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Leaving the Euro

by rz Sun Nov 30th, 2014 at 03:50:15 PM EST

I wrote a quite long comment in  Migerus Diary and I thought I should extend it even more and make a diary out of it.

In the comment section melo started a discussion about the Euro, in this case Germany leaving the Euro.

I posed the question to all participation in this thread

Would you recommend leaving the Euro? And: Would you vote for a party which recommends leaving the Euro?

The answers to this question I got could be divided into two groups:

Answer a)  Cyrille,  Migeru,  afew, (maybe melo):
We need a credible threat to leave the Euro, to change the European institutional setup. The exact nature of the changes has not been spelled out, but from our discussion on this blog it is quite clear that what would be needed is, i) changes to the 'Stability and Growth Pact', ii) The possibility for the ECB to directly finance gouvernments. iii) maybe a higher inflation target.

Migeru later specified:


Unless and until Article 123 of the Treaty on the Functioning of the European Union (Article 104 of Maastricht Treaty) is repealed, all the rest is cosmetic.

Which is basically my point ii). I completely agree that this is the most crucial point.

front-paged by afew


Answer b)  A swedish kind of death,  cagatacos:
We should leave the Euro right now.

I want to lay out here why I think that position a) is wrong and b) is correct. With the caveat that b) makes most sense for Portugal, Spain and Greece. And that their are in fact other options as well, which I will lay out at the end.

Why is a) wrong?

The threat is not credible:
As expressed by afew, melo and Cyrille, I guess the idea here is that if countries where to leave the Euro, their new currency would devalue leading to less demand for German goods and in turn to a negative economic impact for Germany. I think there are several reasons why this will not be take seriously in Germany:
I)German economists are crazy and the economists advising our government are the worst of the bunch.
The understanding of the economy in Germany is deeply ideological: 'if you work hard things will be fine', 'a lower value for the currency is only needed for lazy southerners' and so on.
II) Even looking at it objectively it is not clear to me if German would be worse of if other countries would leave the Euro. All other countries have to import at lot of good, no matter what. So the amount of devaluation possible is limited. At the same time, the real income of Germans would rise. they could go cheaper on Holidays, they could by cheaper goods from the rest of Europe and so on. this would create a rebalancing which is urgently necessary.
III) In the special case of France I am not even sure that the new currency would devalue. The French economic weakness is a myth. I am not saying that everything is fine in France, but still the economy is quite strong. Furthermore, in contrast to Germany France has not destroyed its infrastructure in an obsession with its deficit and it has a growing population. These two factors lead to the conclusion that its growth potential is much better then the growth potential of e.g. Germany. If now on top of this France would have its own currency and could run a sane monetary policy this would probably create solid growth (I will also come back to this in b)) and therefore an appreciation of  the currency.
IV) If you simply threaten to leave the Euro your financial system will be destabilized. As soon as you start to talk about leaving the Euro you basically have to shut down all banks, or you will have a bank run. Even if you agree with III), then it would still make sense to first take your Euros out of France, wait till the new currency drops a little and then go back in. For Spain and Portugal, anybody how lets his Euros be exchanged to the new currency will have substantial losses. So either you do it directly and quickly, or your banks will collapse and you will have to beg the IMF for Money.
V) I agree that with Migeru that repealing 'Article 123 of the Treaty on the Functioning of the European Union' is what we need to do. But no German government will ever do this! It is absolutely unthinkable. Which means that the threat of leaving the Euro is pointless.

Lets go to b):

We should not underestimate the challenges in leaving the Euro. I also have to say that legally any country leaving the Euro would enter unknown territory. If some investment fund would loose money because your country leaves the Euro, could it sue? Most probably. And, while in the long run leaving the Euro could be hugely beneficial, in the short run it could lead to real loss of purchasing power for imported goods, which are a lot of goods. A debt default is also pretty much unavoidable, which also comes with real costs down the line.

That said: 25% unemployment is unacceptable. I do not see how this can continue! This is an obvious reason why Spain, Portugal and Greece should leave the Euro. Similar to Argentina around 2000, the benefits of a different monetary policy would most probably outweigh all costs.

Now for France the Situation might be different. It could probably leave the Euro, and some of its creditors might even agree to denominate the debt in the new currency. Or maybe not, but even then France will not need to default on its debt. I am quite confident that growth would be sufficient. Again, it is not clear to me that leaving the Euro is really a good idea for France at the moment, but it still beats the 'whining about leaving the Euro' option.

