Welcome to European Tribune. It's gone a bit quiet around here these days, but it's still going.
Lafontaine sees the End of the Euro coming - Interview - Spiegel Online
...and he designates Merkel and Sarkozy as irresponsible spendthrifts.

There is a common currency but economic, financial, social, and wage policies are drifting apart... German wage dumping... The banks have now succeeded in blaming the state for maldevelopments. Unfortunately, most politicians are parotting this nonsense. Two years ago statesmen saw that deregulated finance have led to massive additional expenditures because banks had to be bailed out. Put differently, deregulated finance is a giant debt machine. If that machine is not stopped, if they're not shrunk and strongly regulated this debt will ever increase.

SPON: Isnt that a bit too easy? Many EU countries have borrowed heavily from financial markets to finance welfare, living above their means and becoming dependent on financial markets.

No. The German example shows - HRE, Commerzbank, IKB, Landesbanken - that the debt explosions originating from banks have nothing to do with welfare spending. Ireland and Spain had -before their banks bombed- no debt problem. It would be fatal if European governments again saw the main problem in welfare spending. That results in absurd policy. Instead of freeing themselves from the yoke of financial markets, the Agenda 2010 is applied on all EU countries. The result: the economies are suppressed and debt increases. We have two notorious debtors: the banks on one side and Angela Merkel and Nicholas Sarkozy with their austerity programs on the other side.

...A classic liberal would have to say: all banks are to be shrunk so that they're no longer too-big-to-fail. E.g. Deutsche Bank wouldn't be allowed to have a balance sheet of 2000 billion but only around 200 billion...

On a recent talk show he (the classic lefty) and the neoliberal H.W. Sinn largely concurred that the EU polity is screwing around with side battles like sovereign debt and not tackling the real problems of easy money and overleverage. Additional points of concurrence: banks trying to offload debt onto taxpayers, stability and fiscal pact won't work and are undemocratic. Says the FAZ ("Lafontaine and Sinn shoulder to shoulder"): "'Is Germany also going down now?' ...One has to fear yes, if the chief lefty Lafontaine and neoliberal Sinn agree so often."

Schengen is toast!
by epochepoque on Tue Dec 13th, 2011 at 02:23:05 PM EST

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