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“The Mindset”: Growing Number of Investment and Economic Analysts Grasping Reality of Eurozone Crisis

The Teutonic "Haircut"

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COMMENT: As “Europa Germanica” takes form and additional substance, the reality  of what Germany is doing is being recognized by a growing number of analysts.

This is not to say that they are conversant with the fundamental realities discussed here–the Bormann capital network, the program theorized by Friedrich List, the Third Reich’s manifestation of List’s theories, the Third Reich’s plans to go underground, the Western Allies’ negation of the de-Nazification edict for postwar Germany, the Webb-Pomerene Act and the World Commerce Corporation, the theories of Carl von Clausewitz–but they are grasping the extent to which the German political and economic agenda is bad for business.

German’s power elite certainly does not believe in collective ownership of the means of production–they believe in  German control of the means of production. Once termed “National Socialism,” it might be labeled “monopoly (or “cartel”) imperialism.”

Their adherence to the brutal, thoroughly discredited “austerity” doctrine should be seen as what it is–waging war “by other means,” as von Clausewitz put it. The post below has noted that: It is the occupation of Poland in a very real sense just, accomplished without tanks or bloodshed as money is used instead of armaments to dominate and control a nation.” 

To those who might view this as an extreme analysis, recall that the fascist LAOS party was installed in late 2011 as part of the provisional government in Greece, installed by “the troika” (read Germany) with no input whatsoever from the Greek people.

As noted in the remarkable piece reproduced in its entirety below, the program Deutschland is imposing on Europe undermines the security of any wealth invested in the afflicted nations. Anyone or anything foolish enough to invest in Europe should be prepared to have their assets appropriated and/or negated at some point.

In addition, one should not lose sight of the fact that the “Final Solution to the Greek and Cypriot Crises” will, like previous, superficial steps to resolve the crisis, keep the Euro weak, benefiting Germany’s export-driven economy.

One wonders how much exposure U.S. banks have to European financial institutions. If the fears of a contagion of bank runs and capital flight destroys banks in the weaker Eurozone countries, how will that affect American lenders?

The “Europa Germanica” is deliberate and, to any honest analyst familiar with the historical record, preconceived.

The post below also notes the relative economic weakness of Germany itself. Suffice it to say that most Germans have not shared in the largesse of the past decade, although they have been spared the trauma visited upon other European citizens. They are exceedingly vulnerable to the propaganda of their own media establishment. 

Kudos to “SWAMP” for researching this one for us. The post is reproduced in its entirety here, with emphasis added.

“The Mindset” by Mark J. Grant [Author of Out of the Box] and Tyler Durden; Zero Hedge; 3/26/2013.

EXCERPT: In all of the tortuous moments that have taken place with the European Union the one thing that has become apparent is a radical change of mindset. In the beginning there was a kind of democratic viewpoint. All nations had a voice and while some were louder than others; all were heard. This is no longer the case.
There is but one mindset now and it is decidedly German. It is not that this is good or bad or even someplace in between. That is not the real issue. The crux of the matter is that not all of the people in the EU are Germans and so they are not used to being treated in the German fashion, they do not live their lives like Germans and, quite importantly, they do not wish to be Germans.

There is the problem.

The Germans will do what is necessary to accomplish their goals. There is nothing inherently bad or evil about this but it is taking its toll on many nations in Europe. In the case of Greece they went back and retroactively changed the covenants of the bond contract. They did not actually admit this of course and they called it other names but that is what they forced on Greece. In doing so they got the bond holders to shoulder a good deal of the expense of the bailout of Greece. You can say, “Right,” you can say, “Wrong,” but that is what they did. They accomplished their goal.

Always remember that the Germans are under severe financial pressure. They are still paying the bill for the East Germans. They support Target2 and their economy is just $3.6 trillion which is a fraction of the entire Eurozone. They are trying to support a house with less than desirable supports.

Then we come to Cyprus and they make it complicated and put one bank with another bank and take money from depositors and call it a “Tax” and say that people and institutions are liable for where they keep their money when it is more than 100M Euros. All true of course but they do not allow for any “Rule of Law” or “Due Process” by the judicial system but just mandate that the money will be used to help pay Europe for a loan to the sovereign government. Then they also tagged senior bond holders reversing their position of the last years so now, so that it can now be said with accuracy; everyone is at risk. Consequently they have to pay less and they have accomplished several goals which are to punish a “Casino Economy,” to put Cyprus in the same position as Greece, which is not only bankrupt but a ward of the European Union, and finally to insist, by the use of money, that Cyprus succumbs to the German demands. Note that CDS in Europe (Markit iTraxx Financial Index) has jumped 22% in just one week.

It is the occupation of Poland in a very real sense just accomplished without tanks or bloodshed as money is used instead of armaments to dominate and control a nation. Politically you may “Hiss” or you may “Applaud” but there are consequences here for investors that must be understood.

First and foremost is that they will not stop. Nothing will be allowed to get in their way. It can be senior bond holders one day, bank depositors the next, the dismantling of some Parliament on the day after that, a wealth tax on corporations on Thursday, the disallowance of dividends on Friday; with every announcement to come on Saturday evening. The next week can be a cap on bank bonuses, a demand that the cap on bank bonus savings be returned to the State, a financial transaction tax that gets expanded and taxes all bond coupons and the list goes on. What might be, could be, and nothing, absolutely nothing, will be allowed between Germany and her desire to control all of Europe.

I do not speak of motivation here. I am not bashing Germany in the furtherance of their desires. That is a useless and unnecessary exercise. However, what is profoundly necessary, if you invest in Europe, is to understand the risks that you are taking. If you place money in securities on the Continent then what is yours is theirs when they want it. I suggest you clearly understand that proposition and allow for that occurrence.

You no longer have any excuse after Greece and Cyprus. Everything may be called “one-off” but nothing is “one-off” as Germany expands its power wherever they can and by any means necessary. If you believe the propaganda, if you believe what you are told every day by the Press then I can virtually assure you that you will suffer dire consequences at some point and you will now have no one to blame but yourself.

There is also one “unintended consequence” of Cyprus and Greece. No one is going to invest in the local banks. Keeping money in the German banks, the Swiss banks or maybe even the French banks may go on but the local banks in each country are finished. In a clever move, the problems with Greece and Cyprus will drive the money from the local banking institutions in the troubled countries. Watch for capital flights in Spain, Portugal and Italy as their banks will be found unsafe and with good reason.

It is unknown, as of yet, if Germany can win this game. What can be said though is that, nation or investor, you will put yourself at peril by getting in their way. The current risks, in my opinion, are dramatically more than imagined by many or generally thought to be the case. There is no more investing in Europe just gambling and speculating and suffering the consequence of either. Anything can be changed, anything can be modified, and when the forfeiture of people’s savings is trumpeted as a “Tax” then even the English language has lost some of its meaning.

“Better to be safe than sorry,” has never had such important consequences as it does now in the European arena of the Great Game.

Discussion

14 comments for ““The Mindset”: Growing Number of Investment and Economic Analysts Grasping Reality of Eurozone Crisis”

  1. It looks like some of Dijsselbloem’s cohorts in Brussels are somewhat miffed at him for revealing another part of that “mindset”: that upcoming 700 billion euro “European Stability Mechanism” (ESM) fund that’s supposed to open next year might never be used regardless of the circumstances:

    Blunt Dutchman casts doubt on Europe’s bank promise

    By John O’Donnell

    BRUSSELS | Wed Mar 27, 2013 12:00pm EDT

    (Reuters) – Blunt remarks by a leading minister saying European support for troubled banks is a last resort laid bare what has long been an open secret in Brussels: promises to create a euro zone backstop for banks may never be fulfilled.