Are there other options?
Again, I am not so sure about the situation of Spain, Portugal and Greece. Maybe there is no other option. But for France and Italy there are plenty of other ways of how to improve the situation.

I) Break the 'Stability and Growth Pact'. Others (e.g. Bernard) have already pointed that out. And in fact France is already doing it.  and as expected the the Commission is doing nothing!

II) Grandstanding! But on the right issue: Why the fuck is the ECB failing in fulfilling its 2% Inflation Mandate! Just a few Months ago Jens 'Worst Central Banker of the World' Weidmann gave a speech were he demanded this or that type of structural reform from Italy (make it easier to fire people). And I could not help but wonder: why did nobody tell him to shut the fuck up, and do his job! How can it be that inflation is still running below target. Every speech of every southern European politician should be about blaming the ECB to hit its target.

III) Don't leave, push Germany to leave the Euro (again others pointed that out, too.). 5 Stars, Podemos, Syzra and others need to attack 'Article 123 of the Treaty on the Functioning of the European Union'! This is the best way to shove Germany out of the Euro. It is a much better solution then for any of the economically weaker countries to try to leave the Euro on its own.

IV) and now for the radical stuff Solving the economic depression in the eurozone by issuing "quasi"
monies
(pdf).
The idea here is to issue your own currency in parallel to the Euro. You do it basically by paying in somthing similar to IOUs.  

Display:
There was a long comment by Bernard, which I also want to put into the comment section of this Diary:


A few comments:

rz:

 

  German economists are crazy and the economists advising our government are the worst of the bunch.

No objection from this quarter :)
As you've noted elsewhere, some Germans have exposed it as such (but if it's written in an English paper, even the FT, does it really count?).

rz:

 

    The French economic weakness is a myth.

No objection either, but would the hypothetical new French currency not devalue against the German one? I doubt the respective economic strengths (and the more dynamic French demography) would be enough to prevent an appreciation of the eventual new DM, if only for Deutschmark fetishism in a lot of financial circles. After all, if policies were mostly driven by facts, we would be in a very different situation, wouldn't we? Let's not forget that markets can remain irrational longer than we can remain solvent...

rz:

 

  the real income of Germans would rise. they could go cheaper on Holidays, they could by cheaper goods from the rest of Europe and so on.

As good as it would be for German people, especially those with the lowest incomes, an over-appreciated currency would be a catastrophe for a German economy entirely oriented towards exports: a lot of companies would be hurt, not necessarily the big conglomerates who already have facilities outside of Germany, but the Mittelstand certainly. "Real income" with respect to what? Imported goods? Precisely what an export minded leadership wants to limit at all costs...

Lastly, I don't think the "credible threat to leave the Euro" is the only option for other EZ countries: never mind the fact that, barring a Le Pen elected French president, it is totally unlikely to happen, what with the current EU leaders enthralled with the austerian fairy tale. As you rightly pointed out, threats do not work well, especially with a German leadership (and a German population to a large extent) living in the parallel Swabian housewife universe. Grandstanding never works in the EU, as a British PM is finding out.

Another option is to quietly refuse to apply the full austerity straitjacket. There will be of course a lot of furor, and possibly scathing editorials from German EU commissioners (oh, wait...), but, in the finest EU tradition, no frontal crisis: just long winded horse trading negotiations ending up into some "new consensus", the details of which being difficult to predict from here.

Lastly, there's the - not entirely unthinkable - possibility that the first country to pull the metaphorical trigger won't be Greece or Portugal or Italy, or even France: Germany might well beat them all to the punch. Especially if the EU commission fails to strictly enforce full-metal austerity from Lisbon to Tallin and the cries of currency debasement and Weimar inflation upon us grow increasingly louder in Germany. This would actually provide a perfect vindication to the "lazy Southerners who cannot be trusted" theme

To quote Migeru:

Migeru:

 

 I'm pinning my hopes on AfD.

