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#14981011
EU deliberately subjugates prosperity to maintain its neoliberal ideology

link: http://bilbo.economicoutlook.net/blog/? ... more-41372


While the Brexit shambles wound on in London, with the Prime Minister being walloped one day by her own party, and then the next given a victory, courtesy of some Labour Party bungling (the no-confidence motion), across the Channel things have been turning markedly sour. While the Europhile Left hold Europe dear to their hearts, the reality is that their dreamworld is falling apart. This is not only because of the incompetence of its polity but also because of the deliberate strategies of the polity to privilege ideology over economic reality. But if the Europeans continue down their ideological path, there mightn’t be much to exit from for the British. Late last week (January 14, 2019), Eurostat published their latest output data – Industrial production down by 1.7% in euro area – which as the title indicates is not good. Once again, the fiscally-starved Eurozone is trailing behind a sinking EU28. Over the 12 months to November 2018, industrial production in the Eurozone fell by 3.3 per cent and by 2.2 per cent in the EU28. The declines are across all product categories – capital goods, energy, durable consumer goods, intermediate goods and non-durable consumer goods. What we understand from this is that the policy makers in the European Union deliberately choose to subjugate economic prosperity and the well-being of people (jobs, incomes, savings, etc) to maintain an adherence to an ideology that purposely redistributes real resources and incomes to the top end of the distribution and provides lucrative paths for European Commission executives to move between these ‘political’ roles into highly paid banking and related jobs. It is neoliberal central, in other words, and is beyond reform.

On January 13, 2019, French President Emmanuel Macron penned a – Lettre aux Français to his “Chères Françaises, Chers Français, Mes chers compatriotse”.

All very stirring I am sure.

But pure neoliberalism and denial.

UNder the guise of launching a “great national debate” about the “great questions of the future”, Macron, instead reasserted the mindless logic of the European Union, which the Gilets Jaunes are rebelling over.

The logic is simple when the Government is using a foreign currency (the euro).

Taxes are required to ‘finance’ public services.

Macron writes:

Tax … makes it possible to pay to the most fragile social benefits but also to finance some big future projects, our research, our culture, or to maintain our infrastructures. It is also the tax that pays the interest on the very important debt that our country has incurred over time.

And you immediately realise how skewed the logic has become.

In the past, even those economists who fail to understand the role of taxes in a fiat monetary system would acknowledge that tax revenue should cover recurrent spending (including debt servicing) and debt-issuance should cover capital expenditure.

This is the only way (using their logic) that intergenerational equity can be achieved by matching burden with benefit.

This logic says that it is grossly unfair to impose tax burdens on the current generation to fund long-lived public infrastructure assets that future generations will also gain benefit from.

Macron’s logic doesn’t even acknowledge that and, instead, proposes a much more radical ‘taxes’ pay for everything.

He continues in his letter to argue that tax relief for lower income groups to help improve the growing inequity in France are impossible “without lowering the overall level of our public spending”.

In other words, the idea that a fiscal deficit can be used to achieve social purpose is banned. That is pure European Union ideology being imposed.

He also proposes that ‘savings’ could be made by cutting the scope and layers of government.

Environmental sustainability is also cast in a ‘finance model’ – how can we afford an “ecological transition”?

The whole exercise is a smokescreen – talking about grand visions of democracy and citizenship – but all shackled in the day-to-day reality that the Gilets know only too well – the stifling straitjacket of European Union austerity.

Which is once again manifesting in the declining economic activity in the major economies.

The Eurostat data is very disturbing.

Eurostat report that:

In November 2018 compared with October 2018, seasonally adjusted industrial production fell by 1.7% in the euro area (EA19) and by 1.3% in the EU28 …

In November 2018 compared with November 2017, industrial production fell by 3.3% in the euro area and by 2.2% in the EU28.

The following graph shows the evolution of Industrial Production (indexed to 100 at the peak month April 2008) for the EU28 (blue) and the Eurozone Member States (orange) from January 2000 to November 2018.

The pattern is interesting.

The early years were marked by recessions in Germany and France (which led the European Commission to change the Stability and Growth Pact rules to suit these two nations, something they refused to do later for Greece).

The frenetic period of growth leading up to the GFC was driven by the construction sector as Germany financial surpluses found their way into the periphery of Europe.

Then the rapid crash, which was initially met with rising fiscal deficits and a V-shape cyclical pattern (standard recession profile).

But that recovery in 2009-10, which followed the US recovery path closely (for the same reasons – fiscal support) was too much for the European Commission ideologues who saw their ‘fiscal rules’ being violated.

The relevant question that should have been asked was how could have they devised such ridiculous and unworkable rules that did not allow for sufficient flexibility in the face of an economic crisis.

But the denial was massive and the technocrats then enforced austerity and activity fell again and this time the recovery is slow and weak and anything by V-shaped.



The departure from the V-shape is because potential output has also been damaged by the austerity.

As the authorities demanded reductions in fiscal deficits and forced a second recession, capital formation expenditure collapsed.

Capital formation not only adds to current spending but also adds to the supply-side potential of the economy. Firms will not invest if the outlook is poor and they can service current expected demand (sales) with the productive capacity already in place.

So as a consequence, the sharp drop in capital formation across Europe, has led to a decline in potential GDP.

All preventable.

Here is the same period graphed but focussing on the major Eurozone economies: Germany, France, Italy and Spain. This allows us to see the dominance of Germany in the overall evolution of the Eurozone industrial production index and how poorly performed the other major economies have been.

