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Briefly : 30 billion euros of deficit reduction, which is alleged to bring the deficit back to 3% in 2013 (based on the absurd premise of 0.8% economic growth).

  • 10 billion in spending cuts
  • 10 billion from business, mostly in eliminating tax exemptions for big companies
  • 10 billion from households, of which 6.2 billion from the richest.


It is rightly acknowledged that people of faith have no monopoly of virtue - Queen Elizabeth II
by eurogreen on Fri Sep 28th, 2012 at 06:17:46 AM EST
[ Parent ]
Briefly : 30 billion euros of deficit reduction, which is alleged to bring the deficit back to 3% in 2013 (based on the absurd premise of 0.8% economic growth).
<sob>

The Eurozone's giant sucking sound (28.08.2012)

If Eurozone countries (except Germany) have a persistent current account deficit averaging close to 3% (and, on current trends, soon to exceed it), and at the same time the government deficit must remain below 3%, it becomes mathematically impossible for the Eurozone private sector (outside Germany) to net-save. This is unsustainable, because if the private sector is dissaving eventually it will become insolvent.

Take, for example, France:

If France were to bring its Government deficit below 3%, it would destroy the ability of the French private sector to net-save, assuming the current account deficit stays on trend (and it should: Germany's 6% current account surplus is as stable as if it were a successful policy target, and the Eurozone's neutral current account balance is consistent with the ECB pursuing a non-interventionistic foreign reserve policy).



I distribute. You re-distribute. He gives your hard-earned money to lazy scroungers. -- JakeS
by Migeru (migeru at eurotrib dot com) on Fri Sep 28th, 2012 at 06:32:59 AM EST
[ Parent ]
if we are in a liquidity trap, do we really want the private sector to be in a net save position?

The Hun is always either at your throat or at your feet. Winston Churchill
by r------ on Fri Sep 28th, 2012 at 08:01:07 AM EST
[ Parent ]
Doesn't matter what we want. We are in a liquidity trap (as the not-quite-Keynesians call it) because the private sector is in a position of enforced saving.

- Jake

Friends come and go. Enemies accumulate.

by JakeS (JangoSierra 'at' gmail 'dot' com) on Fri Sep 28th, 2012 at 08:40:29 AM EST
[ Parent ]
In a balance sheet recession, the private sector cannot avoid striving for a large net saving position, because the alternative is immediate insolvency.

I distribute. You re-distribute. He gives your hard-earned money to lazy scroungers. -- JakeS
by Migeru (migeru at eurotrib dot com) on Fri Sep 28th, 2012 at 09:48:52 AM EST
[ Parent ]
large segments (corporations) in the private sector are hoarding cash?

The Hun is always either at your throat or at your feet. Winston Churchill
by r------ on Fri Sep 28th, 2012 at 10:58:27 AM EST
[ Parent ]
That follows from the widespread private sector insolvency. They're holding cash to meet margin calls and because there's no productive use for that cash when there is no demand for product.

- Jake

Friends come and go. Enemies accumulate.

by JakeS (JangoSierra 'at' gmail 'dot' com) on Fri Sep 28th, 2012 at 11:25:31 AM EST
[ Parent ]
Well in that case, since no one wants to print money in the Buba, wouldn't it be better if the government got that cash instead of it sitting in the hands of those segments of the private sector who have it?

The Hun is always either at your throat or at your feet. Winston Churchill
by r------ on Fri Sep 28th, 2012 at 11:36:36 AM EST
[ Parent ]
Only if we trust said government to spend it?
by Metatone (metatone [a|t] gmail (dot) com) on Fri Sep 28th, 2012 at 12:20:03 PM EST
[ Parent ]
That depends on which sorts of firms have it, and the term structure of their liabilities.

It is entirely conceivable, in a situation such as the present, that a firm we would like to keep existing would hold cash or cash-equivalent assets to meet future payments due. Because they can neither be certain that they can roll over their liability, nor that any non-cash asset will be not-toilet-paper by the time they need to make payment.

Basically, it only makes sense to take the cash away if there are no short- or medium-term liabilities that the cash will be needed to meet, or if you can guarantee that those liabilities will be rolled over (which you can't, because the BuBa has its thumb up its ass).

Or if you think the company in question should be taken out back and shot on general principles. Which is, of course, the case for some companies.