    Designed to secure a level playing field in the euro zone and prevent vulnerable countries having to contain financial problems alone, a European banking union was one of the biggest political commitments made to underpin the euro.

    Comments from the head of the Eurogroup of finance ministers this week that countries which encounter bank problems may have to cope alone, however, underscore resistance to delivering on last year’s promise.

    “Strengthen your banks, fix your balance sheets and realize that if a bank gets in trouble, the response will no longer automatically be that we’ll come and take away your problem,” Jeroen Dijsselbloem told Reuters.

    “We’re going to push them back,” the Dutch Finance Minister said shortly after announcing a bailout of Cyprus that forced the closure of the country’s second-biggest bank and imposed huge losses on big depositors.

    “That’s the first response we need. Push them back. You deal with them.”

    His candid remarks, described by one EU official as “not the most brilliant thing to say”, clashed with a commitment by euro zone leaders to club together when banks fail. They irritated many in Brussels, used to gentler diplomacy.

    The comments also grated in Dublin, which still hopes the euro zone will stand by a pledge to allow its rescue fund, the European Stability Mechanism, to recapitalize banks directly.

    Bailed out by European countries and expected to resume normal borrowing on markets this year, Ireland wants direct assistance available for its banks should they get in trouble again to avoid the risk of adding to the country’s debt…

    Recall that Ireland’s 85 billion euro “bailout” in 2010 came in the form of austerity mandates and an 85 billion euro loan(it’s the “bailout” gift that keeps on giving). All that that loaned money went to pay back the 85 billion euros in previous loans Ireland’s government had to take out from November 2008 (when the government nationalized all the private debt of their three largest banks) until the “bailout” in 2010. Those loans went to pay back mostly German and French banks that fueled the real estate bubble in the first place. So the 2010 “bailout” was really just a loan extension that would allow Ireland to pay back it’s previous 2008-2010 loans from the ECB/IMF/EU. That’s why Ireland could have an 85 billion euro “bailout” whle still needing its banks to be recapitalized.

    Continuing…


    It is also hoping the ESM will assume some of the burden of big recapitalizations that have already taken place.

    “The principle which was agreed in June was to break the link between sovereigns and banks and the clear understanding… is that the ESM … of course will potentially be used for recapitalizations,” Ireland’s European Affairs Minister Lucinda Creighton told Reuters. “That’s the whole point.”

    The euro zone’s three main triple-A rated states, Germany, the Netherlands and Finland, said last year the ESM could only be used if trouble arose at banks under European supervision in future, leaving “legacy” problems to home countries.

    BANK RUNS

    Dijsselbloem appeared to go further when he said the aim should be “a situation where we will never need to even consider direct recapitalization”.

    After remonstrations from several euro zone partners, he issued a statement clarifying that Cyprus was not a template but a special case.

    Another euro zone source said the Dutchman, barely one month in the job, had got carried away by his enthusiasm and needed to learn that, as head of the Eurogroup, “you must give up on expressing personal opinions”.

    Small countries like Ireland have every reason to be concerned. The closure of banks in Cyprus and the imposition of controls on money movements once they reopen may achieve exactly the opposite effect of a banking union.

    Capital controls are a step backwards from the integrated financial market with a single supervisor and resolution mechanism, designed to underpin confidence in banks no matter where they are based.

    “They have solved the problem in Cyprus temporarily, at the cost of a higher probability of future bank runs,” said Paul De Grauwe of the London School of Economics. That followed the decision to hand losses to some big depositors, sparing those with less than 100,000 euros, who are protected under EU law.

    “The signal has been given very clearly. If a country like Ireland gets into trouble, deposit holders will pay. That makes banks in Ireland more fragile,” De Grauwe said.

    It’s going to be very interesting to see what happens with Ireland’s bank recapitalization ambitions. Back in February, the recapitalization of Ireland’s nationalized banks via the ESM appeared to look something like this:

    irishecononmy.ie
    Recapitalisation of Irish Banks by ESM

    This post was written by Philip Lane

    The IMF Banking Union has quite a bit to say about how the ESM should go about the recapitalisation of banks, including in relation to legacy problems. The main quotes are below (including the lengthy section C)

    Meanwhile, to delink weak sovereigns from future residual banking sector risks, it will be important to undertake as soon as possible direct recapitalization of frail domestically systemic banks by the European Stability Mechanism (ESM). Failing, non-systemic banks should be wound down at least cost, and frail, domestically systemic banks should be resuscitated by shareholders, creditors, the sovereign, and the ESM.

    ESM and crisis resolution. To be clear, the core purpose of ESM recapitalization of domestically systemic banks undergoing restructuring must be to remove the residual risk from the balance sheet of a sovereign whose finances are already strained. Unviable, non-systemic banks should be wound down at least cost; and systemic banks should be resuscitated by shareholders, creditors, the sovereign, and the ESM as the quintessential patient, deep-pocket investor. By delinking the sovereign from future unexpected losses on bank balance sheets, ESM direct recapitalization would remove future tail risks from the sovereign balance sheet; by ensuring that the banks have an owner of unquestioned financial strength, it would improve bank funding conditions. Thus, the ESM would attack the sovereign-bank link from both sides. In all cases, ESM involvement should be conditional upon a determination of systemic risk, which could be as basic as a finding that the bank is too large for the sovereign alone to wind up, given the state of public finances. A robust mechanism for the systemic risk determination will be critical (Box 4).

    Now, presumably, recapitalization looks something like like this:

    Meanwhile, to delink weak sovereigns from future residual banking sector risks, it will be important to undertake as soon as possible direct recapitalization of frail domestically systemic banks by the European Stability Mechanism (ESM). Failing, non-systemic banks should be wound down at least cost, and frail, domestically systemic banks should be resuscitated by shareholders, creditors, the sovereign, and the ESM.

    ESM and crisis resolution. To be clear, the core purpose of ESM recapitalization of domestically systemic banks undergoing restructuring must be to remove the residual risk from the balance sheet of a sovereign whose finances are already strained. Unviable, non-systemic banks should be wound down at least cost; and systemic banks should be resuscitated by shareholders, creditors, the sovereign, and the ESM as the quintessential patient, deep-pocket investor. By delinking the sovereign from future unexpected losses on bank balance sheets, ESM direct recapitalization would remove future tail risks from the sovereign balance sheet; by ensuring that the banks have an owner of unquestioned financial strength, it would improve bank funding conditions. Thus, the ESM would attack the sovereign-bank link from both sides. In all cases, ESM involvement should be conditional upon a determination of systemic risk, which could be as basic as a finding that the bank is too large for the sovereign alone to wind up, given the state of public finances. A robust mechanism for the systemic risk determination will be critical (Box 4).

    Interesting indeed. At least Moody’s doesn’t seem to care about whether or not the ESM recapitalizes Ireland or not…”in the short term” so that’s a plus. One might even say Moody’s is positively negative on Ireland’s future financial prospects:

    UPDATE: Moody’s Ireland Analyst Upbeat on Ireland, But Negative Outlook Remains
    By Dow Jones Business News, March 28, 2013, 10:11:00 AM EDT

    (Adds further quotes, details, background.)

    By Eamon Quinn

    DUBLIN–The lead analyst for Ireland at Moody’s Investors Service Thursday provided her most upbeat assessment yet of the country’s prospects for emerging on schedule this year from its international bailout, but warned the country could be driven off course by contagion from the wider euro-zone debt crisis in countries such as Cyprus.

    In an interview with Dow Jones Newswires, Kristin Lindow, the new lead analyst for Ireland at Moody’s, said she was ” very impressed” with the many “accomplishments” the Irish government and its bailout creditors had achieved toward the goal of re-securing Ireland’s full place in debt markets, saying the country was now on course to exit its bailout when the European Union and International Monetary Fund disburse the last of their emergency loans later this year.

