June 14, 2012
Comments Off on A rare non-hyperbolic take on the likelihood of a Grexit
Good stuff from European economics think tank Bruegel:
“Commentators, especially from North America, take it for granted that Greece will exit the euro area and will be followed by others… But is a Greek exit really inevitable?
“…If we look at the export performance of EU15 countries since 2008, Spain is the best, followed by Germany, Ireland and Portugal – they outperform even the UK and Sweden, the only two EU15 countries which benefitted from sizeable nominal exchange rate depreciations. Therefore, even if the unemployment situation is miserable in Spain, Ireland and Portugal, their export sectors show signs of hope. But Greek exports look hopeless…
“Consequently, euro-area partners should recognise two major issues and act on them decisively if a cooperative government is elected in Greece:
“1. Greece’s economic outlook is hopeless. A real programme for supporting Greek growth should be put together with very significant investment from Europe…
“2. Greece’s public debt is still too high. The Greek fortune cannot be turned to good without properly addressing the public debt overhang. Greeks were irresponsible in accumulating such a huge debt, but it was a major mistake of official lenders to start the first programme in 2010 without a sizeable debt reduction.
“If a cooperative government is elected [in the Greek elections this weekend], but Europe fails to offer a prospect for Greece, the country will likely subsequently fall back to its current state. Then the scenario of Greek exit and the disorderly and destructive dissolution of the euro area could follow, unless all of the flaws in the euro’s design are corrected promptly, which does not seem to be realistic.”
June 12, 2012
Comments Off on Treating the EU & G20 leaders like naughty schoolchildren
Excellent teacherly putdown in this post from thinktank Bruegel’s blog:
“Europe has already expressed its intention to focus [the upcoming G20 summit] on growth and jobs; the deliverable should foreseeably be yet another ‘plan’ without specific deadlines or commitments, along the lines of previous summit discussions. Growth and jobs are obviously fine in principle, but adopting such broad focus is likely to divert attention from the immediate challenges and even more from the actions to be undertaken. It is a pity, because Europe, while being ultimately responsible for its own actions, badly needs to explain itself and convince the global community that it is doing its best to resolve its problems.”
Reads like many a school report*: “It is a pity… Must try harder… We wouldn’t mind if it were only himself this behaviour was affecting, but he’s disrupting the whole class…” (etc. etc. etc.)
* Not one of mine, obviously… *ahem*
June 12, 2012
Comments Off on An American view of Europe the UK would be sensible to note
Once again, no one knows what’s going to happen – yet everyone knows it’s going to be bad. This from The Atlantic makes some good points amidst the “eurogeddon” worst-case scenario act – but this time from an American perspective, which is a handy alternate view, now that our American friends are starting to wake up to the problem and sound like they know a little of what they’re talking about:
“Last year, the European Union was America’s second largest export market. It wouldn’t necessarily be catastrophic if we sold them fewer goods. But consider this: the EU is also China’s biggest export customer. It’s one of Brazil’s top buyers as well. In turn, China is our fourth largest partner, Brazil is our eighth. If Europe stops buying as many Chinese flat screen TVs and Brazilian beef, those economies will have less to spend on American medical equipment and tractors. Not to sound too much like a T. Rowe Price commercial, but it’s all deeply connected.
“‘Whatever happens in Europe has truly systemic implications,’ when it comes to trade, said Domenico Lombardi, a senior fellow at the Brookings Institute. What we sell directly to Germany, Italy, Spain, and France is only part of that picture. The real worry is that a deep European recession would sink world trade across the board.
“…The U.S. economy might be able to sustain all of these body blows if our government had all of the possible tools at its disposal. But we don’t… Our defenses are down. Our economy already appears to be wobbly. It’s not hard to see how a Italian or Spanish exit would knock it over. At this point, our future depends on the ability of Europe’s leaders to get their house in order.”
And remember, this is an American analyst talking. If America has that much reason to be worried (with only 3 eurozone members among the US’s top 15 trading partners), then how much more does the UK (with 7 out of our top 10 trading partners being euro countries).
