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The elephant in the room is the fact that the political consensus that the EU is attempting to create - austerity forever - is going to produce problems like those presently seen in the UK and the US, as well as Hungary, etc. - the further rise of the right. But the governing elites in the governments comprising the EU are too distracted by this imbroglio to notice or are using it as a reason not to have to deal with the consequences of their policies - the tip of that spear being austerity. What would the EU do were both France and Germany to be taken over by leaders representing ascendant right wing parties who more resemble Trump than any present 'mainstream conservative' politician? Another ten years of the same ole same ole and what are the chances the USA and Europe will not both be saddled by such leaders by the furious and easily misled disaffected bottom 60% of the population?

"It is not necessary to have hope in order to persevere."
by ARGeezer (ARGeezer a in a circle eurotrib daught com) on Fri Oct 20th, 2017 at 06:04:31 AM EST
The EU puts some restrictions on absolute debt levels (60% GDP) and Budget deficits (3% GDP) which have been more honoured in the breach in recent times and which, if observed, limit the degree to which individual governments can act counter-cyclically in bad economic times while having little practical effect when times are good.

AFAIK the intent is to prevent individual irresponsible governments (aka Greece, Italy) from racking up big debts and then expecting responsible governments (aka Germany, Benelux and Nordic) to bail them out when everything goes south.

This of course ignores structural imbalances within the EU and especially the Eurozone and and reduces the scope governments - who have already lost control of their interest rates and the value of the Euro - have of using Keynesian stimulus to revive a recession hit economy.

All of which wouldn't matter as much if ECB policies were more geared to the needs of struggling peripheral economies or if the EU itself has a greater fiscal capacity to correct imbalances within the Eurozone as a whole. Hence the debate and need for Eurobonds and common deposit insurance etc.

However it would be wrong to characterise this as austerity forever for most countries other than Greece which has a plainly unsustainable debt burden and little hope of escaping ongoing austerity without debt forgiveness.

What it does mean is that the EU, as a whole, has a limited ability to respond effectively to external or asymmetric economic crises and is forever bedevilled by economic imbalances within.

Attempts to complete the banking Union, limit the degree to which sovereign governments/taxpayers can become liable for private banking debts, and create common deposit insurance schemes etc. may improve the situation at he margins, but the bottom line is that (thanks to net contributor intransigence) the EU lacks significant fiscal capacity to help any members in trouble or indeed respond effectively to mitigate the effects of a global economic crisis on the EU as a whole.

Index of Frank's Diaries

by Frank Schnittger (mail Frankschnittger at hot male dotty communists) on Fri Oct 20th, 2017 at 06:03:15 PM EST
[ Parent ]
However it would be wrong to characterise this as austerity forever for most countries other than Greece which has a plainly unsustainable debt burden and little hope of escaping ongoing austerity without debt forgiveness.

Well, that is optimistic! But it is also practically irrelevant at this point. Germany is imposing austerity on its own citizens to the extent that it, combined with the surge of Syrian and other immigrants, most of whom are followers of Islam, has fueled the rise of AFD. And nothing short of a massive social welfare initiative for the bottom half of Germany's indigenous population is likely to reverse that - as if it were even a conceivable option for any likely German Government. And Macron - who reminded Hollande about Say's Law and is busy pushing through 'reforms' in France will do nothing to improve the lot of the bottom half of Frenchmen.

Anything that might have a chance of working is off the table for even discussing - see Varoufakis. Putin must be laughing. At least HE knows how to gull the bottom 70% of Russians it seems and he is well on his way to being democratically elected as President for Life of Russia.

"It is not necessary to have hope in order to persevere."

by ARGeezer (ARGeezer a in a circle eurotrib daught com) on Tue Oct 24th, 2017 at 04:42:25 AM EST
[ Parent ]

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