    She said, however, that Moody’s had no timetable in mind for removing its current negative outlook on Ireland’s creditworthiness, saying that Ireland isn’t shielded from contagion from the wider euro-zone debt crisis and that recent developments in Cyprus “pose risks that are clearly sufficiently large that they did not outweigh the fact that [ Ireland] country-specific risks are diminishing.”

    The Irish government has expressed its impatience with and is closely watching for any signs of change in Moody’s assessment of the country’s rating because many potential bond investors are precluded from buying its sovereign bonds while the ratings firm maintains its non-investment–or junk–grade, on the country’s debt.

    John Corrigan, the head of Ireland’s debt office, the National Treasury Management Agency, said earlier this month that Moody’s continuing negative outlook and junk rating is “somewhat frustrating” for the Irish government because Moody’s hadn’t altered its rating since it downgraded the country’s creditworthiness in July 2011, and despite Fitch Ratings and Standard & Poor’s Corp. having raised theirs.

    Ireland sold a significant amount of long-term debt in 10-year bonds in March–the first time since late 2010 when it was forced to strike a bailout–in a sign it is likely to secure full access to markets from 2014.

    Were Moody’s later this year to lift its threat to further downgrade Ireland’s creditworthiness, it would be a significant indication that the firm was preparing in time to restore the country’s investment-grade status, and would likely help drive Irish yields even lower, some analysts say.

    The country needs its borrowing costs to fall as low as possible because it faces financing a huge sovereign debt pile of more than 120% of its gross domestic product, when it can no longer rely on official bailout loans from the EU and IMF at the end of this year.

    Ms. Lindow, who is one of Moody’s most senior analysts, is also the lead analyst of bailout-recipient Portugal, and was a former regional credit officer for Europe at the height of the region’s debt crisis.

    Ireland is already “well on its way” to qualifying for the European Central Bank’s Outright Monetary Transactions program, the central bank’s still-untried bond-buying program of troubled euro-zone nations’ debt, she said; access to the European Stability Mechanism, the euro-zone’s permanent bailout fund that has yet to start working, will not influence Moody’s decision on Ireland’s creditworthiness in the short term, she added.

    Ms. Lindow said Moody’s believed that Ireland’s banking system wouldn’t require more injections of government recapitalization cash despite the banks carrying many loss-making home-loans.

    On the issue of euro-area contagion, she said Moody’s had for a long time warned that the region’s debt crisis hadn’t been resolved. The Cypriot bailout–which in a first for the euro zone involved losses for the island’s bank depositors- -raised the question about what could happen in other potential bailouts.

    European authorities had said the terms of the bailouts for first Greece and then Cyprus were supposed to be “unique cases”.

    “The worry is, of course, that there will be another unique case,” Ms. Lindow said.

    The poor markets. Diabolically confusing mindsets can be difficult to deal with.

    Posted by Pterrafractyl | March 28, 2013, 1:42 pm
  2. Here’s another “Family” harboring dark and secretive economic paradigms and this one has kids too…someone needs to call Child Protective Services:

    Analysis: Germany sees itself as Europe’s grown-up, children sullen

    By Paul Taylor

    BERLIN | Mon Apr 1, 2013 3:37am EDT

    (Reuters) – Buoyed by solid finances, roaring exports and low unemployment, Germany increasingly sees itself as the only grown-up in Europe, responsible for bringing wayward children into line to hold the family together.

    The children are not enjoying it. Some, such as the Cypriots and Greeks and many Italians and Spaniards, are openly resentful of “Mutti” (mum), as Berlin officials privately call Chancellor Angela Merkel. Others, such as the French, are sulking.

    The mood among German politicians and officials is one of economic self-confidence tinged with a sense of parental duty to provide the euro zone with stiff-backed leadership, even if that makes them unpopular in Europe.

    “German policymakers have taken to their new found status with something close to gusto,” Simon Tilford, chief economist at the Centre for European Reform, said in the latest edition of the London-based think-tank’s bulletin.

    “They routinely tell other euro zone countries how to run their economies, citing Germany as a model for the currency union as a whole.”

    The view from Berlin, set out by a range of policymakers who spoke on condition of anonymity, is that Germany has a unique responsibility for the survival of the single currency area as its biggest and most dynamic economy.

    The subtext is that since the Germans are the main bailout contributors and have most to lose in any collapse of monetary union, they must ensure that their partners cut their deficits, implement reforms and avoid mistakes that could sink the euro.

    German confidence in the ability of the European Commission and the European Central Bank to hold to a firm course without yielding to political pressure is limited.

    Hence Berlin’s insistence on involving the International Monetary Fund in all euro zone financial rescues and its own willingness to play bad cop, even if that means Merkel being burned in effigy or dressed in Nazi uniform by protesters.

    Some European partners and many economists argue that her recipe of a synchronous fiscal contraction across Europe is deepening recession and raising unemployment and could turn the sovereign debt crisis into a social and political tsunami.

    “Prolonging austerity today risks not achieving a reduction in deficits but the certainty of making governments unpopular so that populists will swallow them whole when the time comes,” French President Francois Hollande warned last week.

    “I perfectly accept that European countries have to be rigorous, and France first of all. But not austerity, because sticking with austerity would condemn Europe not just to recession but to an explosion.”

    In Berlin, such comments elicit a rolling of eyeballs. From Merkel on down, German leaders feel the French have not taken the measure of the crisis facing Europe and their own economy.

    “There is a lack of will, a lack of awareness. What is needed is an emergency U-turn,” said a Francophile German lawmaker, adding: “There is still no clarity over their deficit reduction plans.”

    SICK MAN

    German leaders like to remind visitors that a decade ago their own country was depicted on the cover of The Economist weekly as the “sick man of Europe” for its rigid labor market, ineffective bureaucracy and low competitiveness.

    “We are quite a good example of a success story,” says one senior politician who was in opposition in 2003 when Social Democratic Chancellor Gerhard Schroeder pushed through a tough overhaul of labor laws and reduction in unemployment benefits.

    Last month’s bipartisan celebration of Schroeder’s “Agenda 2010” program highlighted a broad consensus that the reforms had triggered an exemplary jobs miracle, even though many thousands in Germany now work for as little as 3 euros an hour.

    Whatever the outcome of September’s general election, a “grand coalition” also exists de facto on many policy issues between Merkel’s conservatives and the Social Democrats.

    When German officials are asked what joint liability they are willing to accept for borrowing or insuring euro zone bank deposits in return for stronger central control over national budgets and economic policies, the answer is to point a decade or more down the road without making a specific commitment.

    “The problem is getting reforms in return for the present German solidarity in the crisis mechanisms,” one official said.

    When she contemplates the future of this ageing continent, Merkel’s “reform or die” outlook is shaped by her experience of witnessing the collapse of her native East Germany.

    At a mid-March EU summit on economic reforms, she drew the lessons of a slide-show by ECB President Mario Draghi, showing how wages had soared in southern states since the launch of the euro in 1999, far outstripping productivity gains.

    Merkel said the crash course in macroeconomics highlighted how the gap had widened within the euro zone between countries with current account surpluses and those with deficits, and was an eye-opener for many leaders.

    Faced with ever more unruly children, “Mutti” may eventually face a hard choice between the breakup of the family and more financial support for the poorer relatives.

