Welcome to European Tribune. It's gone a bit quiet around here these days, but it's still going.
Popular understanding of MMT is near zero and people mostly recoil in horror if you try to explain it. Journalists ought to know better, but largely pander to the neoconservative economic hegemony.

However, the USA has been doing it for decades, and the fact that the EU has now signed up for deficit spending on a fairly big scale, to remarkably feeble opposition, is perhaps a game-changer.

Clearly, the euro is the key resource. Other countries with their own currencies are much more vulnerable.

It is rightly acknowledged that people of faith have no monopoly of virtue - Queen Elizabeth II

by eurogreen on Thu May 6th, 2021 at 10:57:49 AM EST
[ Parent ]
I don't see your last sentence as necessarily true. Sweden has been spending a lot more then taxes received since the start of the pandemic.

According to trading economics non-euro EU members Sweden and Denmark increased government debt in 2020 by 20-25% and eurozone by 11%. UK by around 15% and US by just above 25%.

So far it looks like the euro is still a constraining factor when it comes to using deficit spending to alleviate teh effects of the pandemic.

by fjallstrom on Thu May 6th, 2021 at 02:41:00 PM EST
[ Parent ]
Correlation is not causation: the overall lower government debt increase in the EZ countries is not necessarily the result of the Euro itself; many so-called "frugal" countries with large GDP are part of the EZ. Would be interesting to know what caused the difference between EZ and the other...
by Bernard on Thu May 6th, 2021 at 05:00:53 PM EST
[ Parent ]
But lack of correlation indicates a lack of causation, so if other countries has larger increases in debt it indicates that eurogreen's last sentence isn't true. It isn't because of the euro that the euro zone can run deficits, it is despite the euro. Also because sovereign governments with their own currency are not restrained by deficits, only countries using a foreign currency are.

Sweden and Denmark are your typical "frugal" countries with current accounts surpluses (easier outside the euro zone) and low debt/GDP ratios. Actually, now I realise that one can argue against the metric in my last comment in that relative increase in government debt gives undue weight to previous debt level (which is low in the case of Sweden and Denmark). So if one wants to make comparisions one should use some other metric.

by fjallstrom on Thu May 6th, 2021 at 08:54:31 PM EST
[ Parent ]
But perhaps being outside the euro forces them to have a low deficit or a surplus? Perhaps it's not purely a policy choice?

It is rightly acknowledged that people of faith have no monopoly of virtue - Queen Elizabeth II
by eurogreen on Fri May 7th, 2021 at 01:24:19 PM EST
[ Parent ]
It could also be that having a sovereign currency and not the Euro means they can call the shot themselves.  A dozen years ago, when Iceland was trying to dig out of the Kreppa, joining the Euro was floated as a solution.  I told friends, "You don't want to do that.  The ISK may be in a crater, but at least you have the last word on what it is and what it's good for."
by rifek on Mon May 10th, 2021 at 02:05:42 PM EST
[ Parent ]
But smaller currencies are more vulnerable to markets, surely. Nothing bad has happened yet, but perhaps some wannabe Soros is planning an attack on the Danish kroner when the opportunity presents?
Pure speculation, on my part, I confess.

It is rightly acknowledged that people of faith have no monopoly of virtue - Queen Elizabeth II
by eurogreen on Fri May 7th, 2021 at 01:21:43 PM EST
[ Parent ]
Were EU and ECB policy more even in its benefits between the large and small national economies I might agree. But not under current and likely future policy options.

"It is not necessary to have hope in order to persevere."
by ARGeezer (ARGeezer a in a circle eurotrib daught com) on Mon May 10th, 2021 at 06:32:50 PM EST
[ Parent ]
You can't raid a floating currency, because the government isn't going to bet against you. So there isn't much Soros can do as long as the Kronas stay floating (and Sweden's need to stay floating to avoid fulfilling the entrance criteria to the euro).
by fjallstrom on Wed May 12th, 2021 at 08:01:13 AM EST
[ Parent ]


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