The "summer series" 'End of the line for the Euro', a political fiction published by Le Monde over the summer of 2011, might even end up to be true after all :-)

by Bernard on Sun Nov 30th, 2014 at 01:12:34 PM EST


by rz on Mon Dec 1st, 2014 at 03:23:18 AM EST
Very quickly (probably more later):
you seem to suggest that b) is better than a) because it would be done without a warning.
Well, that is an impossibility unless you suggest moving back to dictatorships. There are constitutionality issues there.

Also, you seem to misunderstand Migeru's an my use of the word "threat". It does not mean you grandstand and threaten. I specifically mentioned that a balanced position was to not make the Euro an absolute decision. At the moment parties in power have it as an absolute yes, whatever the cost, so indeed Germany can feel that there is not threat of breakup.
Simply saying the obvious, that while you would much rather stay in, you'll also take the situation in consideration, creates a threat, but no grandstanding.

It's like in chess - it's for the opponent to realise that there is a threat. You don't play your move stating "I commit to taking on c7 unless you physically restrain me".

Earth provides enough to satisfy every man's need, but not every man's greed. Gandhi

by Cyrille (cyrillev domain yahoo.fr) on Mon Dec 1st, 2014 at 04:02:27 AM EST
Lets say Podemos gets elected, they could close all Banks and call for a Referendum on leaving the Euro in 2 Weeks, or so? But I agree, it is not so clear how to actually implement b).

About a): Don't you think that any position but full commitment to the Euro would destabilize your financial system?

by rz on Mon Dec 1st, 2014 at 04:20:19 AM EST
[ Parent ]
About a): Sarkozy (and please don't take that as indicating my support for the guy) did briefly state a position of not being ready to stay at ANY cost.

It did not destabilise anything other than Merkel, who immediately softened her stance -probably the only time Sarkozy had any impact on Merkel.

As for Podemos, whether they can do it like that in Spain I don't know, but certainly they would at least need to campaign on a platform of leaving, and there are polls, so people would know if they are about to win. So hardly a stealth action...
In France, it would require either a referendum or convening both chambers and getting a supermajority. Again, not something you can do quietly.

You are ruling out a) on the argument of a destabilisation from a lack of total commitment, to then promote a much, much stronger "lack of commitment" - in fact, commitment to leaving. That seems slightly odd.

As for ignoring the rule 123, yes, I'm all for that, but I don't think it's enough in the long run if the ECB won't act as a proper central bank, and it does nothing (or at least very little) to remove the fundamental imbalance created by Germany not playing fair.

Earth provides enough to satisfy every man's need, but not every man's greed. Gandhi

by Cyrille (cyrillev domain yahoo.fr) on Mon Dec 1st, 2014 at 04:36:16 AM EST
[ Parent ]
"Rule" 123 will not be ignored, because the ECB cannot afford to open itself to successful legal challenges on it. The game is played on the interpretation. In February 2010 everyone lied through their teeth about the impossibility of buying sovereign debt in the secondary market. That was a deliberate stance to leverage market pressure to force a political agenda on Greece. They ended up buying bonds timidly later that year.

However, the ECB may start buying bonds in the secondary market again. Vicepresident Vitor Constâncio said as much last week:

We expect that within the time of the programme, the adopted measures will lead the balance sheet to return to the size it had in early 2012. We have of course, to closely monitor if the pace of its evolution is in line with that expectation. In particular, during the first quarter of next year, we will be able to better gauge if that is the case. If not, we will have to consider buying other assets, including sovereign bonds in the secondary market, the bulkier and more liquid market of securities available. It would be a pure monetary policy decision, buying according to our capital key, within our mandate and our legal competence.
You see in the last sentence he's pre-empting German protests of unconstitutionality.

A society committed to the notion that government is always bad will have bad government. And it doesn't have to be that way. — Paul Krugman
by Migeru (migeru at eurotrib dot com) on Mon Dec 1st, 2014 at 05:43:04 AM EST
[ Parent ]
In February 2010 everyone lied through their teeth about the impossibility of buying sovereign debt in the secondary market. That was a deliberate stance to leverage market pressure to force a political agenda on Greece.

You know, currently Jens "Worst Central Banker of the World"  Weidmann is going around and gives speeches where he basically argues that the ECB should not fulfill its Mandate, to force specific political decisions upon various European Governments! This should definitely be an issue in the political discussion.

by rz on Mon Dec 1st, 2014 at 06:49:45 AM EST
[ Parent ]
I agree, a lot of noise should be made about Weidmann. That it is not the case is a major part of the blame that can be apportioned to the various non-German Eurozone countries.