Germany caught up in the period after reunification by imposing ‘internal devaluation’ starting inn 2003 (Hartz). This strategy deliberately gamed their Eurozone partners by shifting trade competitiveness in favour of Germany and dramatically undermining the export capacity of the other Eurozone nations.

Clearly, the crash affected all four economies to a similar degree:

1. Germany went from peak 100 in April 2008 to a trough of 76.4 in April 2009.

2. France went from peak 100 in April 2008 to a trough of 81.6 in May 2009.

3. Italy went from peak 100 in April 2008 to a trough of 73.8 in March 2009.

4. Spain went from peak 100 in April 2008 to a trough of 76.9 in March 2009.

But Germany recovered more quickly while the other three nations have languished.

By November 2018:

1. The German industrial production index stood at 100.7 (in other words about what it was at the onset of the crisis).

2. France, 88.5 – hardly any recovery from the trough and a loss of 11.5 per cent since April 2008.

3. Italy, 79.7 – – hardly any recovery from the trough and a loss of 20.3 per cent since April 2008.

4. Spain, 78.2 – hardly any recovery from the trough and a loss of 21.8 per cent since April 2008.

These are massive losses in national income for these Member States and they are amplified through the Eurozone otherwise known as the Austerityzone.



My conclusion that the European Commission deliberately prioritises neoliberal ideology over economic well-being of the Member States was reinforced by the Business Insider article (January 14, 2019) – Europe has made a political decision to go into recession.

Note they use the term “political” while I prefer the term ‘ideological’ – but the intent is the same.

The article says that the Eurostat data is “horrible … for November … It looks like Europe is heading into recession”.

They provide this graphic (taken from a private consulting report) which shows the moving average industrial production performance for the large Eurozone states.

The decline back into negative growth is clear.



But more telling is their assessment (drawn from two separate sources – proprietary research services) that:

The tragedy is that the contraction is being helped along by a deliberate political choice made by Europe’s own governments: Their effort to rein in deficit spending, to cut fiscal stimulus, and to balance their budgets in the 10-year aftermath of the 2008 financial crisis. “Austerity,” as it’s known, has shrunk the potential size of the European economy and retarded its ability to grow again. And now that the manufacturing sectors of Italy, France and Germany are all stagnating or shrinking, austerity is hurting their ability to pull out of the dip …

In both studies, the analysts concluded that Europe inflicted on itself permanently lower actual GDP growth, following the crisis.

I read a lot of Tweets etc from those hanging onto the Europhile dream that the European Union is not a neoliberal construct.

They even claim that it serves as a bulwark against neoliberal excesses.

Well if the relative conservative think tanks such as The Institute of International Finance and Oxford Economics (whose work the Business Insider is summarising) conclude that the fiscal rules are deliberately prioritised even if that means a permanent reduction in growth, employment, income and prosperity, then it is hard to defend that Europhile position.

Yes, I know the next response.

Dear Bill, the European Union is not the Eurozone.

No it is not but the rules are the same and the intent of the European Commission is that everyone would be using the common currency. Only some political hiccups (Denmark’s rejection of the Treaty referendum, and Margaret Thatcher’s understanding that currency sovereignty is crucial) prevented the 19 being much closer to 28.

The common currency is a project of the European Union not something separate.

The Eurozone is just the most advanced implementation of the neoliberal, corporatist, anti-democratic structure that the European Union has evolved into.

The days of the European Union caring about workers and their rights and social well-being are long gone.

They are steadily chipping away at the legislative structures that earlier incarnation of the Union had created so that all policy conforms with its neoliberal masterpiece – the Single Market.

The BI article reports that the Oxford Economics study found that:

Since 2008, Europe lost economic activity the equivalent of Spain’s entire GDP … Spain’s GDP is about $US1.3 trillion and the country employs about 19 million people, to give you an idea of just how much is “missing.” While it is not directly the case that there would be an extra 19 million jobs in Europe if governments here had been more fiscally supportive, that is nonetheless the scale of the issue we’re talking about.

The cause of these losses goes right to the architecture of monetary union and the way the European Commission enforces it:

… they proceeded cautiously on government spending and didn’t cut taxes, to balance government books … The result was less money sloshing around in Europe – and lowered economic growth … Contractionary fiscal policy at the height of the crisis contributed to this enduring decline in both actual and potential output …

And the familiar refrain:

By lowering GDP permanently, fiscal consolidation increased the long-run debt burden rather than reducing it (as was the aim) …

In an BI earlier article by the same BI journalist (November 29. 2018) – Austerity has measurably damaged Europe: here is the statistical evidence – summarises the Institute of International Finance findings.

The key point is that:

For conservatives, fiscal “austerity” was the answer – limiting debt, deficits, and consequently government spending, in order to put the economy on a sound basis for future growth.

The left, by contrast, argued that fiscal spending was the solution – using the government to supply the investment money that disappeared in the private markets during the crash, thus priming the pump (but at the risk of funding it with more debt).

We now know, categorically, which view is correct, even though Modern Monetary Theory (MMT) is a more sophisticated version of this representation of the “left” here, given that the last qualification “at the risk of funding it with more debt” is a non-sequitur.

But there is no nuance at all in the conclusion that those who opposed the stimulative fiscal activism were part of the problem.

That includes: most academic macroeconomists, the IMF, the World Bank, the OECD – most of whom have subsequently tried to reinvent themselves as supporting some stimulus etc or using terms such as “growth friendly austerity” (which of-course doesn’t exist).