    Some notes for Child Protective Services on this case: The parent, Mutti, insists that she is justified in beating her children because such a program of regular corporal punishment helped her overcome her own “sickness” last decade. We could be looking at a history of abuse in the family. Mutti also appears to be unable to discern the vast differences in the degree of beatings she received (it was more like a spanking) and the beatings she is issuing to her current children (signs of abuse are seen all over the body and permanent scarring is certain). Mutti cannot recognize that much of the “misbehavior” she is beating her children over is due to stresses caused by her prior beatings of the children. Her attempts to hold the family together are clearly what is breaking it apart but she has yet to acknowledge this reality. A mental health evaluation of Mutti by Child Protective Services is recommended. We may be dealing with some form of unaddressed mental sickness.

    Posted by Pterrafractyl | April 1, 2013, 9:40 am
  3. This also helps explain the austerity mindset: As is generally the case in the US, if you’re an austerity skeptic in the EU these days, the policy-making establishment is, by default, skeptical of you and anything you say no matter what:

    The New York Times

    Very Ernstig People
    April 1, 2013, 9:43 am

    Paul Krugman

    The FT reports on the lonely life of an austerity skeptic:

    Mr Teulings’ CPB let loose with a report in March accusing Dutch politicians of ignoring a consensus among macroeconomists that cutting deficits does much more economic damage than usual during so-called “balance-sheet recessions”, like the current one. Such contractions are driven by consumers and firms trying to pay down heavy debt loads, leaving government as the only actor in the economy still able to spend.

    The Dutch government’s inability to acknowledge the damage done by austerity despite mounting evidence is a case of “cognitive dissonance”, Mr Teulings told the Financial Times. He said persisting with the proposed new deficit cuts, on top of planned austerity measures amounting to 8 per cent of GDP over seven years, would hurt consumer confidence.

    “There’s different evidence that all fits [the argument] that the costs of austerity are currently higher, because there’s rising unemployment, there’s a financial crisis and we are close to the zero lower bound [on interest rates],” Mr Teulings said. He referred to recent papers by the IMF’s Olivier Blanchard and to work by Larry Summers, Paul de Grauwe and others that has rekindled the debate over the wisdom of austerity across the EU.

    Mr Teulings is not the only economist in the Netherlands sceptical of austerity, but he has been the only one with any policy influence. Prominent austerity sceptics at universities and big banks say they have been shut out, not just from government policy-making bodies but from the counsels of political parties on both right and left.

    “It’s not only the current government, basically all the sensible political parties have embraced austerity,” said Bas Jacobs, a professor at Erasmus University and austerity-sceptic. That includes the centre-right Liberals and the centre-left Labour party, who form the coalition government, as well as most mainstream opposition parties.

    Despite writing about all this stuff for years, I’m still amazed not just by the way policy makers threw basic macroeconomics out the window, but by the absolute unanimity of the turn to austerity. After all, the critics weren’t exactly invisible or inaudible; how could everyone serious be so sure that prominent macroeconomists were all wrong, and bureaucrats with no predictive track record were right?

    Yelling “the Emperor has no clothes” does little good when you’re surrounded by the blind, deaf, and dumb.

    Posted by Pterrafractyl | April 1, 2013, 10:06 am
  4. The Bundesbank recently put out a study purporting to show that Germans and Austrians were much poorer, on average, than their Spanish and Italian counterparts. Classy:

    Financial Times
    March 22, 2013 5:13 pm
    Poor Germans tire of bailing out eurozone

    By James Wilson in Frankfurt

    Germans have never warmed to the idea of using their financial muscle to bail out struggling eurozone neighbours. Perhaps for good reason. A central bank study shows most Germans are worse off than those in some of the economies that have stoked the crisis.

    The typical German household is three times less wealthy than its Spanish or Italian counterpart, according to a Bundesbank study of personal wealth that was published this week. Whereas the median Spanish household has net wealth of €178,000, the equivalent in Germany is €51,000.

    The findings contrast sharply with other aspects of eurozone economic performance, with Germany’s average gross domestic product per head almost a quarter higher than Spain’s. Germany’s unemployment rate is close to record lows at 5.3 per cent while Spain’s has soared above 26 per cent.
    n
    Germany’s relatively low level of home ownership is one of the principal reasons suggested for the wealth disparity.

    The study – released as the banking crisis in Cyprus reawakened fears of a rupture in the eurozone – has prompted online comments showing the hostility felt by some Germans, who feel they are being asked to pay for the sins of others.

    “It gives the word crisis a whole new meaning. Has Ms Merkel seen this?” commented one reader on magazine Der Spiegel’s website.

    Another said: “Southern Europeans have been getting rich for years at Germany’s expense.”

    The average wealth of Germans was behind that of the French and Austrians, the other countries included in the comparison used by the central bank.

    Posted by Pterrafractyl | April 4, 2013, 7:08 am
  5. With Germany’s election season heating up, it worth keeping in mind that Merkel got extremely lucky when it comes to her main SPD opponent. Not only is Peer Steinbruck Merkel’s own former Finance Minister he’s also apparently a gaffe-prone with an out-of-touch rich-guy flair. Yep, Merkel it running against the SPD’s version of Mitt Romney. Europe is so screwed. Peerhic Victory here we come:

    Spiegel Online
    Amateur Hour at the SPD: Merkel Challenger Steinbrück Fails to Find His Feet
    Germany’s Social Democrats had hoped that former Finance Minister Peer Steinbrück could topple Chancellor Angela Merkel in this year’s elections. But his campaign has thus far been characterized by a series of damaging blunders. Support from within his own party is beginning to crumble. By SPIEGEL Staff

    BY RALF BESTE, DIRK KURBJUWEIT, ANN-KATHRIN NEZIK, GORDON REPINSKI and BARBARA SCHMID
    January 08, 2013 – 06:11 PM

    He doesn’t stride up to the lectern. In fact, he doesn’t look at it at all, shunning it as though it were the enemy. Peer Steinbrück sticks one hand into his trouser pocket, shifts his weight back and forth from his left to his right foot, and says: “If I stood behind it, I might make a remark that I would have to take back afterwards.”

    It’s Friday evening, and he is standing in a concert hall in the northern German town of Emden, where he is set to give a stump speech ahead of the Jan. 20 state elections in Lower Saxony. The audience laughs at his remark, knowing full well what he means: Steinbrück has developed a reputation for putting his foot in his mouth. This time, though, his speech came off without any mishaps.

    These days, that qualifies as news. Once Chancellor Angela Merkel’s respected finance minister in the dark days of the crisis, he has since become the Social Democrats’ candidate to dislodge Merkel from the Chancellery in elections this autumn.

    “He can do it,” former Chancellor Helmut Schmidt said in October 2011, a quote SPIEGEL used on its cover page at the time. But now one word in that sentence has changed, from “can” to “can’t.” It’s become a real possibility that perhaps the SPD made a mistake when it selected Steinbrück to carry its torch.

    Rarely has a candidate gotten off to such a bumpy start, and rarely has a candidate been so controversial within his own ranks as Steinbrück. On the Sunday before last, he managed to make two significant gaffes in one single interview with the Sunday paper Frankfurter Allgemeine Sonntagszeitung. First, he said that he found the chancellor’s salary too low, thus creating the impression that he is hoping to improve his own future income. Second, he claimed that current Chancellor Angela Merkel has a “female bonus,” even though many women justifiably assume that they are in fact at a disadvantage in professional life.

    It was not the first slip-up, and once again SPD members were left shaking their heads in disbelief, as were politicians from the Green Party, the SPD’s favored coalition partner. Meanwhile, their political opponents were happily exchanging high-fives.

    This week, Steinbrück has found himself in the headlines again. According to the business daily Handelsblatt, Steinbrück, as a member of ThyssenKrupp’s supervisory board, offered last January to provide political support should the company launch an initiative aimed at achieving lower electricity prices for industry. Steinbrück was a member of the board from January 2010 until the end of 2012 and was also a member of German parliament during that time.