Earth provides enough to satisfy every man's need, but not every man's greed. Gandhi
by Cyrille (cyrillev domain yahoo.fr) on Mon Dec 1st, 2014 at 07:07:49 AM EST
[ Parent ]
Krugman is on the case :
What about resolving the problem of too little inflation in Germany? Very aggressive monetary policy might do the trick (although I wouldn't count on it), but German monetary officials are warning against such policies because they might let debtors off the hook.
by rz on Mon Dec 1st, 2014 at 09:33:55 AM EST
[ Parent ]
Why? Weidmann is nowadays a total outsider at the ECB.
by IM on Tue Dec 2nd, 2014 at 06:22:51 PM EST
[ Parent ]
Same reason you need to prosecute war criminals long after the war has stopped.

And let's be totally candid about this: Weidman's policies have killed more people than most of the successfully prosecuted war criminals from the Yugoslav wars.

- Jake

Friends come and go. Enemies accumulate.

by JakeS (JangoSierra 'at' gmail 'dot' com) on Wed Dec 3rd, 2014 at 03:34:58 PM EST
[ Parent ]
  1. Because it is totally outrageous that the Bundesbank want to force its policy preferences onto other countries, by failing to fulfill its mandate.

  2. At present Jens "Worst entral banker of the world" Weidmann has little impact on the policy of the ECB, since it turned out that everything he says is total shit (inflation expectations are well anchored...not). But there is no doubt that he is still slowing down the ECB in adopting QE. Therefore attacking him makes total sense.
 
by rz on Thu Dec 4th, 2014 at 03:45:22 AM EST
[ Parent ]
Weidmann is going around and gives speeches where he basically argues that the ECB should not fulfill its Mandate, to force specific political decisions upon various European Governments!

This needs clarification. It is hard to imagine that he means PIGS should not be cutting public services, and I rather doubt that he is concerned that countries are not meeting inflation targets.

"It is not necessary to have hope in order to persevere."
by ARGeezer (ARGeezer a in a circle eurotrib daught com) on Mon Dec 1st, 2014 at 10:34:14 AM EST
[ Parent ]
His concern is that certain countries are not implementing required reforms with enough alacrity, surely?
by afew (afew(a in a circle)eurotrib_dot_com) on Mon Dec 1st, 2014 at 10:45:32 AM EST
[ Parent ]
Well, I am pretty certain he does not oppose 'austerity' measures as contingent requirements to ECB or Troika bailout measures.

"It is not necessary to have hope in order to persevere."
by ARGeezer (ARGeezer a in a circle eurotrib daught com) on Mon Dec 1st, 2014 at 10:54:11 AM EST
[ Parent ]
What is unclear? In order to force PIGS to do what he wants, he wants the ECB not to fulfil its Mandate.

Earth provides enough to satisfy every man's need, but not every man's greed. Gandhi
by Cyrille (cyrillev domain yahoo.fr) on Mon Dec 1st, 2014 at 11:15:45 AM EST
[ Parent ]
A naive reader might assume that Jens has had second thoughts on the wisdom of enforced austerity - depending on how much they know about him.

"It is not necessary to have hope in order to persevere."
by ARGeezer (ARGeezer a in a circle eurotrib daught com) on Mon Dec 1st, 2014 at 11:20:24 PM EST
[ Parent ]
After all, when I think of Germany, the ECB and the Troika I cannot avoid thinking of the influence over policy held by the Bundesbank and how it has used that influence self righteously to force austerity on the periphery. The devastation wrought by enforced austerity in the most outstanding and noteworthy result of its efforts to enforce its Mandate. Thus, when I read: 'Weidmann is going around and gives speeches where he basically argues that the ECB should not fulfill its Mandate, to force specific political decisions upon various European Governments!' my first reaction is 'WTF', not enforce its Mandate'? It is Germany's Mandate'> But of course he is simply being hypocritical. He must be referring only to such minor aspects of that Mandate as enforcing the minimum inflation requirements. (How long has it been since the Eurozone has had inflation equal to or greater than 2%?) Weidmann decides for himself and Germany which aspects of the EU and EMU agreements are to be enforced and which neglected while denying that right to others.