What these BI articles are highlighting is the essential stupidity of macroeconomic policy conduct in this neoliberal era that the core MMT group have been exposing for more than 25 years.

It is good that the mainstream media is starting to catch on – but, what took them so long!

Conclusion
So there you have it.

A deliberate choice to subjugate economic prosperity and the well-being of people (jobs, incomes, savings, etc) to an adherence to an ideology that purposely redistributes real resources and incomes to the top end of the distribution and provides lucrative paths for European Commission executives to move between these ‘political’ roles into highly paid banking and related jobs.

A total neoliberal disgrace in other words.

Which then leads one to question the sanity of the Europhile Left who dream on about reforming this nightmare.

And I noted last night a Tweet from one of those attention-seeking characters feigning outrage that Thomas Fazi and I would dare advocate Britain leaving the European Union and demanding my core MMT colleagues answer his question as to whether they supported our position.

It drew no response. I urge all those interested in MMT to ignore these facile attempts to create controversy and divide-and-conquer.

MMT is on a roll at present and awareness of our work is growing and seeping into the mainstream media as these BI articles attest.

Those economists left behind (like this attention-seeker) are feeling a bit lost and stupid. Ignore them.


Noemon Edit: Title Fixed
In the chicken & egg game, the ideology precedes the institution and not vice-versa, just like the engineer precedes the car.
Last edited by Steve_American on 18 Jan 2019 04:51, edited 1 time in total.
#14981016
What they couldn't win with armies, they won with cheap money followed by tight money. Trump's tax policy will make it worse too as American firms repatriate money that used to sit in European banks. Now that money is increasingly in American banks. If the US Fed tries to take out Trump with a much tighter monetary policy, they may succeed. However, it will also likely precipitate the end of the European Union.
#14981017
Steve American's quoted blog wrote:Neoliberals deliberately subjugate EU prosperity to maintain their political power over the EU electorate


Fixed that for you.

A total neoliberal disgrace in other words.


Indeed, like many other propagandists before them, neoliberals attack the only institution that they have not yet entirely conquered, the last vestige of employment rights, welfare and healthcare.

The EU even at its most neo-liberal due to sham electoral victories of far-right neoliberal conservatives in the governments of its members states on platforms of racism, hate, fear & slander still does better infrastructure than the US.

However as the EU Parliamentary report concluded, the EU needs to up its game on infrastructure spending.
#14981018
Late last week (January 14, 2019), Eurostat published their latest output data – Industrial production down by 1.7% in euro area – which as the title indicates is not good.
Link: https://ec.europa.eu/eurostat/documents ... 70888aab0a

Eurostat reports that:
1] In November 2018 compared with October 2018, seasonally adjusted industrial production fell by 1.7% in the euro area (EA19) and by 1.3% in the EU28 …
2] In November 2018 compared with November 2017, industrial production fell by 3.3% in the euro area and by 2.2% in the EU28.

But more telling is their assessment (drawn from two separate sources – proprietary research services) that:
1] The tragedy is that the contraction is being helped along by a deliberate political choice made by Europe’s own governments: Their effort to rein in deficit spending, to cut fiscal stimulus, and to balance their budgets in the 10-year aftermath of the 2008 financial crisis. “Austerity,” as it’s known, has shrunk the potential size of the European economy and retarded its ability to grow again. And now that the manufacturing sectors of Italy, France and Germany are all stagnating or shrinking, austerity is hurting their ability to pull out of the dip …
2] In both studies, the analysts concluded that Europe inflicted on itself permanently lower actual GDP growth, following the crisis.

Well if the relative conservative think tanks such as The Institute of International Finance and Oxford Economics (whose work the Business Insider is summarising) conclude that the fiscal rules are deliberately prioritized even if that means a permanent reduction in growth, employment, income and prosperity, then it is hard to defend a Europhile position [that the EU protects the people from Neo-liberl excesses.].

The BI blog reports that the Oxford Economics study found that:
1] Since 2008, Europe lost economic activity the equivalent of Spain’s entire GDP … Spain’s GDP is about $US1.3 trillion and the country employs about 19 million people, to give you an idea of just how much is “missing.” While it is not directly the case that there would be an extra 19 million jobs in Europe if governments here had been more fiscally supportive, that is nonetheless the scale of the issue we’re talking about.

The cause of these losses goes right to the architecture of the monetary union and the way the European Commission enforces it:
… they proceeded cautiously on government spending and didn’t cut taxes, to balance government books … The result was less money sloshing around in Europe – and lowered economic growth … Contractionary fiscal policy at the height of the crisis contributed to this enduring decline in both actual and potential output …
And the obvious conclusion that:
By lowering GDP permanently, fiscal consolidation increased the long-run debt burden rather than reducing it (as was the aim) …

In an BI earlier article by the same BI journalist (November 29. 2018) – Austerity has measurably damaged Europe: here is the statistical evidence – summarises the Institute of International Finance findings.

The key point is that:
1] For conservatives, fiscal “austerity” was the answer – limiting debt, deficits, and consequently government spending, in order to put the economy on a sound basis for future growth.
2] The left, by contrast, argued that fiscal spending was the solution – using the government to supply the investment money that disappeared in the private markets during the crash, thus priming the pump (but at the risk of funding it with more debt).

We now know, categorically, which view is correct, even though Modern Monetary Theory (MMT) is a more sophisticated version of the representation of the “left” here, given that the last qualification “at the risk of funding it with more debt” is a non-sequitur [tautology].

But there is no nuance at all in the conclusion that those who opposed the stimulative fiscal activism were part of the problem.

