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IM is complaining about anti-German xenophobia, but is it xenophobia when German economists agree that the direction German economic policy makers are pushing the EU in is misguided?

GERMANY IS UNFIT FOR THE EURO (Joerg Bibow)

Not for the first time in its history the German people have been irresponsibly misled by a political leadership that seems to have lost any sense of history, any sense of order and stability in Europe, and any sense of Germany's key contributing role to the current crisis. As ever, the mindset of lawyers frames the political debate among a political class that seems inhumanly uneducated in matters of economics. If economic voices are heard at all, it is usually the voice of the Bundesbank. It is a peculiar democracy that expects either its constitutional court or central bank to have the final word of wisdom.
Berlin weaves a deficit hair-shirt for us all (Wolfgang Münchau)
I can foresee two outcomes. First, Germany might end up in a procyclical downward spiral of debt reduction and low growth. In that case, the constitutionally prescribed pursuit of a balanced budget would require ever greater budgetary cuts to compensate for a loss of tax revenues.

...

One could also construct a virtuous cycle - the second outcome. If Germany were to return to a pre-crisis level of growth in 2011, and all is well after that, the consolidation phase would then start in a cyclical upturn.

Either of those scenarios, even the positive one, is going to be hugely damaging to the eurozone. In the first case, the German economy would become a structural basket case, and would drag down the rest of Europe for a generation. In the second case, economic and political tensions inside the eurozone are going to become unbearable. ...

...

While the balanced budget law is economically illiterate, it is also universally popular. Average Germans do not primarily regard debt in terms of its economic meaning, but as a moral issue. ...

... The balanced budget constitutional law is therefore not about economics. It is a moral crusade, and it is the last thing, Germany, the eurozone and the world need right now.




Keynesianism is intellectually hard, as evidenced by the inability of many trained economists to get it - Paul Krugman
by Migeru (migeru at eurotrib dot com) on Sat Feb 5th, 2011 at 11:16:07 AM EST
[ Parent ]
What the hell has this with anything? What exactly has the debt bake or other nonsense to with the question of the neoliberal irish policies. Do the two economist you cite think Ireland is a economic model? I doubt that.
by IM on Sun Feb 6th, 2011 at 12:05:55 PM EST
[ Parent ]
You really are not paying attention to your own government's policy position, are you?

The "debt brake" has now become a condition that Germany wants to impose on the entire EU as a conditionality for allowing enough money to be lent to get over the sovereign debt crisis.

Since the debt brake is economically harebrained, default and let the chips fall where they may is looking better by the day, to be honest.

Keynesianism is intellectually hard, as evidenced by the inability of many trained economists to get it - Paul Krugman

by Migeru (migeru at eurotrib dot com) on Sun Feb 6th, 2011 at 12:42:49 PM EST
[ Parent ]
Nationalistic nonsense. I am not responsible for the policy position of the german government. And Ireland brought itself to ruin without any debt brake. So you are suddenly of the opinion that Ireland is  able to service its debt, if not for the newest german demands?
by IM on Sun Feb 6th, 2011 at 02:23:54 PM EST
[ Parent ]
No, Ireland is not able to service its debt, therefore it will be defaulted on sooner or later. Given that, better that it be sooner rather than later. And the German policy proposals not only have nothing to do with the causes of the crisis (since Germany brought itself to ruin without any debt brake, as you say), they do nothing to resolve it.

Keynesianism is intellectually hard, as evidenced by the inability of many trained economists to get it - Paul Krugman
by Migeru (migeru at eurotrib dot com) on Sun Feb 6th, 2011 at 02:32:28 PM EST
[ Parent ]
If Belgium and Italy were able to handle  this level debt, since twenty years now, Ireland should be too. And how exactly the german debt brake in 2009 was bale to cause the Irish property bust and bank bankruptcy in 2008 I really don't get.

And Germany did get somewhat better through the crisis, because it did talk austerity, but did do stimulus.

by IM on Sun Feb 6th, 2011 at 02:49:53 PM EST
[ Parent ]
Everyone did stimulus in 2009.

Just like everyone is doing austerity in 2010.