"It is not necessary to have hope in order to persevere."
by ARGeezer (ARGeezer a in a circle eurotrib daught com) on Tue Dec 2nd, 2014 at 10:43:56 AM EST
[ Parent ]
The ECB is currently not fulfilling its mandate because its (self-defined) mandate is to keep inflation "below (but close to) 2% over the medium(-to-long) term" and it is failing on that score. The ECB should be reflating the economy, but it isn't.

That's what's meant by "Weidmann advocates not fulfilling its mandate".

A society committed to the notion that government is always bad will have bad government. And it doesn't have to be that way. — Paul Krugman

by Migeru (migeru at eurotrib dot com) on Tue Dec 2nd, 2014 at 10:46:25 AM EST
[ Parent ]
Indeed. And that is certainly not a minor point.

Earth provides enough to satisfy every man's need, but not every man's greed. Gandhi
by Cyrille (cyrillev domain yahoo.fr) on Tue Dec 2nd, 2014 at 04:20:45 PM EST
[ Parent ]
Sorry, sloppy writing.

I meant to say (but indeed said something else entirely) that I was all for ignoring constraints of the SuicideStability and Growth pact, but that it would not be enough in the long run because of article 123, or at least the way it is being interpreted.

Ignoring deficit limits would only take us so far economically, although politically it might infuriate the Germans enough to make them leave, which would markedly improve things of course.


Earth provides enough to satisfy every man's need, but not every man's greed. Gandhi

by Cyrille (cyrillev domain yahoo.fr) on Mon Dec 1st, 2014 at 07:05:22 AM EST
[ Parent ]
Individual countries could threaten add alternative currencies/payment systems, subject to capital and exchange rate controls, in parallel to the Euro and just ignore any protests. They should actually set in motion the process with public discussion on the design of the currencies, etc. Were they to call them Franc, Lira, Peso, Drachma it would make the message clear: the ECB is allowing 25%+ unemployment and deflation in much of the EuroZone so we are going to do something about it.

"It is not necessary to have hope in order to persevere."
by ARGeezer (ARGeezer a in a circle eurotrib daught com) on Mon Dec 1st, 2014 at 10:46:46 AM EST
[ Parent ]
Not to forget that national currencies existed in parallel with the euro between 1997 and 2001.
by afew (afew(a in a circle)eurotrib_dot_com) on Mon Dec 1st, 2014 at 11:15:28 AM EST
[ Parent ]
More like 1999 and 2001 but the exchange rate was fixed already. I would expect that control over the issue of national currencies was already transferred to the Eurosystem in 1999.

A society committed to the notion that government is always bad will have bad government. And it doesn't have to be that way. — Paul Krugman
by Migeru (migeru at eurotrib dot com) on Mon Dec 1st, 2014 at 11:36:27 AM EST
[ Parent ]
Right.

Euro - Wikipedia, the free encyclopedia

The currency was introduced in non-physical form (traveller's cheques, electronic transfers, banking, etc.) at midnight on 1 January 1999, when the national currencies of participating countries (the eurozone) ceased to exist independently. Their exchange rates were locked at fixed rates against each other. The euro thus became the successor to the European Currency Unit (ECU). The notes and coins for the old currencies, however, continued to be used as legal tender until new euro notes and coins were introduced on 1 January 2002.
by afew (afew(a in a circle)eurotrib_dot_com) on Mon Dec 1st, 2014 at 12:00:39 PM EST
[ Parent ]
Ah, fantastic...

This is the Maastricht treaty (1992):

Article 105a

l. The ECB shall have the exclusive right to authorize the issue of banknotes within the Community. The ECB and the national central banks may issue such notes. The banknotes issued by the ECB and the national central banks shall be the only such notes to have the status of legal tender within the Community.

  1. Member States may issue coins subject to approval by the ECB of the volume of the issue. The Council may, acting in accordance with the procedure referred to in Article 189c and after consulting the ECB, adopt measures to harmonize the denominations and technical speci/ications of all coins intended for circulation to the extent necessary to permit their smooth circulation within the Community.
Lisbon treaty (2007):
Article 128

  • The European Central Bank shall have the exclusive right to authorise the issue of euro banknotes within the Union. The European Central Bank and the national central banks may issue such notes. The banknotes issued by the European Central Bank and the national central banks shall be the only such notes to have the status of legal tender within the Union.