That includes: most academic macroeconomists, the IMF, the World Bank, the OECD – most of whom have subsequently tried to reinvent themselves as supporting some stimulus etc or using terms such as “growth friendly austerity” (which of-course doesn’t exist).

What these BI articles are highlighting is the essential stupidity of macroeconomic policy conduct in this neoliberal era that the core MMT group have been exposing for more than 25 years.

It is good that the mainstream media is starting to catch on – but, what took them so long!

{Shamelessly plagiarized (cut and pasted) from Bill Mitchell's Blog. See it all by going to my recent thread in the Europe section.}
#14981019
noemon wrote:Steve American's quoted blog wrote:
Neoliberals deliberately subjugate EU prosperity to maintain their political power over the EU electorate


Fixed that for you.

A total neoliberal disgrace in other words.

Indeed, like many other propagandists before them, neoliberals attack the only institution that they have not yet entirely conquered, the last vestige of employment rights, welfare and healthcare.

The EU even at its most neo-liberal due to sham electoral victories of far-right neoliberal conservatives in the governments of its members states on platforms of racism, hate, fear & slander still does better infrastructure than the US.

However as the EU Parliamentary report concluded, the EU needs to up its game on infrastructure spending.

Considering your recent thread about how wonderfully democratic the EU is; I'm surprised by this reply.

Well,
The Yellow Vest protests show a way that you are wrong that Neoliberals deliberately subjugating EU prosperity will maintain their political power over the EU electorate. It seems likely that the French people are waking up to the reality that they are being fucked over by the EU rules and the rich.

And, yes the US also sucks in a lot of ways.

This is why I call on the Progressives to unite in the streets. Not to protest so much as to meet each other and gain the strength that comes from KNOWING [=groking] that you are part of a huge movement. In the US, all it takes is one or 2 big swing elections to put Progressives into total power. Even the US SC can be expanded to water down the effect of recently adding the new conservative justices.
. . . In Europe all it takes is for almost all the nations to leave the EU. This is the only way it can be done under the rules.
#14981020
Steve_American wrote:Considering your recent thread about how wonderfully democratic the EU is; I'm surprised by this reply.


What is surprising to you?

The Yellow Vest protests show a way that you are wrong that Neoliberals deliberately subjugating EU prosperity will maintain their political power over the EU electorate. It seems likely that the French people are waking up to the reality that they are being fucked over by the EU rules and the rich.


Yellow-vest protesters are demanding the abolition of the French senate, referendums at the national and local level for all issues as well as the following:

Increase the minimum wage
France’s pre-tax minimum wage (link in French) is €1,498.47 ($1,701.80) a month, for a work week of 35 hours, or roughly $11.22 an hour. In the US, the federal minimum wage is $7.25 per hour and has not budged since 2009. A US employee working the same number of hours as a French worker (35 hours per week) would make $1,100 per month. (Minimum wage laws vary across US states, with some cities like Seattle offering $15 an hour.)

Enforce pay equality in the workplace
According to the US Census Bureau, women working full-time, year round, earned 80% of what their male counterparts earned in 2017. In France, according to the European Commission, that number is 84.8%. Macron has made the fight for gender equality the centerpiece of his administration (paywall), and has committed to reducing the gender pay gap through a set of measures, including sanctioning companies that pay men and women differently. Protestors would have him do more (link in French) but haven’t specified what, exactly.

Increase public subsidies for hiring young employees
French employers who hire workers between 16 and 25 years old on a short-term, full-time, or apprenticeship contract, receive a government subsidy to help offset the costs of healthcare, pensions, and other social welfare contributions, which are unusually large (paywall) in France. The government is willing to give subsidies, tax credits, and tax exemptions worth as much as €7,000 to incentivize companies to hire young people. Previous French governments have offered to pay up to 75% of young workers’ salaries for up to three years (paywall).


The US has no specific tax incentive policy at the federal level for companies that hire young people, though some companies can qualify for a Work Opportunity Tax Credit of up to $1,200 for hiring 16 to 17 year old summer workers who reside in an Empowerment Zone or Rural Renewal County. (Some states, including New York, have put in place their own incentives for hiring youth workers.)

Reduce all taxes
That one doesn’t require much explanation, but context is key. The average French worker pays more taxes than the average American worker—according to the Tax Foundation, average US wage earners have a total tax burden of 31.7% of their pretax earnings, versus 37.3% for the average French wage earner. Nonetheless, the taxes French workers pay go towards funding relatively generous state pensions, free universal healthcare, one of the world’s best public health systems, and inexpensive public education. That’s not the case across the board in the US.


None of which have anything to do with the EU. Yellow-vests have not called for anything against the EU.

This is why I call on the Progressives to unite in the streets. Not to protest so much as to meet each other and gain the strength that comes from KNOWING [=groking] that you are part of a huge movement. In the US, all it takes is one or 2 big swing elections to put Progressives into total power. Even the US SC can be expanded to water down the effect of recently adding the new conservative justices.
. . . In Europe all it takes is for almost all the nations to leave the EU. This is the only way it can be done under the rules.


Sounds like you are an EU-hater instead of an actual "progressive" because quite clearly you have rationalised the EU as the only obstacle to the defeat of neoliberalism totally ignoring that the EU is the least neoliberal place among what can be termed western economies. The only place that spends on infrastructure, has labour rights, consumer protections, welfare policies, healthcare and free education. Racists call anti-racists as racists in order to feign victimisation, neoliberals do that to social-democrats to delegitimise them and so on and forth and every single hater in the planet does that to the EU. The EU is at the same time the EUSSR as well as more neoliberal than the US, apparently!
#14981021
noemon wrote:None of which have anything to do with the EU. Yellow-vests have not called for anything against the EU.

