s important. Power (lots of it) is shifting towards Frankfurt and Brussels. How will this power be used?

First, the shift. A quote from a recent speech from José Manuel González-Páramo, member of the board of the European Central Bank: Read more…

Meanwhile, in Europe… Unemployment hits a record, differences larger than ever (Nov 2011, graph)

January 9, 2012 2 comments

from Merijn Knibbe

According to last weeks Eurostat unemployment report the EZ unemployment rate did not change in November, compared with the month before (10,3%). The number of unemployed in the European Union however increased with 55.000 to a new record. According to the press release, ‘Compared with November 2010, unemployment rose by 723 000 in the EU27 and by 587 000 in the euro area’. But averages do not serve us well when we look at either the European Union or the Eurozone, as differences between countries are still increasing (graph). When we look at a somewhat longer period we see employment rates converging up to 2008. After about january 2008, i.e. quite some time before ‘Lehmann’, rates in Ireland and Spain start to explode and differences bertween countries became larger than ever. Read more…

The Euro is leaving Greece – and a new Great Depression has entered.

January 5, 2012 6 comments

from Merijn Knibbe

Do Great Depression’ policies lead to ‘Great Depression’ results? Yes, they do. Look at this chart showing the development of the money supply in Greece: Read more…

The ECB’s high wire act

December 27, 2011 6 comments

from Dean Baker

At this point the sovereign debt crisis in Europe is almost getting boring. We’ve seen the same script played out over and over with country after country. The basic story is the markets begin a run on the debt of a country: Greece, Ireland, Italy, Spain etc.

The troika, the European Central Bank (ECB), the European Union (EU), and the International Monetary Fund (IMF) then demand a series of austerity measures. In addition, they sometimes demand measures unrelated to fiscal policy, such as a lower minimum wage in Ireland or weaker employment protection legislation in Italy, that are intended to weaken workers’ bargaining power. As a quid pro quo, the troika then arranges enough bond purchases or other supports to get through the immediate crisis. Read more…

Europe’s Crisis and Latvia’s “Success”

December 18, 2011 1 comment

from Mark Weisbrot

In recent months some advocates of Europe’s austerity policies have been touting Latvia as a “success story” that shows how “internal devaluation” can work. This was the theme of a book published earlier this year by the Peterson Institute for International Economics, one of Washington’s most influential think tanks. The book was co-authored by the Institute’s Anders Aslund and Latvia’s Prime Minister Valdis Dombrovskis.

The case study is very relevant to Europe because there are important similarities between Latvia’s economic strategy since 2008 and that now being promoted by the European authorities – the European Commission, the European Central Bank, and the International Monetary Fund (IMF), otherwise known as “the Troika.” Read more…

Meanwhile, in Europe… (22). Government deficits, large and small (chart).

December 9, 2011 5 comments

from Merijn Knibbe

The leaders of the Eurozone countries have decided to maximise the structural national government deficits to 0,5% of Gross Domestic Product. Didn’t they learn anything from recent history (graph)? Read more…

Categories: Eurozone Crisis

It’s getting real in the Eurozone: self-inflicted recession threatens World Economy

December 1, 2011 34 comments

from Mark Weisbrot

The economic news out of the eurozone is getting worse every day, and so is the contagion to the rest of the world. The OECD (Organization for Economic Co-operation and Development), the club of 34 mostly high-income countries, has now lowered its projection for eurozone growth for 2012 from 2 percent (in May) to just 0.2 percent. According to their report, the 17-member eurozone economy already “appears to be in a mild recession.” For the U.S., the forecast for next year was lowered from 3 percent to 2.1 percent.

Forecasts for China, India, and Brazil have also Read more…

Categories: Eurozone Crisis

Breaking (up the Euro) news. Eurzone housing market might be crashing

November 28, 2011 2 comments

from Merijn Knibbe

Today, the European Central Bank published new data on M3 money growth in the Euro Zone

The data are entirely consistent with: DISASTER LOOMS Read more…

Euro break-up beckons

November 25, 2011 1 comment

from Peter Radford

It’s a holiday here in the US so we can all sit back and watch the slow motion dance towards the break-up of the Euro while we ponder our own ineptitude. An ineptitude that, fortunately, we can take a day’s break from.

Why talk of the end of the Euro?

Because of the spectacle that unfolded in Germany this week. A regular small sale of German bonds was significantly undersubscribed. Only two thirds of the offering was taken up, meaning that the German central bank had to buy the rest for secondary sales over the next few days. Read more…

Categories: Eurozone Crisis

“To the Parliament of the Republic, to the Political Parties”

November 16, 2011 3 comments

Dear friends,

We submit to your kind attention a petition [at the bottom of this post] addressed to the Italian Parliament and to the political parties with some proposals concerning the current economic policy situation. We are asking for signatures from both our Italian and foreign colleagues and we shall publicise the petition both on the Italian and foreign mass media after a significant number of signatures is collected. Read more…

The ECB gets it wrong on the causes of the Euro troubles (again).

November 8, 2011 3 comments

from Merijn Knibbe

On the fourth of November, 2011, José Manuel González-Páramo (JMPG), member of the executive board of the European Central Bank, held a speech in Madrid. It was a sad one. According to this banker

“The economic and financial crisis has led to a severe deterioration of public finances across European countries. Governments which already had significant fiscal imbalances ahead of the crisis exited from the recession with the highest deficit and debt-to-GDP ratios recorded in times of peace”. Read more…

Categories: Eurozone Crisis

Meanwhile in Europe…(21). Unemployment, time to panic edition.

November 5, 2011 2 comments

from Merijn Knibbe

At the very moment that I’m writing this, European unemployment may already have hit a new record. In september the old record of 10,2% was reached. And that’s not all. The number of unemployed has been increasing for seven months in a row. Youth unemployment in Greece and Spain is well over 40%. Differences within the Euro area are increasing at an astonishing speed. In countries like Germany, Austria, Belgium and the Netherlands unemployment has declined, up to about July 2011. In some other countries, however… see the graph.  Read more…

“Crisis in the Eurozone” Conference

November 3, 2011 2 comments

A two-day conference on the financial crises in the Eurozone begins today in Austin,Texas.  It has been organized by James Galbraith and in addition to himself features other RWER contributors, including  Gilles Raveaud, Yanis Varoufakis, Matias Vernengo, Steven Cohen and Thomas Palley. 

The event will focus on “A Modest Proposal for Overcoming the Euro Crisis” by Yanis Varoufakis and Stuart Holland, a plan which would combine the innovation of the Eurobond with a “New Deal” approach to European development.  There will be two live webcasts.  Here is a list papers with links. Read more…

Categories: Eurozone Crisis

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