  • Member States may issue euro coins subject to approval by the European Central Bank of the volume of the issue. The Council, on a proposal from the Commission and after consulting the European Parliament and the European Central Bank, may, adopt measures to harmonise the denominations and technical specifications of all coins intended for circulation to the extent necessary to permit their smooth circulation within the Union.
  • See the subtle and important difference?

    A society committed to the notion that government is always bad will have bad government. And it doesn't have to be that way. — Paul Krugman
    by Migeru (migeru at eurotrib dot com) on Mon Dec 1st, 2014 at 12:05:58 PM EST
    [ Parent ]
    How did that happen? Did really anybody put this in to mean that parallel currencies should be legal?
    by rz on Mon Dec 1st, 2014 at 12:13:41 PM EST
    [ Parent ]
    They forgot that currencies other than the Euro could exist...

    A society committed to the notion that government is always bad will have bad government. And it doesn't have to be that way. — Paul Krugman
    by Migeru (migeru at eurotrib dot com) on Mon Dec 1st, 2014 at 12:23:11 PM EST
    [ Parent ]
    Hoist on their own petard! It says nothing here about issuance of other currencies, such as Berkshire Bucks, or, indeed, such existing practices as Business Exchange dollar credits.

    "It is not necessary to have hope in order to persevere."
    by ARGeezer (ARGeezer a in a circle eurotrib daught com) on Mon Dec 1st, 2014 at 11:35:08 PM EST
    [ Parent ]
    A naive person like myself might ask how all these credit mechanisms, guarantees, etc. are not in themselves alternate currencies.

    Experience keeps a dear school, but fools will learn in no other. -- Dr Johnson
    by melvin (melvingladys at or near yahoo.com) on Tue Dec 2nd, 2014 at 02:02:29 AM EST
    [ Parent ]
    An alternate currency circulates.

    A society committed to the notion that government is always bad will have bad government. And it doesn't have to be that way. — Paul Krugman
    by Migeru (migeru at eurotrib dot com) on Tue Dec 2nd, 2014 at 04:52:40 AM EST
    [ Parent ]
    In the USA BX operates nation wide. My brother exchanged the cost of chassis and alignment work for Tuscon and Pima County agencies for travel and lodging in various travel destinations, as well as treating us to some of the finer restaurants in Tuscon.

    "It is not necessary to have hope in order to persevere."
    by ARGeezer (ARGeezer a in a circle eurotrib daught com) on Tue Dec 2nd, 2014 at 10:07:02 AM EST
    [ Parent ]
    How can the threat of leaving the Euro be pointless, if the alternative is to actually leave the Euro?

    A society committed to the notion that government is always bad will have bad government. And it doesn't have to be that way. — Paul Krugman
    by Migeru (migeru at eurotrib dot com) on Mon Dec 1st, 2014 at 05:31:57 AM EST
    A fair question. For the shake of the discussion we will have to divide this up into discussing France and SPG (Spain-Portugal-Greece).

    I would consider my point IV (collapsing banks in a country which threatens to leave), the most important point which distinguish these two options.

    France:
    As Cyrille has pointed out, it is not quite clear how to leave the Euro with out discussing it first and for France the Banks did not collapse when Sarkozy hinted that France could leave the Euro. But that is France, and I guess that many people simply agree with my point III (The French fundamental are sound).

    SPG:
    Maybe you know better, but I feel that here my point IV is fully applicable. this obviously leaves the problem of how to organize a withdrawal form the Euro.

    That is why I also added the 'other options part'. Issuing an additional currency could be the best option for SPG.

    by rz on Mon Dec 1st, 2014 at 06:31:38 AM EST
    [ Parent ]
    Would the markets be spooked by the introduction of a parallel currency? It actually improves the fiscal sustainability of the country that does it.

    A society committed to the notion that government is always bad will have bad government. And it doesn't have to be that way. — Paul Krugman
    by Migeru (migeru at eurotrib dot com) on Mon Dec 1st, 2014 at 08:53:54 AM EST
    [ Parent ]
    It would also improve the country's ability to flat up default on primary currency debts which it might consider odious.

    So I'm guessing "yeah."