Well, when the most pro-EU politician in France has an approval rating below 20%, that doesn't suggest a lot of pro-EU sentiment among the Gilets Jaunes. I could be wrong. However, I think the French populace is beginning to get a clue.
#14981022
blackjack21 wrote:Well, when the most pro-EU politician in France has an approval rating below 20%, that doesn't suggest a lot of pro-EU sentiment among the Gilets Jaunes. I could be wrong. However, I think the French populace is beginning to get a clue.


If the Yellow-vest protesters had any anti-EU sentiments they would have expressed it by now. American far-right Trump supporters divining their message while ignoring their actual demands, making up percentages in their own heads and accusing a far-milder neoliberalism than the one they vote & support is comical.
#14981024
noemon wrote:
What is surprising to you?

Yellow-vest protesters are demanding the abolition of the French senate, referendums at the national and local level for all issues as well as the following:

None of which have anything to do with the EU. Yellow-vests have not called for anything against the EU.

Sounds like you are an EU-hater instead of an actual "progressive" because quite clearly you have rationalised the EU as the only obstacle to the defeat of neoliberalism totally ignoring that the EU is the least neoliberal place among what can be termed western economies. The only place that spends on infrastructure, has labour rights, consumer protections, welfare policies, healthcare and free education. Racists call anti-racists as racists in order to feign victimisation, neoliberals do that to social-democrats to delegitimise them and so on and forth and every single hater in the planet does that to the EU. The EU is at the same time the EUSSR as well as more neoliberal than the US, apparently!

You seemed to love the EU. You refused to discuss, at the time it 1st came up, the Economic problems of the EU & EZ.

skip

I'm not a EU hater. I'm a Neo-liberalism hater. But, since the treaties enshrine Neo-liberal economics in the heart of the EU and the rules make it functionally impossibe to get all 28 nations to agree on any radical change, it is impossible to reform the EU.
. . . If you love the EU then you should call for all the nations to leave it AND FORM A NEW BETTER EUROPEAN UNION that has cut the Neo-liberalism out of it and replaced it with MMT. I can say this with virtual certainty, the current EU rules that enshrine Neo-liberalism will be replaced very soon (10 years max.).
. . . This way you get the wonderful democratic rules you love without the false and destructive Neo-liberal economic rules that are undermining the promised PROSPERITY of Europe. And, thereby undermining the desire of the people of Europe to live under the current EU. See my soon to be posted thread in "Economics and Capitalism" about "When the GDP doesn't grow ..."

To your reply to Blackjack21, As he replied; yes, their current demands center on the symptoms and not the disease germs themselves. However, the Fr. Gov. can't give in to their demands without violating the rules; so sooner or later the germs themselves will have to be dealt with. Those germs are the Neo-liberal rules in the treaties.
#14981026
Steve_American wrote:Eurostat reports that: The tragedy is that the contraction is being helped along by a deliberate political choice made by Europe’s own governments: Their effort to rein in deficit spending, to cut fiscal stimulus, and to balance their budgets in the 10-year aftermath of the 2008 financial crisis. “Austerity,” as it’s known, has shrunk the potential size of the European economy and retarded its ability to grow again. And now that the manufacturing sectors of Italy, France and Germany are all stagnating or shrinking, austerity is hurting their ability to pull out of the dip …


then it is hard to defend a Europhile position [that the EU protects the people from Neo-liberl excesses.].


The EU reports that national governments have made this deliberate political choice, but you or some guy's blog interprets that as the EU being at fault and not the national governments! :lol:

The BI article reports that the Oxford Economics study found that:
The cause of these losses goes right to the architecture of the monetary union and the way the European Commission enforces it.


The Commission has no power to enforce austerity in the member's national budgets. Either you or the author of that blog are simply posting lies for the gullible.

[{Shamelessly plagiarized (cut and pasted) from Bill Mitchell's Blog. See it all by going to my recent thread in the Europe section.}[/size] See my soon to be posted thread in "Economics and Capitalism" about "When the GDP doesn't grow ..."


You should not be doing that, plagiarising text, you should include your text in quotes and avoid spamming obscure blog posts.

Steve_American wrote:You seemed to love the EU. You refused to discuss, at the time it 1st came up, the Economic problems of the EU & EZ.


I have been discussing the economic problems of the EU & EZ since 2007, still do not see how is any of that relevant to my question.

Steve_American wrote:I'm not a EU hater. I'm a Neo-liberalism hater.


If that were the case you would be attacking neo-liberalism instead of the EU. The EU has had its treaties for decades but neo-liberalism it has had since people elected neo-liberal national governments. You are very confused and apparently the EU is the only place that must be destroyed for neo-liberalism to die, not the US, or Japan, or Singapore, no the least neo-liberal place must be the first to go! Are you serious? :?:

You are confusing the chicken & the egg and very badly so.
#14981031
noemon wrote:The EU reports that national governments have made this deliberate political choice, but you or some guy's blog interprets that as the EU being at fault and not the national governments! :lol:

The Commission has no power to enforce austerity in the member's national budgets. Either you or the author of that blog are simply posting lies for the gullible.

You should not be doing that, plagiarising text, you should include your text in quotes and avoid spamming obscure blog posts.

I have been discussing the economic problems of the EU & EZ since 2007, still do not see how is any of that relevant to my question.

