Welcome to European Tribune. It's gone a bit quiet around here these days, but it's still going.
Display:
Martin Wolf: A disastrous failure at the summit (FT.com)
Mr Cameron presented his colleagues with a list of demands designed to protect both the City and the ability of the UK government to regulate it, largely unhindered by European regulators. Mr Cameron could have stated, instead, that he would accept a treaty applicable only to members and candidate members of the eurozone. He could have intimated that he would put a treaty that did any more than this to a UK referendum (which would have been surely lost). Instead, he ended up with no additional safeguards for the City and a semi-detached status inside the European Union, of which, he has insisted, he wants the UK to remain a member. That is not a success. He has achieved nothing positive, but will undermine the credibility of UK membership of the EU. That brings substantial costs.

...

The core decision was to strengthen fiscal discipline, so building what Angela Merkel, Germany's chancellor, and Nicolas Sarkozy, the French president, last week called a "stability and growth union" - or, as I think of it, an "instability and stagnation union". Even under an intergovernmental treaty, this reinforced discipline could probably still occur via EU institutions, as Olli Rehn, European commissioner for economic and monetary affairs, now argues.

...

Still more important, as professor Kevin O'Rourke of Oxford university argues on Project Syndicate, is that it is also an economic monstrosity. Let me make this point by turning last week's analysis of the balance of payments into one of foreign, private and government financial balances in eurozone members (see charts). To remind readers: these have to add up to zero, by definition. But how they go about adding up is revealing.

Wow. First pointing out that the "Stability and Growth Pact" and now the "Stability and Growth Union" actually foster instability and stagnation, and then getting religion on three-sector accounting (get your paradigm shifts 19 months early on European Tribune).

tens of millions of people stand to see their lives ruined because the bureaucrats at the ECB don't understand introductory economics -- Dean Baker
by Migeru (migeru at eurotrib dot com) on Wed Dec 14th, 2011 at 04:36:10 AM EST
[ Parent ]
Kevin O'Rourke: A Summit to the Death
One lesson that the world has learned since the financial crisis of 2008 is that a contractionary fiscal policy means what it says: contraction. Since 2010, a Europe-wide experiment has conclusively falsified the idea that fiscal contractions are expansionary. August 2011 saw the largest monthly decrease in eurozone industrial production since September 2009, German exports fell sharply in October, and now-casting.com is predicting declines in eurozone GDP for late 2011 and early 2012.

...

... fiscal union is an essential counterpart to monetary union. If the gumbo industry goes into decline, driving the US state of Louisiana into a recession, residents will pay fewer federal taxes and receive more fiscal transfers. These financial flows are a natural counter-cyclical mechanism that helps local and regional economies to weather bad times. In a hypothetical European fiscal union, there would certainly be transfers from Germany to the periphery in 2011, but a properly designed setup would have ensured flows to Germany in the 1990's, as it struggled to cope with the costs of reunification with East Germany.

...

With this in mind, the most obvious point about the recent summit is that the "fiscal stability union" that it proposed is nothing of the sort. Rather than creating an inter-regional insurance mechanism involving counter-cyclical transfers, the version on offer would constitutionalize pro-cyclical adjustment in recession-hit countries, with no countervailing measures to boost demand elsewhere in the eurozone. Describing this as a "fiscal union," as some have done, constitutes a near-Orwellian abuse of language.



tens of millions of people stand to see their lives ruined because the bureaucrats at the ECB don't understand introductory economics -- Dean Baker
by Migeru (migeru at eurotrib dot com) on Wed Dec 14th, 2011 at 05:11:47 AM EST
[ Parent ]
Wow. First pointing out that the "Stability and Growth Pact" and now the "Stability and Growth Union" actually foster instability and stagnation, and then getting religion on three-sector accounting

From the quote above this one it appears he has also gotten religion about Irving Fisher's Debt-Deflation Theory of Great Depressions. How is he on Minski? And will he bring FT along or will he be jettisoned?  

"It is not necessary to have hope in order to persevere."
by ARGeezer (ARGeezer a in a circle eurotrib daught com) on Wed Dec 14th, 2011 at 12:15:48 PM EST
[ Parent ]

Display:

Top Diaries

Leave UK <dot> DT

by Oui - Dec 4
57 comments

It's Tory Austerity Stupid!

by Oui - Dec 9
24 comments

Occasional Series