(Please also note a brilliant name hidden in the middle of that article – Jacob Funk Kierkegaard. I can’t wait for his next album – a glorious mix of New Orleans jazz and Scandinavian existentialist metaphysics)
June 11, 2012
Comments Off on A terrifying but promising sign
Oh, sure, it sounds terrifying at first:
“European finance officials have discussed limiting the size of withdrawals from ATM machines, imposing border checks and introducing euro zone capital controls as a worst-case scenario should Athens decide to leave the euro”
But hell, at least it’s a sign that the buggers in charge are starting to take things a little more seriously.
The euro seems to have been run from day one on a mixture of wishful thinking, misdirection and (increasingly bad) luck. It’s about time some proper contingency plans were put in place – because even if these do smack somewhat of scare tactics designed to knock people into line, the fact that they are being discussed at all is at least a sign that the powers that be are waking up.
Because there *should* have been eurozone exit contingency plans in place from day one, had the thing not been devised an implemented by a bunch of deluded, blinkered idealists who refused to believe in even the *possibility* of failure. That there weren’t was arrogance of the highest degree.
The admission of the possibility that things could go tits up shows a degree of humility that’s long been missing from the European project, and as such should be welcomed even as it scares the hell out of us all.
June 11, 2012
Former Spanish foreign minister Ana Palacio raises some important points:
“few official pronouncements, let alone policies, are addressing Europe’s deficit of trust and credibility. The current crisis has exposed the original lacunae and widening cracks in the compact between Europe’s citizens and EU institutions, between Europe’s north and south, and between its peoples and its elites.
“…The EU’s supposed democratic deficit is a corollary of the ‘technocratic imperative’ that has emerged as a favorite scapegoat in the ongoing European drama. According to this view, European integration was flawed from the outset, more than six decades ago, because it was conceived and developed as an elite project. But, for as long as the European project delivered prosperity, no one bothered to question its rationale. [Nosemonkey note: Well, some did – but most were dismissed as fringe loons…]
“If EU institutions are to regain trust and relevance, they need to articulate concrete policies and deliver on issues that bear directly on citizens’ interests”
And what *are* citizens’ interests? There lies the rub: Throughout the long history of European integration, at no point have the people been asked what *they* want out of it. At no point have *the people of Europe* been asked what powers and responsibilities should be pooled at European level.
Because although some might write me off as an anti-democratic elitist, my position on the EU has been fairly consistent in one regard for years: European integration will never work unless you ask the people what form (if any) it should take:
“if our representatives at these meetings are starting from a position of ignorance about what the people they are representing actually want, little wonder that they end up with something that the people then reject.”
This has long been the EU’s most fundamental flaw – and it looks like the current politicians running the place still haven’t realised that they need to address this most serious of issues if any of the others they are facing are ever to be properly dealt with.
God alone knows how, though. Perhaps a multiple-choice questionnaire? “Which of the following areas should be dealt with at EU level? Yes / Maybe / No” (etc.)
Hell, it’s no more stupid than most of the other suggestions I’ve heard over the years…
June 9, 2012
Likely the first of many posts on this – as a fairly hardcore centrist (arguably a stupid concept in itself, that, if you ask most people today) with a dogmatic refusal to align myself to any one political party this is of particular interest. Because, the theory partially goes, it’s the dominance of political centrism that is the cause of our current woes.
Be warned – this is a long one…
Continue Reading →
June 9, 2012
Good pessimistic (realistic?) piece from Der Spiegel:
“The next stage in the crisis will be blatant blackmail. With their refusal to accept money from the bailout fund to recapitalize their banks, the Spanish are not far from causing the entire system to explode. They clearly figure that the Germans will lose their nerve and agree to rehabilitate their banks for them without demanding any guarantee in return that things will take a lasting turn for the better.
“The next test of the resolution of Europe’s donor nations will come from the Greeks… after the election on June 17, the Greeks will bargain with the other EU countries to see what it’s worth to them to see Greece abandon the euro. The Greeks no longer have much to lose; but their EU neighbors — and particularly the Germans — still do. This discrepancy will determine the price to be paid.