- Jake

Friends come and go. Enemies accumulate.

by JakeS (JangoSierra 'at' gmail 'dot' com) on Fri Sep 28th, 2012 at 02:33:32 PM EST
[ Parent ]
Ulrike Guérot: Germany in Europe: What Germany expects from France (28th September 2012)
Secondly, the Germans are wondering when France will start listening to (and answering) the German discussion about political union. Germans have understood that France is still hoping for Eurobonds - within the next five years - as French Finance Minister Pierre Moscovici recently restated in London - and Germans are trying to argue that these will not be `for free' but require a different set up of European democracy.  

In this respect, it was interesting to listen to Karine Berger, a member of parliament for the French Socialists, this week at a conference on European democracy and the way out of the crisis organised by the Heinrich Böll Foundation. In a panel discussion, Mme Berger stated repeatedly that she does not believe the euro has much chance of surviving if the eurozone does not ultimately enter a debt community and create Eurobonds. In essence, I agree. She said that if this does not happen, there would not be a common solution to the euro crisis. For the rest of the world, Mme. Berger continued, the currency union wouldn't exist anyway, as interests rates vary greatly again. If there is no debt community, there is no budgetary union and the euro would be finished. However, a budgetary union cannot exist without parliamentary control. Europe cannot take parliamentary control over budgets away at the national level and give it to non-parliamentary (and therefore non-democratic) institutions on the European level. So far, so good, and again I agree. But then the discussion touched on the point of the current Franco-German misunderstanding: when the moderator questioned her deeper about European parliamentary control, she answered that, indeed, the right of the EP to oversee the budget must be strengthened - but she meant the EU budget.

Germans however, are currently having a discussion on the topic and are mostly arguing that a debt community would necessitate common parliamentary control on the European level (however this might be organised), about national budgets, including, as van Rompuy's  report on a genuine banking union also requests, the introduction of a `budgetary ceiling' which ought to be under European and preferably parliamentary control.  This is probably also what ECB president Mario Draghi meant by the condition of `budgetary oversight' that he mentioned in his speech in Berlin this week at the Annual Conference of the German Industrial Association, BDI, though he did not provide an answer as to how this could and should be organised. Germans are having an intense discussion about how it could be organised. One idea is to create a Eurozone parliament, which would satisfy the requirements of parliamentary legitimacy and therefore qualify as a body for collective decision-making on both the discretionary spending of the Eurozone and the oversight of national budgetary ceilings. French ideas on this would be welcome, but they would need to go beyond strengthening the rights of the EP concerning its own budget.

With lots, lots of links.

I distribute. You re-distribute. He gives your hard-earned money to lazy scroungers. -- JakeS
by Migeru (migeru at eurotrib dot com) on Fri Sep 28th, 2012 at 07:16:27 AM EST
[ Parent ]
on how revenues from capital will be submitted to the same tax regime as revenues from labor. Devil is gonna be in the details I suspect.

The Hun is always either at your throat or at your feet. Winston Churchill
by r------ on Fri Sep 28th, 2012 at 07:54:12 AM EST
[ Parent ]
in 2013. Clearly, the Socialists have no intention of hitting the 3% target, as this is an absolutely unrealistic forecast they are pinning their budget to.

A big gamble, with a big press conference and P/R to go along with it, but one wonders what will be the next moves expected once it becomes clear that the 3% target will not in fact be reached.

It's a matter of months, at best, that this becomes clear, and then, Holland's gamble to punt the issue down the road will start showing whether ultimately it pays off or it does not.

I for one am pessimistic.

The Hun is always either at your throat or at your feet. Winston Churchill

by r------ on Fri Sep 28th, 2012 at 07:58:39 AM EST
[ Parent ]
The game seems to be : OK we'll pretend to buy the Austerian lunacy that we can cut our way to growth. Then, when we've missed the 3% target because of the lack of growth, (and Spain etc likewise) then the Germans will be ready for some expansionary policies.

It is rightly acknowledged that people of faith have no monopoly of virtue - Queen Elizabeth II
by eurogreen on Fri Sep 28th, 2012 at 09:09:00 AM EST
[ Parent ]
That's a plan or a punt?
by afew (afew(a in a circle)eurotrib_dot_com) on Fri Sep 28th, 2012 at 09:17:52 AM EST
[ Parent ]

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