If that were the case you would be attacking neo-liberalism instead of the EU. The EU has had its treaties for decades but neo-liberalism it has had since people elected neo-liberal national governments. You are very confused and apparently the EU is the only place that must be destroyed for neo-liberalism to die, not the US, or Japan, or Singapore, no the least neo-liberal place must be the first to go! Are you serious? :?:

You are confusing the chicken & the egg and very badly so.

Every MMTer professional economist is in agreement that the Neo-liberalism of the EU is going to destroy it. Bill Mitchell is hardly alone.

Bill was quoting the report. That is a quote from the report. It is not Bill saying it. It is not a lie.

I think the author of the report was able to see what you apparently can't see. Namely that if the govs. of Europe can't deficit spend because of the rules and can't create money with deficit spending then the austerity can't be fixed. It will go on and on. If this is true then the EU rules are the cause of the problem. And, frankly I don't see how you can claim that Greece, Portugal, and Italy, for just 3 examples, chose to go the austerity route without any pressure from the EU, ECB, IMF, etc. That claim is just flatly false.

I did include the entire text in the other thread I posted in Europe today. And I pointed you to it there too.
#14981033
Steve_American wrote:Bill was quoting the report. That is a quote from the report. It is not Bill saying it.


First of all, we hardly know who is the guy saying it, because you provided no link at all, you have plagiarised some blogger who is apparently quoting a report....but regardless of all that..

It is not a lie


Of course it is a bold-faced lie, because the Commission has no power to enforce budgets on national governments. It is actually quite simple. The truth is simple, not complicated.

I think the author of the report was able to see what you apparently can't see. Namely that if the govs. of Europe can't deficit spend because of the rules and can't create money with deficit spending then the austerity can't be fixed. It will go on and on. If this is true then the EU rules are the cause of the problem.


The governments of Europe have been deficit spending and exceeding the limits they agreed by far and wide margins for decades without anyone in the EU being able to do anything about it.

And, frankly I don't see how you can claim that Greece, Portugal, and Italy, for just 3 examples, chose to go the austerity route without any pressure from the EU, ECB, IMF, etc. That claim is just flatly false.


Frankly, you have a very bad case of chicken & egg syndrome. These countries went bankrupt and after going bankrupt their creditors gave them loans subject to budgetary terms and conditions. That fact alone is proof enough that noone(.ie the EU) can do anything to you unless you go bankrupt and prostrate yourself before the mercy of banks which at that point you have only yourself to blame. The IMF has been doing that around the world for decades and the good thing is that the EU got involved on it so Greece, Italy and Portugal have far better interest-terms, easing of their budgetary constraints, as well as receiving back profits on their own debt, so profits made by the ECB on Greek debt are sent back to Greece, Italy and so forth. The EU is not making any money on Greek debt! Try even mentioning that in the US and people will throw tomatoes at you.
#14981036
@noemon,
What we [you and I personally]have here is a failure to communicate.
You have drunk too much of the koolaid, so you and I will never agree.
At this point I would just be writing to the lurkers.
So, I'll quit.
Except to say ---
1] The only reason they are bankrupt is the EU rules. Clearly your grasp of economics is not good enough to see what the professional economists can see. That is rule one + situation creates situation 2, the it + rule 2 creates situation 3 then it and rule 1 make the situation worse, resulting in what you call bankruptcy.
. . The ECB bailed out France and other nations and bailed out the European banks that would have gone under if the ECB didn't make the loans to Greece, because the bond holders were those European bank and they bought the bonds after Greece entered the the EZ [but not from Greece, from the old pre-EZ bond holders]. The E. banks did this in search of more profit. They took the risk and they got bailed out and the people of Greece where made to to pay for it.
2] If they didn't use the euro they could not go bankrupt in their own currency.

Got to go the wife needs me NOW. Can't edit.
OK, edited better now.
Last edited by Steve_American on 18 Jan 2019 08:38, edited 2 times in total.
#14981039
Steve_American wrote:@noemon,
What we [you and I personally]have here is a failure to communicate.
You have drunk too much of the koolaid, so you and I will never agree.
At this point I would just be writing to the lurkers.
So, I'll quit.
Except to say ---
1] The only reason they are bankrupt is the EU rules. Clearly your grasp of economics is not good enough to see what the professional economists can see. That is rule one + situation creates situation 2, the it + rule 2 creates situation 3 then it and ruless 1 make the situation worse, resulting in what you call bankruptcy.
. . The ECB bailed out France and othe nations and bailed out the European banks that would have gone under if the ECB didn't make the loans to Greece, because the bond holders were those European bank and they bought the bonds after Greece entered the the EZ [but not from Greece, from the old pre- EZ bond holders]. The E. banks did this is search of more profit. They took the risk and they got bailed out and the people of Greece where made to to pay for it.
2] If they didn't use the euro they could not go bankrupt in their own currency.

Got to go the wife needs me HOW. Can't edit.


HUH? You are arguing against neo-liberalism and at the same time you are against bailing out governments? Infrastructure investment? etc

This does not make any coherent sense. As Noemon said, the whole situation was not created by the EU. It was the national governments that went in to significant deficit spending before the crysises happened and EU had nothing to do it. After the crises and especially Greece happened it was a wake up call. The same governments that were defecit spending understood that "Hey, we are next if this continue". This had nothing to do with the EU. Did the EU enforce them to go down the defecit spending route? Did EU enforce them to go to the austerity route? No, in both cases. The only thing that EU did was bail out the governments which subsequently paid off the creditors(Banks). EUs objective was not to help the banks, EUs objective was to stabilize the situation in those countries.

