20 comments

  • Ending the Lisbon Treaty would be the place to start. It enshrined neo-liberal principles as the policy framework for Europe, creating the conditions for the Eurozone troubles.

  • This is indeed very scary stuff Andrew.

    These guys are saying what I’ve been saying, only with stronger arguments (the Eurozone will come apart, and so may the EU):

    http://ftalphaville.ft.com/blog/2011/09/14/676871/eurozone-crisis-porn/

    http://blogs.telegraph.co.uk/finance/andrewlilico/100011966/why-collapse-of-the-euro-equals-collapse-of-the-eu/

    And there’s little or nothing we in Canada can do about it.

  • Nick – Don’t know if you follow Varoufakis – an economist at Athens University. He argues convincingly that a Greek default will precipitate a chain of events leading to German withdrawal from the Euro. (Follow the links from her to his earlier pieces.)
    http://www.social-europe.eu/2011/09/is-greece-finished/?utm_source=feedburner&utm_medium=feed&utm_campaign=Feed%3A+SEJColumns+%28Social+Europe+Journal+%C2%BB+Columns%29

  • It is not that difficult to destroy the eu, we all know that. The key is how difficult will it be to keep it and build it stronger. It has been a long time now that the feet dragging have went on, and hence they have been destroying it for sometime. Can the monetary union handle the rigours and needs of a political union. The foot dragging is a very loud no.

  • I would be very surprised to see the Eurozone either fall apart or settle this crisis easily.

  • Andrew: I haven’t been following Varoufakis. But I think he’s basically right. Unfortunately. Same basic view of the causation as mine, but a slightly different twist on the timing. I’ve been saying the others will exit, leaving a German rump. The Holy Roman Eurozone. He sees Germany exiting first, because it knows what’s coming even if it doesn’t exit.

  • Duncan, the easy is to let nationalism run its course like history has demonstrated. It will be a a long difficult minefield to walk under democracy to get such difficult issues as brokering a massive TARP like deal to put an end to the crisis. Not sure how under the austerity forces we can see a way to grow out of this mess, and given the electorate of Germany and the northern countries, it will definitely take more political clout within the EU to broker the monetary union into a pathway that can suceed.

    My guess, if the outside powers can keep the vulturous bond vigilantes away from the soon to be carcass of bankrupt nations, then we could see a potential start to a belief that crisis can be avoided. However, on the current trajectory, there is a massive short being built up on failure and turning the tides against deeper crisis may just not be possible.

    However when it comes to lessons and history, potentially we are all selling the lessons of the past too short, and somewhere within is a belief that failure will not be an option. It seems as though Geitner was putting such optimism into play couple days ago before his meeting with the EU.

  • Some of the comments seem to just take as an assumption that the best thing for Europe and the world is the continued existence of the EU and the monetary union. Is that a given? The EU is a largely undemocratic project, which seems to have turned into an avowedly neoliberal one years ago. And even if this crisis can be solved, I don’t see that any of the solutions really deal with the basic problems implied by a common currency among very different places with quite different economic needs. If you’re a place with its own development project, it will be seriously hampered in pursuing it if it cannot control its own economic rules, currency and so forth.

    There are some benefits to member states and their citizens in the EU, but are they worth the downsides? When I hear about the potential breakup of the EU or the Euro due to this crisis, my reaction tends to cautious optimism, the feeling that while I can’t be sure, that’s one lining for this cloud that may be silver.

  • Europe is being built on the battlefields of two 20th century world wars, and centuries of bloodshed in years before. Germany is going to have to face its history, and lead a re-structuration of sovereign debt, if only to save banks.
    The Ezone can easily repurchase deeply discounted debt.
    Beware of the Anglo-American anti-Euro voices who never liked the project to begin with,want to see it fail, and see it failing.
    The austerity packagesd, and unemployment are the real problems facing Europeans.
    Looking out on the old port of Marseille as I write this, let me suggest that Europe has decided to be Europe, and is not going back to nationalist currency practices, and exchange market volatility that has 16 countries floating seperately against the dollar.