    Days of Peace Are Over

    The SPD, not surprisingly, is beginning to wonder whether Steinbrück is the right candidate for the chancellorship. It starts with Chairman Sigmar Gabriel, who was measured in his comments on Steinbrück in a SPIEGEL interview. But in the candidate’s own camp, aides have long noticed that what Gabriel is saying off the record isn’t nearly as congenial.

    Bizarre Behavior

    After the interview in the Frankfurter Allgemeine, hardly any top politician was willing to stand up for Steinbrück, with only General Secretary Andrea Nahles assuming the role of public defender. Even Steinbrück’s supporters are speechless about his poor judgment in making such remarks publicly, especially at a time like the Christmas holidays, when there typically isn’t much else in the news. “The deliberate traps in this interview should have been recognizable,” says Rolf Mützenich, the foreign-policy spokesman of the SPD parliamentary group.

    The left wing of the party is especially disappointed. It has long been irritated by the candidate’s bizarre behavior but has said nothing. They are also critical of Steinbrück’s seeming unwillingness to further policy demands that are central to the SPD’s left, a concern that many had even when the former finance minister was chosen to represent the party. After the interview on the chancellor’s salary was published, senior left-wing leaders called each other to discuss their frustrations — and they decided to break their silence and to publicly criticize Steinbrück.

    The group has called a meeting for the beginning of February in Berlin to consider Steinbrück’s progress. “I expect that the SPD’s message become clear on issues such as the labor market, pensions and on climbing rents,” says Jan Stöss, SPD head in the city-state of Berlin.

    Steinbrück hadn’t expected to be Chancellor Angela Merkel’s challenger. After he and the SPD were voted out of government in the fall of 2009, he stopped leading a serious political life. He was still a member of the German parliament, the Bundestag, but he seemed to devote more of his energy to writing a book and giving speeches, for which he was paid handsomely. He wasn’t living the way a high-ranking representative of the SPD should live, but rather the way private citizen Steinbrück prefers to live. Even after receiving Schmidt’s endorsement, he didn’t shape his life to conform to his ambitions. He was now a gambler who had chosen a high-risk approach.

    Yet when he became the SPD’s candidate, he was suddenly the center of attention, and soon his secondary sources of income became an issue. He had collected €1.25 million ($1.64 million) in speaking fees between November 2009 and July 2012. One fee seemed particularly objectionable: €25,000, for a roughly one-hour speech, paid by the public utility in the cash-strapped city of Bochum in the industrial Ruhr region.

    Steinbrück eventually decided to utter a few words of regret about the Bochum case. Otherwise, though, he insisted that everything had been perfectly legal, and then proceeded to accuse the media of hyping the issue. He seemed not to understand that the SPD still wants to represent the working class and that some of its voters might find it unfair that men like Steinbrück are paid a lot of money for little work, while they are paid little money for a lot of work. A few explanatory remarks certainly would have helped, but Steinbrück brusquely rejected such demands as an imposition. It had all been completely above reproach, and that was that, he said.

    But that wasn’t that. In early December, he cheerfully said: “I wouldn’t buy a bottle of Pinot Grigio for only €5.” The connoisseur with exquisite taste isn’t exactly a standard role in the world of Social Democrats.

    In the wake of this string of gaffes, it seemed odd for Steinbrück to be telling the Frankfurter Allgemeine Sonntagszeitung, on Dec. 30, that the German chancellor’s salary is too low, as if he were making sure that he would never have to drink a bottle of Pinot Grigio for less than €20. Indeed, in the first weeks of his candidacy, Steinbrück has given the impression that money means a great deal to him — and that he has but little sympathy for the concerns of people with low incomes.


    In short, the situation could hardly be worse after three months. How does the SPD expect to win an election with a candidate who alienates a large share of his party, consistently trips over his tongue and is engaged in a subtle feud with the party chairman?

    One of the prevailing assumptions in the eurozone crisis is that Berlin’s insistence on austerity and punitive “bailout” terms will subside once the fall elections in Germany are out of the way. It will be interesting to see if that prediction is true following a right-wing electoral sweep by the most pro-austerity parties:

    the Local.de
    Merkel’s coalition hits winning poll position
    Chancellor Angela Merkel’s coalition government is doing better in polls than it has done for more than three years, with less than six months to go before the general election, a survey published on Wednesday showed.
    qPublished: 10 Apr 13 14:23 CET

    If a vote were held now, her conservative Christian Democratic Union (CDU) and its junior partner, the pro-business Free Democrats (FDP), would win a clear governing majority, the Forsa institute poll suggested.

    The prospect of the coalition remaining in office has strengthened mainly because of the weakness of the centre-left Social Democratic Union (SPD), whose chancellor candidate Peer Steinbrück has had a poor campaign start, hobbled by a series of gaffes and missteps.

    Asked which candidate they preferred as chancellor, 57 percent of respondents opted for Merkel against just 19 percent for Steinbrück.

    Under Merkel, the champion of tough reforms and austerity during the eurozone’s debt woes, “people have the feeling that, in times of crisis, they are in safe hands with her,” said Forsa institute chief Manfred Güllner.

    “If the SPD had a charismatic chancellor candidate, then Merkel would also be viewed in a more critical light,” he told the Stern news weekly, which commissioned the weekly poll along with RTL television.

    The latest embarrassment for the SPD came this week with the launch of their election slogan Das Wir entscheidet “The ‘We’ decides” which, it was revealed on Wednesday, had already been used for years by a temporary employment agency.

    “We had the slogan before the SPD – since 2007 in face,” Christophe Cren, German head of the firm Propartner, told Der Spiegel magazine.

    It was the first Forsa poll since elections in late 2009 that indicated a clear ruling majority for Merkel’s government over the combined support for the three main opposition parties.

    Posted by Pterrafractyl | April 10, 2013, 7:16 pm
  6. Paul Krugman makes an important point in his latest column that’s critical when trying to understand the forces at work in the eurozone crisis: Even though the eurozone isn’t technically on the gold standard, it’s effectively run as if it that’s the case. Austerity policies mimic the kind of deflationary traps associated with gold standards: fiscal or monetary stimulus is simply much less of an option when a gold standard is in place OR when there’s a “troika” that’s mandating austerity. And it doesn’t really matter if a gold standard or austerity ends up ruining the economy because the benefits for imposing a gold standard or austerity aren’t really about economic/financial benefits. They’re about psychological benefits…people will feel better about the overall “system” if they confident that no one is getting any “free money”…especially the “moochers”. Confidence that eurozone leaders (in Berlin) will impose pain on “moocher” nations is intended to be sold as if it’s good as gold. And austerity is, indeed, effectively as good as a gold standard when it comes to being as bad as a gold standard can be for the economy. But that doesn’t seem to matter. Gold is shiny and people just like shiny objects. Similarly, austerity is pain, and a large swathe of humanity just seems to enjoy inflicting pain on each other. Golden austerity, it seems, is here to stay:

    The New York Times
    Lust for Gold
    By PAUL KRUGMAN
    Published: April 11, 2013

    News flash: Recent declines in the price of gold, which is off about 17 percent from its peak, show that this price can go down as well as up. You may consider this an obvious point, but, as an article in The Times on Thursday reports, it has come as a rude shock to many small gold investors, who imagined that they were buying the safest of all assets.

    So the financial crisis of 2008 brought a surge in gold fever (although that surge has abated a bit since 2011). But why?

    After all, historically, gold has been anything but a safe investment. Sometimes it yields big gains, as it did in the late 1970s and again between 2001 and 2011. But that 1970s run-up was followed by an epic plunge, with the real value of gold falling by more than two-thirds.