Now having said that, i might have a clue why you are against the EU so much. Or more precisely why you are against those bailouts and austerity. It goes against your MMT principle right? If i remember MMT states that defecit spending is not a problem. Well EUs situation disproves it. Massive deficit spending is a problem if it is not under control by other mechanisms. The US might be able to do it but EU is not able to do it in the same way.
#14981041
JohnRawls wrote:
1] HUH? You are arguing against neo-liberalism and at the same time you are against bailing out governments? Infrastructure investment? etc

2] This does not make any coherent sense. As Noemon said, the whole situation was not created by the EU. It was the national governments that went in to significant deficit spending before the crisises happened and EU had nothing to do it. After the crises and especially Greece happened it was a wake up call. The same governments that were deficit spending understood that "Hey, we are next if this continues". This had nothing to do with the EU. Did the EU enforce them to go down the defecit spending route? Did EU enforce them to go to the austerity route? No, in both cases. The only thing that EU did was bail out the governments which subsequently paid off the creditors(Banks). EUs objective was not to help the banks, EUs objective was to stabilize the situation in those countries.

3] Now having said that, i might have a clue why you are against the EU so much. Or more precisely why you are against those bailouts and austerity. It goes against your MMT principle right? If i remember MMT states that deficit spending is not a problem. Well EUs situation disproves it. Massive deficit spending is a problem if it is not under control by other mechanisms. The US might be able to do it but EU is not able to do it in the same way.

1] I never said I was against all bailouts, just bailouts for the rich and sticking the poor with the bill. I never said I was against infrastructure improvements either. Where do you think I said that? i alrady see why you thought I was against all bailours.

2] You and just disagree on the EU's hand in the current mess. No doubt because you see the euro as a good thing and I see it as the work of the devil. Almost literally.

3] I'm not at all against the idea of a united Europe. I'm just appalled at the Neo-liberal elements of it.
. . . Right, or even stronger; MMT calls for a much larger amount of deficit spending in most cases. MMT argues that inflation in the 2% range is a good thing and most Central banks seem to agree because they aim for 2% infltion. MMT argues that hyperinflation only happens in very select and strange case. They explain why 1920s Germany and Zimbobway [spelling is wrong] are not at all the general case.
. . . MMT says that all nations that have a fiat currency, a free floating exchange rate, and no debts in any other currency have much more fiscal space than other nations. Also, no limits from treaties imposed on their fiscal policy.
SO, THE EU DOES NOT DISPROVE IT.! Because most of the EU uses the euro and the rest are limited by EU rules from creating money. None of the nations meet the requirements of a real fiat currency.

The thing is you, John, and I just make totally different economic assumptions. And, this leads you to make statements like "The EU situation disproves what MMT teaches" and "The EU had nothing to do with the austerity imposed post GFC/2008."
#14981042
I see that the moderators combined 2 threads and changed the title of the main one. So, the thread I pointed you-all to is right above the 2nd one.
Dear moderators, your car and engineer example is not valid. Engineers can have free will and so initiate actions, cars don't and can't.
It is possible for 2 groups of people to both initiate actions that cross paths.
It seems to me that the EU technocrats can also be Neo-liberals and can take actions to reinforce Neo-liberal ideology even though Neo-liberal ideology did predate the EU. So, I agree with the blog I was quoting that it is the EU Neo-liberal technocrats who are hurting the European people, not the Neo-liberals that have no power in this situation.
#14981045
The downward shift in the industrial production index could be due to other reasons than the business cycle, the article should at least mention that. It doesn't necessarily look different outside the Eurozone.

noemon wrote:Of course it is a bold-faced lie, because the Commission has no power to enforce budgets on national governments. It is actually quite simple. The truth is simple, not complicated.


Is this Newspeak? :lol:

It is not that simple.

The Commission can propose to punish an EU member for violating the Stability and Growth pact (note the funny name), the European Council can only reject that proposition by qualified majority. Meaning punishment can only be avoided if 55% of member states representing 65% of the population reject it.

But that's not even necessary, since when the Commission launches an excessive deficit procedure (EDP) markets go apeshit and the bond yields of the sinning country go up because they expect a Eurozone exit or/and because said country cannot indirectly fund the deficit with central bank money (only with what the ECB provides).

Not surprisingly some commenters in the German media were praising the market for disciplining Italy.
#14981049
Rugoz wrote:Is this Newspeak? :lol:
It is not that simple.
The Commission can propose to punish an EU member for violating the Stability and Growth pact (note the funny name), the European Council can only reject that proposition by qualified majority. Meaning punishment can only be avoided if 55% of member states representing 65% of the population reject it.


This is newspeak indeed, even after the crisis and even after 2013 which was the latest round of strengthening the Stability and Growth pact that everyone ignored with impunity what we have is the following:

the "corrective" part entails the Excessive Deficit Procedure (EDP). This procedure is triggered if a member state's budget deficit exceeds 3% of GDP. The European Commission (DG Eurostat) is responsible for providing the data used for the EDP. Council Regulation (EC) 479/2009 [20] requires that "In the event of a doubt regarding the correct implementation of the ESA 95 [now to be understood as ESA 2010] accounting rules, the Member State concerned shall request clarification from the Commission (Eurostat). The Commission (Eurostat) shall promptly examine the issue and communicate its clarification to the Member State concerned and, when appropriate, to the CMFB. For cases which are either complex or of general interest in the view of the Commission or the Member State concerned, the Commission (Eurostat) shall take a decision after consultation of the CMFB." When the Council, on the basis of Eurostat data, decides that the deficit is excessive, it makes recommendations to the member state concerned and sets a deadline for bringing the deficit back below the reference value. The Council can grant extensions to this deadline if it is found that the country concerned has made good progress in implementing the initial recommendations but has not been able to fully correct its deficit because of an exceptional economic context. When it addresses decisions and recommendations to euro area member states, only euro area ministers have the right to vote.