  • “The austerity packagesd, and unemployment are the real problems facing Europeans.

    Looking out on the old port of Marseille as I write this, let me suggest that Europe has decided to be Europe, and is not going back to nationalist currency practices, and exchange market volatility that has 16 countries floating separately against the dollar.”

    Yes and some Europeans have decided to use the EU as tool for imposing top down neoliberal restructuring (starting and finishing with the ECB and EMU) and other were looking towards a greater Europe as a progressive bulwark against neoliberal globalisation. The fact that there is not in place a fiscal union with a euro bond to underwrite the provinces if needs be gives the lie to the hopes of the progressives. So does the present mantra of austerity uber alles.

    You know some of us did not like the European project because of the way it was shaping-up at the institutional level. I think we have won that argument. Painting us all with the same brush hardly dignifies the realities of the different positions on the European project.

    “Going back to national currency practices”

    You mean like devaluation and printing money as opposed to drastic austerity and deflation?

  • Throughout the history of the Eu, I do believe there was a legitimate effort to bring living standards through labour standard harmonization and a host of other unifying efforts. And to some extent that project was a success. And yes there have been concerted neoliberal manifiestation within many of the institutions. However, given the history and also the successes over the recent past in unification, one has got to conclude the EU was a success. However, we need to look deep into the chasm that is currently dividing the power structures right now. And if it is money, then there has got to be a way to figure this out that not just the more prosperous economies foot the bill on the bills in which the crisis has brought on. There is a real and legitimate effort by private interests to put this all onto the public shoulders for losses, and not many private carries of debt are willing to listen to reason. If somehow the EU fails and re go backwards several decades in political terms, then the price of these shallow private interests would have to take in loss, are trivial. So in essence, we are letting a handful of rule makers in behind the scenes allow such a failure for trivial losses.

    What we need is a Tarp like mountain to breach against the flood waters. That alone would alleviate so much within the psyche.

  • The economics profession needs to start learning a whole lot more about the banking sector and what it has tranformed into over the past 20 years. Instead of focusing on countries we need to look at the financial sector side of the EU crisis and focus on the problems there. Lots of problems in haicuts, transparency and the entire make up of the enormous shadow banking sector. Just amzing how far into the risk fold that shadow sector has dragged us into, without much regulation. It is insanely insane.

  • By national currency practices, I mean individual currencies with floating exchange rates for the Eurozone countries, instead of the single currency, with all this implies for interest rate differentials and pressure on budgets. Just looking at the cross rates and what this implies for foreign exchange activity i.e. speculation is enough to make me think sticking with the Euro is preferable.
    Paul is dead on about the banking aspect of the crisis of the Eurozone. Austerity is designed to make workers pay for interest charges on bank loans.
    The role of the U.S. dollar as the world reserve currency represents a bigger challenge to progressive politics than the single currency in my view. Of course it makes sense to challenge the neoliberal underpinnings of the ECB, and the supporting neoliberal policies. I said as much in my first post in this thread. But the Euro also represents the first challenge to American monetary hegemony which may help to explain why the Anglo American economists are so happy to write the whole idea off.
    The World Bank, IMF, and WTO do not have to be neoliberal institutions. Other visions have been put forward over the years to make them work entirely differently. Same goes with the EU and the Eurozone.
    A single currency is not neoliberal, just as devaluations are not progressive. The IMF went around the world making countries deflate and depreciate as part of structural adjustment. Canadians were happy to see the Can currency drop in the mid-90s to compensate for the structural adjustment package of the 95 budget. But only a transfer of purchasing power from those that have, to those that have less, makes more people better off. Because European countries can not devalue the deflation policies are even more absurd than those imposed by the IMF, and many are starting to understand the need to transfer purchasing power in the opposite direction from the way it is going in Europe (and Canada).

