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DAILY MORNING NEWSBRIEFING: "I was told to say there was no meeting... We had certain necessities to consider" (Eurointelligence, 10.05.2011)
Juncker's spokesman Guy Schuller admits to lying about the secret meeting; Juncker himself is quoted as saying :"when it becomes serious, you have to lie", thereby undermining the credibility of the EU's policy response; Lucas Zeise says lies are a hallmark of an economic policy end game, with the eurozone now very likely to break up; Jean Claude Trichet has proposed another €50bn loan for Greece; Greek tax revenues fall way short of the plan; there are reports that Angela Merkel will travel to Brussels for emergency consultations; euro falls further, and bond spreads rise; an FDP politician has tabled a motion to end all eurozone rescue packages; there are huge recriminations in Brussels against the Germans for leaking the meeting, and for undermining the Greek stabilisation efforts; S&P downgrades Greece, and says that even a voluntary debt restructuring constitutes default; Finnish parties start difficult negotiations about Portugal's bailout package today; Portuguese banks borrowed €48bn from ECB in May; new FDP chief Philipp Rösler becomes economics minister, asserting his power in the party; German exports and imports reach new records, with net exports rising; the euro, meanwhile, is far more popular in France than it is in Germany.


Economics is politics by other means
by Carrie (migeru at eurotrib dot com) on Tue May 10th, 2011 at 02:17:56 AM EST
The best option, it now seems, is for Germany to leave the Euro and for the ECB to be reformed into a genuine monetary authority, financial regulator, and lender of last resort.

Index of Frank's Diaries
by Frank Schnittger (mail Frankschnittger at hot male dotty communists) on Tue May 10th, 2011 at 06:04:07 AM EST
[ Parent ]
Quoting for the umpteenth time... Germany is unfit for the euro (By Joerg Bibow, 21.04.2010)
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.

Regarding Euroland's economic performance since 1999, three stark facts or policy blunders stand out. First, while similar in size to the US economy, Euroland is remarkably export dependent and prone to domestic demand stagnation. The world economy boomed at record rate in 2003-7. Euroland for long was the "sick giant". Joining late, it crashed all the harder as the global crisis hit. Second, the 2001-5 period of protracted domestic demand stagnation saw finance ministers at pains to cut budget deficits below 3 percent, as the so-called Stability and Growth Pact prescribes, and the ECB similarly at pains to squeeze headline inflation below the 2 percent mark that seems to constitute price stability. Obsession with what lawyers judge to be stability produced rather perverse results. Hiking indirect taxes and administered prices to achieve their magic number, finance ministers thereby helped to keep inflation above the ECB's magical number. In turn, the ECB's obstinate refusal to care about domestic demand kept budget deficits above 3 percent, triggering further indirect tax hikes, and so on. Contrary to the notorious stability-oriented gospel, it is hard to conceive of a more counterproductive macroeconomic regime than this. Third, the brief history of the euro saw the emergence of stark divergences and buildup of grave imbalances within an economic area that can no longer rely on exchange rate realignments to solve them - imbalances the implosion of which have left Euroland stuck in the mess it is in today, once again hoping for strong global growth to pull it out.

Sadly enough, Germany has been central to all of this. Germany is the biggest factor in Euroland's export dependence, growing on exports only while domestic demand, especially private consumption, is notoriously stagnant. Among the first countries to break the Maastricht deficit limit dreamed up by its own lawyers, Germany contributed most to the ECB's misses of its headline inflation mark by hiking indirect taxes. Worst of all, Germany reneged on the euro's cornerstone to abstain from beggar-thy-neighbor policies.



Economics is politics by other means
by Carrie (migeru at eurotrib dot com) on Tue May 10th, 2011 at 06:08:03 AM EST
[ Parent ]
And market-maker of last resort.

Economics is politics by other means
by Carrie (migeru at eurotrib dot com) on Tue May 10th, 2011 at 06:10:29 AM EST
[ Parent ]

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