    Meanwhile, the modern world’s closest equivalent to the classical gold standard is the euro, which puts European countries back under more or less the same constraints they faced when gold ruled. It’s true that the European Central Bank can print money if it chooses to, but individual countries, like nations on the gold standard, can’t. And who would hold up these countries’ recent experience as an example of something we’d like to emulate?

    So how can we rationalize the modern goldbug position? Basically, it depends on the claim that runaway inflation is just around the corner.

    Why have so many people found this claim persuasive? John Maynard Keynes famously dismissed the gold standard as a “barbarous relic,” noting the absurdity of yoking the fortunes of a modern industrial society to the supply of a decorative metal. But he also acknowledged that “gold has become part of the apparatus of conservatism and is one of the matters which we cannot expect to see handled without prejudice.”

    And so it remains to this day. Conservative-minded people tend to support a gold standard — and to buy gold — because they’re very easily persuaded that “fiat money,” money created on a discretionary basis in an attempt to stabilize the economy, is really just part of the larger plot to take away their hard-earned wealth and give it to you-know-who.

    But the runaway inflation that was supposed to follow reckless money-printing — inflation that the usual suspects have been declaring imminent for four years and more — keeps not happening. For a while, rising gold prices helped create some credibility for the goldbugs even as their predictions about everything else proved wrong, but now gold as an investment has turned sour, too. So will we be seeing prominent goldbugs change their views, or at least lose a lot of their followers?

    I wouldn’t bet on it. In modern America, as I suggested at the beginning, everything is political; and goldbuggism, which fits so perfectly with common political prejudices, will probably continue to flourish no matter how wrong it proves.

    Posted by Pterrafractyl | April 11, 2013, 8:43 pm
  7. One of Merkel’s CSU allies recently said that the Cyprus bailout showed what could be accomplished when the remaining triple-A rating countries all band together in the face of “problem children” like France and Italy. Unfortunately, this probably isn’t the kind of rhetoric that will help forge a healthy and viable vision of European “solidarity” as the continent continues to forge a common future. The sentiments were certainly an expression of solidarity, just not the helpful kind:

    Top-rated euro states must band together: Merkel ally

    BERLIN | Tue Apr 2, 2013 9:52am BST

    (Reuters) – A leading member of Chancellor Angela Merkel’s Bavarian sister party has urged euro zone states with triple-A credit ratings to band together to restore confidence in the currency bloc in the face of what he called “problem children” like France and Italy.

    Hans Michelbach of the Christian Social Union (CSU) told the Handelsblatt newspaper that deeper cooperation between Germany, the Netherlands and Finland on the recent bailout agreement for Cyprus had shown what the euro area’s top-rated countries could accomplish when they stuck together.

    “This should set an example, it should spur deeper cooperation between the top-rated states in the community. That could help strengthen confidence in the common currency among citizens and investors,” said Michelbach, without providing details on what sort of closer ties these countries should pursue.

    Luxembourg, which depends heavily on its financial industry, is the fourth euro member that is rated triple-A by the big ratings agencies. Although it had deep reservations about the Cyprus bailout because it effectively crippled the island’s banks, Michelbach urged it to join in with its top-rated brethren in fighting for stability-oriented policies in Europe.

    He called France an important partner for Germany, but accused its government of engaging in “socialist experiments” that were hurting the country’s image. If Paris did not change course, Michelbach said, it could turn into a “serious problem” for the euro zone.

    “We need strong partners to pursue policies that ensure stability,” said Michelbach, a member of the Bundestag lower house of parliament’s finance committee, adding that Italy was in urgent need of a stable, reform-minded government.

    With enough selective solidarity, austerity = stability. Apparently.

    Posted by Pterrafractyl | April 14, 2013, 10:14 pm
  8. Most “lost decades” aren’t planned in advance:

    Updated April 17, 2013, 1:50 p.m. ET

    Weidmann: Europe Recovery Could Take Decade

    By BRIAN BLACKSTONE And MATTHEW KARNITSCHNIG

    FRANKFURT—Germany’s top central banker warned that Europe’s debt crisis would take as much as a decade to overcome, dismissing the view expressed by some political leaders that the worst of the crisis is over.

    In an interview with The Wall Street Journal, Bundesbank President Jens Weidmann signaled that the European Central Bank could reduce interest rates if incoming economic and inflation data suggest it is warranted. But he warned that such a move wouldn’t turn around the euro bloc’s economic fortunes, instead pinning responsibility on elected leaders to find ways to kick-start growth and channel money to small businesses.

    Mr. Weidmann praised the agreement between Cyprus and its international lenders for a €10 billion ($13.18 billion) bailout that includes steep losses for large depositors of Cypriot banks. Though the deal isn’t a blueprint for others, it established the principle of a “pecking order” for stakeholders of banks to bear the costs of their investment decisions, he said.

    “Overcoming the crisis and the crisis effects will remain a challenge over the next decade,” he said, contrasting recent comments from European Commission President José Manuel Barroso that the worst of Europe’s crisis is over.

    “The calm that we are currently seeing might be treacherous” if it delays overhauls at the national and European level, Mr. Weidmann said. There can be no quick fixes from the ECB either, he said.

    Many analysts expect that with inflation below the ECB’s 2% target, at 1.7%, and expected to fall further, an interest-rate cut is likely in May or June. Mr. Weidmann didn’t rule out the prospect, but cast doubt that it would do much good.

    “We might adjust in response to new information,” however, “I don’t think that the monetary-policy stance is the key issue,” he said.

    LOL, so Weidmann rules out the utility of any further monetary action to help the ailing eurozone economies, instead insisting that governments take the lead in stimulating growth. But the only growth stimulus he approves of is further austerity. Yeah, a decade might be optimistic:

    Bloomberg
    Merkel Says Austerity Requires Sacrifices for Growth
    By Patrick Donahue – Apr 17, 2013 3:27 AM CT

    (Corrects translation of “victims” to “sacrifices” in headline, first and third paragraphs of story that first appeared yesterday.)

    Chancellor Angela Merkel said that austerity in the euro area will require sacrifices as European leaders struggle to resolve the debt crisis, though the pain will be worth it to regain sustainable economic growth.

    The German leader dismissed the notion that increasing debt is necessary to generate growth. She lauded European leaders for cutting budget deficits in half during the years of crisis, citing her championing of the bloc’s fiscal pact.

    “We know that there will have to be sacrifices in many countries,” Merkel told a forestry conference today in Berlin. “But I believe that in the long term we’ll have to have a growth strategy without always having to pile on debt.”

    The German-led strategy of scaling back deficits as a response to the three-year-old debt crisis has come under criticism from other parts of the world because of recession and record unemployment in the 17-nation euro bloc.

    Merkel has insisted that any recovery must be pursued through consolidating budgets to win back market confidence and provide a sustainable basis for future growth.

    “I’m often surprised that as a matter of course it’s often said in many parts of the world — even after the financial crisis of 2008, 2009 — that the main thing is that we’re growing again, at whatever cost,” Merkel said today. “The piling up of debt is often made into a type of obligation to serve the principle of growth.”

    “All of that is false,” she said. “It’s not sustainable in the long term.”

    Posted by Pterrafractyl | April 17, 2013, 2:16 pm
  9. Ha! So we have European Commission President Jose Manuel Barroso claiming that we know that austerity was the correct policy, but the time has come to retire austerity anyways because it needs popular support to really work and for some strange reason the proles can’t accept austerity’s grace gracefully. After you take ten steps back, maybe it’s time to stumble forward for a bit:

    Spiegel Online
    Time for Growth: Austerity Has ‘Reached its Limits,’ Barroso Says
    April 23, 2013 – 02:01 PM

    European Commission President José Manuel Barroso has said that Europe has reached the political limits of its austerity measures, suggesting that crisis countries should get more time to consolidate their budgets. But Germany warned against changing course on Tuesday.