And if "doing stimulus" is how Germany got out of the crisis, countries that haven't still gotten out of the crisis should continue to do stimulus.

Nobody is claiming that the German debt brake caused anything before it was enacted. The claim is that the debt brake is strongly deflationary, which will only make growth more sluggish and debt more unsustainable in the future, and is therefore incredibly harebrained.

Keynesianism is intellectually hard, as evidenced by the inability of many trained economists to get it - Paul Krugman

by Migeru (migeru at eurotrib dot com) on Sun Feb 6th, 2011 at 02:55:49 PM EST
[ Parent ]
If Belgium and Italy were able to handle this level debt, there's no reason for the markets to cut off credit to anyone in the Eurozone now. Therefore the markets are insane and support at below market prices (as opposed to punitive rates) should be provided by those parts of the Eurozone still enjoying access to the credit markets, for the sake of Eurozone financial stability.

Keynesianism is intellectually hard, as evidenced by the inability of many trained economists to get it - Paul Krugman
by Migeru (migeru at eurotrib dot com) on Sun Feb 6th, 2011 at 02:58:33 PM EST
[ Parent ]
But that is exactly what is happening now. And you demand that Ireland thanks its european partners by defaulting on her debt. That model can't work.

What is necessary, if it is necessary, is a new deal about the interest rate. But that is not the same as  a default on sovereign debt engineered to hit only foreigners.

And am not sure why you want to argue about german economic policies 2008-2010: Clearly fiscal expansion, reaching their height in the first half of 2010. Is that really in doubt anymore?

This whole Ireland is insolvent meme is nonsense. There have be quite a number of countries with a public debt around 100% of gdp.  

by IM on Sun Feb 6th, 2011 at 03:42:17 PM EST
[ Parent ]
This whole Ireland is insolvent meme is nonsense.

Perhaps you should be arguing this point with the bond raiders, who seem unusually keen to assure everyone otherwise.

by ThatBritGuy (thatbritguy (at) googlemail.com) on Sun Feb 6th, 2011 at 03:48:36 PM EST
[ Parent ]
The wisdom of "the markets"? Come on.

And if you swear fealty to "the markets", how do you think they will react to a default?

by IM on Sun Feb 6th, 2011 at 03:53:46 PM EST
[ Parent ]
The markets can stay irrational longer that one can stay solvent.

In the case of Ireland, if you think Ireland is solvent, then it is in fact being subjected to an irrational run (withdrawal of short-term liquidity). The proper response in that case is for the Central Bank to provide liquidity at a reasonable non-market rate.

Instead of that the Central Bank tells the Irish government to call in the IMF.

Also, when the European Council tries to organise a collective fiscal facility, Germany screams "no bail-out clause!". When the ECB tries to buy sovereign bonds in the secondary market, the (German) Chief Economist and the Bundesbank chair wrongly claim that is forbidden by treaty (the treaty forbids buying at issue, which is bad enough already). The European Commission, Council, Ecofin and Central Bank are all such neoliberal market-worshippers that they actually take the market's assessment of Ireland's solvency at face value.

The Irish "rescue package" entails, under any plausible scenarios, including the ones put together by the Ecofin, an actual increase in the Irish debt burden, while at the same time demanding IMF-style "conditionalities". Some "rescue". No wonder the Irish government didn't want to be "rescued" and had to be forced.

Keynesianism is intellectually hard, as evidenced by the inability of many trained economists to get it - Paul Krugman

by Migeru (migeru at eurotrib dot com) on Sun Feb 6th, 2011 at 04:07:03 PM EST
[ Parent ]
No, that's not what's happening.

What's happening is that the Irish sovereign is being funded at 5.7 % when it should be funded at 0.0 %.

The fact that the ECB has finally woken up and started doing its job w.r.t. the private Irish banks (a decade late and a billion € short) does not excuse the fact that the ECB still isn't doing its job and printing money on demand for the Irish government.

- Jake

Austerity can only be implemented in the shadow of a concentration camp.

by JakeS (JangoSierra 'at' gmail 'dot' com) on Sun Feb 6th, 2011 at 06:55:17 PM EST
[ Parent ]
I am not responsible for the policy position of the german government.