“Germans have always expected that being part of a united Europe meant that national interests would recede into the background until they eventually lost all significance. One recognizes in this hope the legacy of political romanticism.”
June 8, 2012
Comments Off on Cameron’s confusing approach to the eurocrisis
Good points raised by the eurosceptic organisation Open Europe’s blog today about the British government’s rather bizarre, contradictory attitude(s?) towards the eurocrisis:
“A German-led superstate still seems years off – if it ever will be agreed (no matter how much other parts of the eurozone or markets might like to see it right now).
“In contrast, David Cameron last month called for a bigger bailout fund, shared eurozone bonds and a more active monetary policy from the ECB – in other words, the eurozone quickly moving to ‘joint and several liabilities’ with stronger states indefinitely underwriting weaker ones. That would really be a German-led super state. [Nosemonkey note: depending on your definition of ‘super state’…]
“…the UK government could end up in a rather strange position by sending all these political hares running at the same time. Is it going to veto the same Treaty changes (to establish a fiscal / banking union) that it is now effectively calling for? If it’s deemed that these treaty changes de facto transfer powers away from the UK – i.e. by shifting the institutional balance of power towards the eurozone at the UK’s expense – will it then also call a referendum on those treaty changes? What would the question be?
“This may all work out both in the polls at home and in talks in Europe. But given the unrealistic expectations it raises – and how very difficult it will be to square all these various factors – it may well come back to haunt the Tory leadership, at home as well as abroad.”
David Cameron having an incoherent approach to the EU? This is nothing new, as this post of mine from FOUR YEARS AGO makes clear.
June 8, 2012
Comments Off on Fixing the euro: “It’s very simple…”
Yeah – sounds like a piece of piss…
“Jörg Asmussen, a member of the European Central Bank’s executive board and a former official at the German ministry of finance, outlined what Europe needs to do.
“‘It’s very simple,’ Mr. Asmussen said. ‘We need a more integrated monetary union, because the monetary area that we have now is incomplete. And we have to complement it in a way to make it more stable. One point is a fiscal union. The second one is a financial market union with three key elements: a resolution regime; second element, a deposit guarantee insurance; and third, we need a centralized supervision for the large 25 banks in Europe.”
“‘We need a democratically legitimized political union,’ he added. ‘We need to start this speedily.'”
Well that’s alright, then. Should be doable by the end of next week, I’d say.
June 7, 2012
Comments Off on My return to blogging: A mission statement
There’s infinitely more being written about the EU these days than when I started this blog 9+ years ago. Some of it is excellent, some of it interesting, some of it utterly fatuous.
My aim with this blog has always been as much to discuss the discussion of the EU as to discuss the EU itself. As such, this passage from a recent piece on Roland Barthes in the New York Times struck a distinct chord:
“what angered Barthes more than anything was ‘common sense,’ which he identified as the philosophy of the bourgeoisie, a mode of thought that systematically pretends that complex things are simple, that puzzling things are obvious, that local things are universal – in short, that cultural fantasies shaped by all the dirty contingencies of power and money and history are in fact just the natural order of the universe. The critic’s job, in Barthes’s view, was not to revel in these common-sensical myths but to expose them as fraudulent. The critic had to side with history, not with culture.”
Strikes me as as good a mission statement as any. Barthes aimed to identify and demythologise cultural assumptions. My aim is to do the same for the EU. To be as critical – in the true sense of the word – of the EU’s analysts as of the EU itself (where merited, of course), as well as to highlight interesting EU-related content from all sources and all parts of the political spectrum.
This will likely mean re-examining my own prejudices just as much as it means dissecting those of others. Should be fun…
June 6, 2012
Comments Off on The euro: A domesday machine
As a counter to the last post, an interesting from investment banker Marshall Auerback at EconoMonitor, worth a read for a bit of history on the (evidently flawed) economic assumptions underpinning the formation of the euro and some links to some further reading:
“the eurozone’s architects failed to follow through with the logic of a political union. Nobody cares about ‘trade imbalances’ in the Canadian confederation. And nobody would care if Alberta, for example, were to run perpetual trade surpluses with the other 9 provinces. Fiscal transfers from the strong to the weak are part of the Canadian bargain in a full national union. Had Europe adopted a similar federal structure, the Greek and Spanish issues would be moot.