    Striking statements were made by one of Europe’s most powerful men on Monday night, when European Commission President José Manuel Barroso said the strict austerity measures thus far imposed on the EU’s beleaguered economies may have reached their political limits.

    Although this policy is “fundamentally right,” it has nevertheless “reached its limits,” he told a conference in Brussels. “A policy, to be successful, not only has to be properly designed, it has to have the minimum of political and social support,” he added.

    ….

    On Tuesday, German Foreign Minister Guido Westerwelle maintained Germany’s position, warning against a move away from austerity. “We are convinced that if we give up on the policies of budgetary consolidation, if we fall back into the old policies of racking up debts, then we will cement mass unemployment for many years in Europe,” he said in Brussels. Growth cannot be purchased with new debts, he added, saying that “growth and consolidation policies are two sides of the same coin.”

    At the same time, prominant austerity-advocating economists are declaring that we don’t know that austerity is the best approach anymore because economies have behaved so differently from what the austerity-advocates expected that we should question what, if anything, we know about macroeconomics at all. Lol, yeah, knowledge sure is a mystery.

    Posted by Pterrafractyl | April 23, 2013, 10:08 am
  10. As we’re learning, they’re not exactly “obligations”. More like helpful suggestions:

    United Nations: Financial crisis causing Greece to fall behind on human rights obligations

    Published April 26, 2013

    Associated Press

    ATHENS, Greece – A senior United Nations investigator says Greece is falling behind on its human rights obligations and strongly criticized the “excessively rigid” demands of the crisis-hit country’s bailout program.

    U.N. independent expert Cephas Lumina said Friday that a surge in unemployment and axed benefits had left a growing number of Greeks without health insurance and about 10 percent of the population living in “extreme poverty.”

    He said some 470,000 immigrants without proper residence permits were among the most vulnerable to labor exploitation and other abuses.

    He urged Greece’s bailout lenders — eurozone countries and the International Monetary Fund — to include human rights considerations in Greece’s austerity programs.

    Germany’s Finance Minister also had some suggestions to EU leaders. Not all suggestions are helpful:

    German finance minister hits out at Barroso over austerity remarks

    BERLIN | Thu Apr 25, 2013 5:36pm EDT

    (Reuters) – German Finance Minister Wolfgang Schaeuble lashed out at European Commission President Jose Manuel Barroso on Thursday, telling lawmakers the euro zone’s woes had nothing to do with strict budget rules and “somebody should tell Barroso that”.

    Barroso said this week austerity had reached the natural limits of popular support, fanning a bitter debate over whether lawmakers should shift their focus from cost-cutting to stimulus which has pitted Germany against many euro zone peers.

    Chancellor Angela Merkel said on Thursday Germany would continue to work towards balanced budgets and she rejected French Finance Minister Pierre Moscovici’s accusation that Germany was too heavily focused on saving.

    Posted by Pterrafractyl | April 26, 2013, 7:07 am
  11. We’re all in this together! separately!

    Reuters
    What did he mean by that?
    By Mike Peacock
    May 8, 2013

    “What did he mean by that?” 19th century Austrian diplomat Metternich is said to have asked of Talleyrand when he heard the French statesman had died. The euro zone crisis, and the response of its leaders, has often required the same question to be asked.

    There were some carefully chosen words from Germany yesterday with Finance Minister Wolfgang Schaeuble saying that elements of a banking union would have to be pursued without lengthy and arduous treaty change, something he’d previously said would be necessary.

    Now you could view this as a sign of softening opposition, certainly the French read it that way. However, the subtext could just as easily be that because treaty change takes too long, Berlin will pursue only those elements of banking union that don’t require it – i.e. bloc-wide regulation yes, but forget about a bank resolution mechanism let alone a joint deposit guarantee. That would be a pale imitation of what was proposed nearly a year ago and wouldn’t provide the sort of structure that would foster confidence that a future financial crisis could be contained.

    Furthermore, what did Schaeuble mean by an intergovernmental or even bilateral approach where necessary? That doesn’t sound like an overarching euro zone banking structure at all.German daily Suddeutsche Zeitung reports, as we have previously, that consideration is being given to giving the European Commission or the ESM bailout fund the power to wind down stricken banks rather than setting up a separate authority. That would also skirt the need for treaty change.

    The bottom line is that Berlin is not keen on the most profound planks of a banking union – a euro zone wide deposit guarantee and a bank resolution structure for the bloc – since the liabilities would be likely to fall disproportionately on Germany. As ECB chief Mario Draghi keeps saying, this crisis won’t be over until a banking union is established and it should be done as a matter of urgency. This is supposed to be sorted at an EU summit in June which both Schaeuble and his French counterpart, Pierre Moscovici, said yesterday remained the aim. But it seems they are either a very long way off or have agreed to settle for the lowest common denominator.

    The proposed banking union has always looked rather ominous simply because it’s always had a “to-be-decided” structure coupled with a mandate that any joint deposit insurance regime would come at the price of setting up an EU-wide national budget oversight regime. And now that the “fiscal compact” treaty that provides the demanded “oversight” (loss of sovereignty) has been put into place we’re finding that the “joint deposit liabilities” is no longer desired by Berlin. So the EU is getting the damaging “fiscal compact” treaty that’s going to ensure mindless austerity for years to come but without any sort of shared risk via a joint deposit regime. Even though a joint deposit regime would probably do more do stabilize the EU financial markets than anything else at this point. I guess the crisis must be over.

    Posted by Pterrafractyl | May 13, 2013, 7:40 am
  12. Well look at that, the US deficit is ‘mysteriously’ shrinking on its own despite the lack of any massive ‘Grand-Bargain’ austerity/privatization/deregulation scheme: Hooray! This is a complete disaster! The opportunity costs alone will be enormous:

    WSJ Money
    En Garde!
    As head of IMF, Christine Lagarde must be ready for any financial crisis. What worries her now?

    May 17, 2013, 10:00 a.m. ET

    By DAVID WESSEL

    IT IS NO EASY JOB, being the grand negotiator at almost every financial crisis in the world in these troubled times. But as head of the International Monetary Fund, or IMF, Christine Lagarde has played a role in dealing with everything from the Cyprus bank scare to Chinese exchange rates.

    A lawyer by training, she came to the post after a six-year stint in the French cabinet. She is described as warm, informal—and highly disciplined. She was, after all, a member of the French national synchronized swim team in her youth, and still hits the gym almost every day.

    Rumors persist that Lagarde may someday return to France and run for president. But these days, her focus is on repairing battered markets and an ailing global economy, a task that requires diplomacy and stamina. She recently sat down in her Washington, D.C., office with David Wessel, the Journal’s economics editor, to talk about the state of the world. Her edited remarks follow:

    Q: We’ve come through a devastating financial crisis. Are we out of this?

    A: We avoided a collapse in 2012. We have to guard against a relapse, and we certainly do not have the luxury of relaxing. I think 2013 is going to be a critical year.

    Q: In what sense?

    A: A lot of the advanced economies’ leaders, thinkers, decision-makers are tired with crisis management. They want out of it. In a way, that’s good; but there is still work to be done. About 80 percent of the decisions have been made, for instance, in the strengthening of the European Union—a lot of the financial sector is better governed, better capitalized, better supervised. But if you don’t do 100 percent of it, you’re at risk again.