Analogously, no individual Irishman is responsible for the economic policy of the Irish government. Or are they? You have argued elsewhere on this thread that they are.

Keynesianism is intellectually hard, as evidenced by the inability of many trained economists to get it - Paul Krugman

by Migeru (migeru at eurotrib dot com) on Sun Feb 6th, 2011 at 02:46:28 PM EST
[ Parent ]
Did I talk about individual irish citizens? There is a collective responsibility in a democracy. And the opposition during the years of the celtic tiger was very small. And because of this responsibility you can't do something like a foreigners only default.
by IM on Sun Feb 6th, 2011 at 03:26:34 PM EST
[ Parent ]
The ECB isn't doing its job. If the ECB were doing its job, the Irish sovereign would be funded at 0.0 %, and we wouldn't be having this discussion.

Since the ECB is obviously unresponsive to the plight of Irish widows and orphans, the Irish state has a duty to protect Irish widows and orphans, and incentivise the ECB to start doing its fucking job and printing money on demand at 0.0 % to sovereigns needing stimulus. The easiest way to incentivise proper behaviour from the ECB is to cause pain to the ECB's political backers. Which means causing pain to the Frankfurt-based banks, and which means causing pain to Mrs Merkel's government.

You call it nationalist. I call it realpolitik. If you have some alternate suggestion for how to get the ECB to start providing unlimited stimulus money for the Irish economy at somewhere around the Frankfurt overnight rate, then I'm all ears. But so far you have presented no viable political strategy for how the Irish can continue to do stimulus without defaulting. And you have provided no political strategy - nevermind a credible one - for how the Irish state can obtain the necessary liquidity for continued stimulus without either leaving the €-zone or threatening to default on foreigners first, in order to pressure those foreigners' governments to pressure the ECB.

Since you seem so keen on applying collective punishment to Ireland for electing Fianna Fail, you may think of it as applying collective punishment to any polity that doesn't pressure the ECB to start doing its fucking job and printing unlimited money for use in Keynesian stimulus.

- Jake

Austerity can only be implemented in the shadow of a concentration camp.

by JakeS (JangoSierra 'at' gmail 'dot' com) on Sun Feb 6th, 2011 at 07:06:27 PM EST
[ Parent ]
I am not responsible for the policy position of the german government.

But the Irish pensioners and unemployed that you're happily throwing under the bus are responsible for the actions of their government?

You can't have it both ways. Either the Irish people don't deserve to suffer for electing evil morons to high office, or the German people don't deserve to get bailed out, because they elected evil morons to high office.

- Jake

Austerity can only be implemented in the shadow of a concentration camp.

by JakeS (JangoSierra 'at' gmail 'dot' com) on Sun Feb 6th, 2011 at 06:50:45 PM EST
[ Parent ]
Bailed out by whom?

Don't you think there is collective responsibility?

by IM on Mon Feb 7th, 2011 at 09:24:49 AM EST
[ Parent ]
No, I don't believe in collective responsibility. I don't believe that it is legitimate to murder a Teabagger just because he voted for a torturing war criminal. And I don't believe that it is legitimate to murder an Irish widow's pension just because she voted for a crooked finance minister.

I do believe in defeating neoliberal policies whenever and wherever they sully humanity with their depravity. In this particular situation, defeating neoliberal policies means defeating Austerity. Defeating Austerity means threatening Mrs. Merkel and Messrs. Weber and Stark with a sufficiently big stick that they start printing money wholesale. And the only stick Ireland has that is big enough to make Messrs. Weber and Stark shit their pants and start printing money wholesale is the threat of making several major German financial institutions insolvent.

And if a German pension fund or two is collateral damage in that fight, well then there's nothing wrong with insolvent private pension funds that better public pensions won't solve.

If you have a better plan for how to fight back against "Hartz IV For Ireland," then I'm all ears.

- Jake

Austerity can only be implemented in the shadow of a concentration camp.

by JakeS (JangoSierra 'at' gmail 'dot' com) on Mon Feb 7th, 2011 at 09:40:50 AM EST
[ Parent ]

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