  • Duncan wrote

    ‘A single currency is not neoliberal, just as devaluations are not progressive.’

    But that is not the point. The way the EU, EMU, and ECB are ordered is neoliberal. And it was precisely this institutional configuration that made us euro sceptics. To be clear there are those that are against the pan european project and those of us who are against the institutional architecture of the European project. The Swedish left was right to reject Euro given the institutional configuration.

  • I do not like the way the Euro is run, but I still think the Euro is better than junking it.
    I opposed free trade with the U.S., and think it should be scrapped.
    Different genes, I would say, in each project. The politics of Europe are lets stop hating each other, and going to war. FTA/NAFTA politics are about Canada getting into line.
    The left develops a critique of the WTO but does not oppose multilateral orgnanization of trade and investment. The ITO (killed by the US congress) enshrined full employment.
    The single currency project is worth saving. Look at who opposes it, and what they want to see in its place.

  • I am with Duncan on this one, not everything was neo-liberal. The whole single currency from a global perspective was more of a protection against Neo liberlism in many ways.
    Also the push towards low labour standard countries towards higher standards was fairly progressive. Point being, there are many roles the eu and teh drive towards unfication were much more than installing neo-liberalism. And given history, it has done more than anything at sorting conflicts and addressing grievances. It must be saved to build upon. One needs this space before addressing anything else, it must be prserved and progressivesnare making a huge mistake to not support it.

  • Ahhhh yeah, that should be lower labour standards pushed up towards a higher unified standard.

  • I think we are all talking passed each other here. Duncan, a European project with a unified currency and a well worked out set of progressive fiscal arrangements would be just fine. The way the EU, EMU and ECB are currently configured is not to my mind better than going back to national currency regimes for some countries.

    Are you really arguing that Greece for example is better to stick it out with the Euro?

  • The Eurozone countries could buy the Greek debt at a deep discount. Greece represents 3 per cent of EU GDP. Only petty politics led by Germany is stoping this simple solution. That and the fact that the short sellers would take a bath. And the financiers of the short sellers are more important than the Greek public, since they are German, French, and other banks.
    Travis I hope we never have to see what happens if Greece gets booted out of the Euro.

  • To be brutally honest here, the sheer fact that little has been done to date other than push draconian cuts onto the peoples of these troubled peripheral countries is all telling. I mean we just went through the biggest financial private sector financial failures since the 30’s.

    We all know these are exceptional times, and one would think that somewhere the capacity could be developed to properly address the crisis. I am no fan of shoveling more money into the coffers of debt holders, but as we have stated on here, it is but a death spiral hold that the financiers have a hold on the world interests. (European success is world success, especially if a failure leads to another more deeper global recession).

    I do think the private and public debt holders need to have a longer term outlook. I think Krugman nailed it today when he makes he point, which we have on here, that the short run austerity is like sucking blood from the patient and eventually you kill the capacity for long run gain. Hence the need to go in with cash bazookas and paint everything green. But I am not a fan of such solutions and when this is in the process, I do think it is the private financiers and the shadow banking sector that needs to be looked at.

    Take for example how Greece got into this. Goldman Sach’s hid its lending practices to Greece in return for all sorts of crazy payments schemes. One report has it that special guaranteed revenue streams from public Greek Airports would be allotted to Gold man in return for hiding the loans. This of course is a bending of how the EU is supposed to work, debt to GDP ratios were key to functioning. This is just one of a number of questionable activities of the ‘ anything goes cause we are too big to fail’ shadow banking sector/ So the question is can these shadow bankers be regulated as I am convinced it was they who not only were a major causal factor in the crash but also an elite group were the only benefactors after the crash.

    Regulation of the shadow banking sector has got to be front burner during this whole EU discussion that everyone is having over the last month. Yet never do you hear much from the policy makers. All that was proposed has been thrown in the ditch by the side of the farm, right beside the harvesting tractor of the masses which is also stuck in that same ditch.

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