    Q: There seems to be an unfortunate but understandable tension, particularly in Europe. When things start to get a little better complacency sets in. It’s almost as if we need another crisis in order to get things moving again.

    A: I don’t think it’s Europe specific. I think it’s also true in other economies, including in the U.S. The fiscal cliff is dealt with, and yet there is more to be done. The moment yesterday’s crisis is dealt with, you want to forget about tomorrow’s issues. The central banks have been very helpful in that respect. They’ve accommodated a degree of slow-paced reforms and gradual fiscal consolidation.

    Note to self: goals of present-day elites appear to be only achievable through the brutal application of shock-doctrine tactics.

    Note to self: need new elites.

    Posted by Pterrafractyl | May 20, 2013, 1:14 pm
  13. I get why a town might be desperate enough to pull a stunt like this, but didn’t anyone bother to ask the G8 leaders themselves if they wanted to be shielded from the grim realities of a global economic downturn? After all, these are world leaders we’re talking about here. Reveling in the impoverishment of the masses while they give happy-talk speeches is sort of their purpose in life. Maybe they wanted to see the devastation in the local economy. It was probably going to be a highlight of the trip for them. Didn’t anyone think of that?

    PRI’s The World
    Northern Ireland Town Fakes Prosperity for G8 Summit
    By Andrea Crossan · May 29, 2013

    A town in Northern Ireland is getting spruced up for the arrival of some special guests.

    World leaders are gathering in the town of Enniskillen for the G8 summit next month.

    And to get ready, the town is putting up fake storefronts on shuttered businesses.

    Anchor Marco Werman speaks with Irish Times reporter Dan Keenan about the efforts to make the town look prosperous.

    Read the Transcript
    The text below is a phonetic transcript of a radio story broadcast by PRI’s THE WORLD. It has been created on deadline by a contractor for PRI. The transcript is included here to facilitate internet searches for audio content. Please report any transcribing errors to theworld@pri.org. This transcript may not be in its final form, and it may be updated. Please be aware that the authoritative record of material distributed by PRI’s THE WORLD is the program audio.

    Marco Werman: I do it. You do it. We all do it, I hope, especially if I’m coming to your house. We do it when we have special guests. Fresh towels in the bathroom, give the counters a wipe, maybe even hide our dirty laundry in the closet. Well, the town of Enniskillen, in County Fermanagh, Northern Ireland is sprucing up for some very special guests: President Obama, German Chancellor Angela Merkel, and Russian President Vladimir Putin, to name just three. In a little over two weeks they and other leaders will gather for a G8 summit at a golf resort in Enniskillen. And as the date approaches the cleanup is moving into high gear. It includes new coats of paint on houses, tidying up lawns, and putting up fake storefronts on shuttered businesses. Irish Times reporter Dan Keenan visited Enniskillen and saw the cleanup process. Describe these fake buildings, first of all. What do they look like?

    Dan Keenan: These are basically empty shops that are being now made to look as if they are thriving businesses, and they’ve done that in a very clever fashion indeed.

    Werman: How do they do it?

    Keenan: What they’ve done is they have filled the shop front window with a picture of what was the business before it went bankrupt or closed. In other words, grocery shops, butcher shops, pharmacies, you name it, they have placed large photographs in the windows that if you were driving past and glanced out the window, it would look as if this was a thriving business. It’s an attempt really by the local authority to make the place look as positive as possible for the visiting G8 leaders and their entourages, and it’s really tried to put a mask on a recession that has really hit this part of Ireland really very badly indeed.

    Werman: So it’s kind of like a trompe l’oeil, and I saw a picture in one newspaper. I’m a little confused because the door looked open.

    Keenan: Yeah, it looks as if the door is open and inside you can see a well-stocked shop. It’s nothing of the sort. That door has been locked shut for well over a year because that particular business went bust this time last year, and that is an image to make it look as if everything is normal in the town and in the county, but unfortunately it’s not. The County of Fermanagh has suffered terribly as a result of the credit crisis and the resulting recession.

    Werman: How are the citizens of Enniskillen reacting to this? It’s kind of, not very funny, is it?

    Keenan: It’s not funny. We’re inclined to take a very light-hearted look upon it but the residents of this part of the world are looking upon the arrival of the G8 positively because at the end of the day, it’s not often you have the eight wealthiest and most powerful leaders on Earth visiting your part of the world. But on the other hand, they are a little bit skeptical of really very shallow attempts like this to make the place look better than it actually is. They would rather that it was an honest attempt to promote Fermanagh in its most positive light and really they would prefer if these problems were not masked in the way that they are.

    Posted by Pterrafractyl | May 30, 2013, 2:23 pm
  14. Austerity: the gift that keeps on giving:

    Nature
    Austerity-led brain drain is killing Greek science

    Lack of funding and recruitment freezes are driving young researchers out of the country, warns Varvara Trachana.
    17 April 2013

    Science in Greece is going backwards. This month, researchers lost access to the journal Bioinformatics, a top-ranked title in mathematical and computational biology. Many more publications are likely to disappear from Greek libraries. The Ministry of Education has not paid the bills for its subscription bundles. The largest publishers — including Elsevier, Springer and Taylor & Francis — have threatened to suspend access. Others have done so already.

    The denial of scholarly papers, the lifeblood of research, to Greek scientists could mark the beginning of the end for creative science at universities and research institutes. We will no longer be able to keep up with international contributions. In areas such as biomedicine, it is crucial to have access to the latest information. Many Greek researchers, unable to afford personal subscriptions to their favourite journals, are already considering reviving a practice that was common a decade or so ago — contacting friends and colleagues in foreign research centres and asking them to fax or e-mail articles.

    For many readers of Nature, the hardship faced by Greek scientists will come as no surprise. The country is reeling from six straight years of recession and unprecedented austerity measures. More than one-quarter of Greek people are out of work.

    I am one of them. I am a biologist with a PhD in biological chemistry from the Aristotle University of Thessaloniki. In 2003, I went to Spain to work as a postdoc at the National Centre of Biotechnology in Madrid. In 2008, I returned to Greece as a research scientist with the National Hellenic Research Foundation in Athens, on a succession of short-term contracts. In March 2011, I was elected assistant professor of cell biology at the faculty of medicine of the University of Thessaly in Larissa. But I never began work there: I am one of about 800 faculty members who are still waiting to take up appointments around the country because the government refuses to approve the budget necessary for their salaries. They are distinguished scientists, many with years of postdoctoral experience, who have been selected through a long and demanding process and have been appointed by the heads of their respective universities.

    The departments that selected these 800 faculty members are struggling to teach their students. In 2011, for the first time in decades, the Ministry of Education placed no new university professors. The scientific and professional prospects of young scholars in Greece are evaporating; this will leave the country’s universities lifeless and impotent. Budgets for research institutes have been reduced by 30%. The 2013 education budget will cut funds by a further 14% and condemns Greece to scientific and educational dormancy.

    There are no signs that the Greek government understands that long-term commitment to funding science and education must be part of the strategy to boost economic growth. In 2007, even before the most recent cuts, university and research funding in Greece stood at 0.6% of gross domestic product in 2007, already far below the European Union average of 1.9%.

    Wages of researchers and faculty members have been reduced by 20%. If someone tells you that the Greek economy fell because of giant public-sector salaries, tell them that the average monthly wage of a university lecturer here is now around €1,000 (US$1,300). Researchers and professors who have spent years building their careers are asking whether it was worth it.

    Didn’t the author get the message? If someone tells you that the Greek economy fell because of giant public-sector salaries you don’t correct them with facts. Instead, you feed into their misperceptions and just keep pushing the wrong solutions. It’s the right thing to do.

    Posted by Pterrafractyl | June 28, 2013, 1:38 pm

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