“As it stands, however, the architects of the euro have created a doomsday machine and a gift for speculative capital… throughout the evolution of the architecture of the European monetary union, it was assumed that deposit movements from one country to another would all be smoothly handled by the market mechanism.”
Markets, eh? If there’s one thing we’ve learned in recent years, you can’t trust markets. Or bankers. Or economists. Or politicians. Or voters. Anyone, basically.
June 6, 2012
Hell, this would have been an unpopular view at most stages in the last decade and a half, even when it looked like the eurozone was doing well. So it’s a brave British politician indeed to make the argument that Britain should have joined the euro – this week of all weeks… Hats off to London Labour MEP Mary Honeyball for having the guts to say it (emphasis mine – and emphasised because those are the bits I agree with):
“Although it’s by no means all set to go, it does look as if the 17 Eurozone countries are coming closer together and accepting the need for a central Eurozone authority look at budgets and fiscal policies.
“Britain as ever is not part of what promises to be the most important European project since the formation of the Common Market. Unfortunately 50 years or so later, we still don’t get it. Europe is where the future lies. If Britain has any hope of being more than a bit player outside our own shores, we have to be a leader in the European Union. Today that means being up there with France and Germany in the Euro. Very unfortunately we did not join, and this blog post explains just how serious a missed opportunity this will turn out to be.
“To add salt to the wounds, if Britain had joined the Euro, there is little doubt we would have been at the top table with France and Germany. Yes, we would have suffered from the current crisis in the Eurozone countries, but thanks to dogmatic Tory Chancellor George Osborne and Prime Minister Cameron we are suffering a double dip recession anyway, even outside the single currency. The Euro was always a political as well as an economic project and the UK has comprehensively failed to grasp the political opportunity.“
As it stands, Britain is again on the sidelines, watching nervously as a whole bunch of its major trading partners hover on the brink with no power to influence them.
I’m certainly not as confident as Ms Honeyball that history will show Britain’s decision to stay outside to have been a mistake (I’ve never been fully convinced of the arguments in favour of joining – though I tend to like the basic *concept* of an EU single currency, I was never convinced that the euro was being set up sensibly). But the counterfactuals thrown up by the idea of Britain having joined the euro from day one are frascinating. Would the sloppy rules and lack of sensible structures have been allowed through if the more cautious Britain had been part of the discussions? Would the presence of another major economy in the eurozone mix have lent greater strength to the whole? Would the presence of the UK have helped prevent German dominance? Would the UK’s apparent preference for quantitative easing to tackle downturns have pushed the ECB into printing money? Or would it just have meant that Britain was even more economically screwed than she has ended up on the outside?
June 5, 2012
Comments Off on EU democracy creeping in?
Former Israeli Foreign Minister Shlomo Ben-Ami makes a good case that the slow advance of the European democratic will is starting to have an impact (hurrah, etc.): “Europe’s experience has shown that the subordination of society to economic theories is politically untenable… Merkel’s now legendary obstinacy eventually might have to succumb to the imperatives of politics. It is one thing to ignore European Commission President José Manuel Barroso’s call for a more flexible economic policy, and quite another to dismiss out of hand the powerful message coming from French and Greek voters.”
He also makes a sound warning of the dangers: ” Social vulnerability and frustration at the political system’s failure to provide solutions are the grounds upon which radical movements have always emerged to offer facile solutions.”
June 5, 2012
New EU recovery plan, eh? It’s about bloody time, though some areas are likely to scare the usual suspects (emphasis mine)… “The proposals… are said to be focused on 4 main areas so far: structural reforms, a banking union, a fiscal union, and a political union. To gain a sufficient traction for these actions, they will be sold under a growth friendly umbrella rather than as austerity related measures”