In fact, neither the Commission, nor the Council can impose budgetary constraints on EU member states, at best the Council(not the Commission) can impose a fine for breaking the rules but only after qualified majority and only after the Member State has been shown to be totally impervious to recommendations. It should be noted that no EU member state has ever been fined as far as I'm aware of and the majority of the EU have been in breach of the Pact for several decades now.

Steve_American wrote:EU technocrats can also be Neo-liberals and can take actions to reinforce Neo-liberal ideology even though Neo-liberal ideology did predate the EU.


You seem incapable of comprehending, even your own beloved blog that states that national governments, not EU technocrats. National governments are neo-liberal. When people elect neo-liberals in government, neo-liberalism is what they get.
#14981057
noemon wrote:This is newspeak indeed, even after the crisis and even after 2013 which was the latest round of strengthening the Stability and Growth pact that everyone ignored with impunity what we have is the following:

In fact, neither the Commission, nor the Council can impose budgetary constraints on EU member states, at best the Council(not the Commission) can impose a fine for breaking the rules but only after qualified majority and only after the Member State has been shown to be totally impervious to recommendations. It should be noted that no EU member state has ever been fined as far as I'm aware of and the majority of the EU have been in breach of the Pact for several decades now.


Treaty on Stability, Coordination and Governance in the Economic and Monetary Union (also known as the ‘fiscal compact’)
https://eur-lex.europa.eu/legal-content ... SUM:1403_3

This ‘fiscal compact’ imposes requirements on euro area countries concerning their budgetary policies. Other EU countries may participate if they wish. Of the 28 EU countries, only the Czech Republic, Croatia and the United Kingdom have not signed the accord. It buttresses the reformed Stability and Growth Pact, under which:

national deficits must not exceed 3 % of gross domestic product (GDP),
national public debt must remain below 60 % of GDP.
The intergovernmental agreement has 3 main objectives.

1
To ensure national budgets are balanced or in surplus.

To comply with this ‘balanced budget rule’, countries must keep their annual structural deficits at 0.5 % of GDP or lower. A structural deficit is the general deficit minus the impact of the economic cycle on government spending and revenue (e.g. higher expenditure on unemployment benefits in a recession).

Governments must put in place an automatic correction mechanism triggered by any departure from the balanced budget rule. That means that if the budget balance deviates from the projected line, corrective measures are taken automatically.

Countries may be temporarily exempted from the balanced budget rule in exceptional circumstances, such as a severe economic downturn. Moreover, if a government’s public debt is well below the Stability and Growth Pact's reference value (60 % of GDP), it may be granted a higher structural deficit of up to 1 % of GDP.

EU countries may be brought before the European Union's Court of Justice if they fail to abide by these requirements. The Court may impose financial sanctions on countries that do not comply with its judgments.

2
To boost the impact of recommendations made by the European Commission when euro area countries' public deficits become too large.

This intergovernmental agreement commits EU countries, when voting in the Council of the EU, to adopting the Commission's proposals and recommendations on the excessive deficit procedure unchanged - unless there is a qualified majority (see glossary) among them against such a decision.

3
To improve coordination of national economic policies.

The intergovernmental agreement requires governments to report their debt issuance plans (raising funds by borrowing from bond-holders) in advance to the Commission and Council of the EU. They have to make sure that their plans for major economic policy reforms are discussed or coordinated among themselves in advance. The agreement also covers governance of the euro area. For instance, summits of the heads of state or government of the euro area countries should be held at least twice a year (Euro summits).


The corrective arm: the excessive deficit procedure
https://eur-lex.europa.eu/legal-content ... M%3Al25020
Voting system

Decisions on most sanctions under the EDP are taken by reverse qualified majority. This means that a fine is deemed to be adopted unless the Council decides by qualified majority to reject it.

Moreover, the 25 countries which signed the Treaty on Stability, Coordination and Governance agreed to apply reverse qualified majority voting at an even earlier stage in the procedure, for example when deciding whether an EU country should be subject to an EDP.
#14981065
Rugoz wrote:The corrective arm: the excessive deficit procedure
https://eur-lex.europa.eu/legal-content ... M%3Al25020


It seems that you are correct on the reverse qualified majority argument, but that was agreed by eurozone(not EU members who may opt-in if they so wish) countries on January 2013, so it is utterly moot, especially in relation to Brexit(as it does not apply to Britain at all) as well as the crises. Moreover, a fine has never been applied in the entire history of the EU despite of the Pact being broken by several countries for several decades, and that makes it comprehensively moot.

Tell us honestly Rugoz, do you believe that the EU (Commission) is to blame for the austerity programs?

Politico wrote:EU finance ministries Thursday evening gave the European Commission the go-ahead to prepare disciplinary action against Italy for breaching the bloc’s fiscal rules, according to a document obtained by POLITICO.

The Commission now may propose Italy’s EDP as soon as December 19 to demand “effective action” from Rome to bring its public finances back in line with the rules.

Under this timeline, EU finance ministers would vote on the EDP proposal in late January when they meet for their regular ECOFIN gathering.

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