    - Jake

    Friends come and go. Enemies accumulate.

    by JakeS (JangoSierra 'at' gmail 'dot' com) on Wed Dec 3rd, 2014 at 04:22:30 PM EST
    [ Parent ]
    I think it depends a bit on the details of how the additional currency is implemented. The government pays its employees with new currency, and the currency starts to circulate. This means also a large part of the tax income will be in the new currency. Depending on how this goes, it could be that it becomes impossible to service the debt.
    by rz on Thu Dec 4th, 2014 at 03:22:30 AM EST
    [ Parent ]
    Yes, It is always dependant on the implementation. Considering the political reality right now, It seems like the best option there is, is tax credit program. All these political parties in Italy and even in spain and France are so fragmented. there are people in  those movements with their own agenda.So you can get members there whos views completely differ regarding euro and EU.Also there are a lot of opportunists riding this wave.  It seems the problem in Europe is that there is not strong left against this neoliberal utopia. The left we have are intellectuals who live in nice houses and they don't really feel the pain austerity or euro for that matter has caused. My view right now is that no matter how many eurosceptics get into any of the governments, the ultimatums will not be given and this nightmare could go on for years. That is why I consider alternative currency to be the best option. It should fly politically too bacause the idea is so simple really: we don't have to have euros to spend and we can give the economy a tax break. Tax credits (quuasi monet) is just a tool though, It depends on what you do with It. Full employment can be quickly achieved, also It is way easier to leave euro once you have implemented tax credits that trade agains euros and are liquid financial assets that government can issue at will. Political situation might change of course but right now I don't see most of the eurosceptics being much more than opportunists regarding euro, national sovereignity etc. Or if some are, those are the kind of radicals that I wish were in no government in Europe.
    by Kristjan on Thu Dec 4th, 2014 at 04:25:38 AM EST
    [ Parent ]
    The Press Project: Update: Syriza bashing memo was fake (28 November 2014)
    Athanasios Vamvakidis, a Bank of America executive who was sitting in the London meeting, said in a radio interview on Vima FM Friday that "what the memo states was simply not presented in our meeting with Syriza", adding that the Capital Fund executive who allegedly wrote it was not present in said meeting.


    A society committed to the notion that government is always bad will have bad government. And it doesn't have to be that way. — Paul Krugman
    by Migeru (migeru at eurotrib dot com) on Mon Dec 1st, 2014 at 09:11:37 AM EST
    [ Parent ]
    and now for the radical stuff Solving the economic depression in the eurozone by issuing "quasi" monies (pdf).

    The idea here is to issue your own currency in parallel to the Euro. You do it basically by paying in somthing similar to IOUs.  

    Berlusconi is now proposing to print a parallel currency.

    A society committed to the notion that government is always bad will have bad government. And it doesn't have to be that way. — Paul Krugman
    by Migeru (migeru at eurotrib dot com) on Mon Dec 1st, 2014 at 05:35:02 AM EST
    Because legally it is not possible to actually leave the Euro, the only way to actually do it in practice is through the issue of a parallel currency. But Germany happens to be the only country which cannot exit the Euro in that manner, because of Gresham's law that "bad money drives out good". The New Mark would be the "good money" to the "bad" Euro, and so the New Mark would be hoarded while the Euro continues to circulate at a depreciating rate. This applies only to cash transactions, however. Electronic transactions would still be conducted using accounts denominated in New Mark.

    A society committed to the notion that government is always bad will have bad government. And it doesn't have to be that way. — Paul Krugman
    by Migeru (migeru at eurotrib dot com) on Mon Dec 1st, 2014 at 05:46:49 AM EST
    Leaving the Euro has become the prime issue in Italian national media, trending ahead of social banlieu breakdown (due to putting immigrant refugee houses in the middle of the most abandoned, deprived areas) and the flooding that continues to plague the North East, (and now the North West too.

    Thanks to the irrepressible and telegenic Salvini, leaving the Euro has become the top campaign call for the Lega (don't call in Lega Nord any more, the 'PADANIA" newspaper shut down yesterday).

    The Lega has jumped 10% in the polls in the last three months. Theirs is a simple formula: show up near a refugee or Rom camp and tap into the growing racism, adding further incendiary rhetoric and urging the public to blame immigrants for all the woes inflicted by fallacious economic ideologies.

    This has propelled him into the 'favourite son' position of Berlusconi (until recently occupied by wunderkind Renzi).

    Salvini is also new BFF of Marine le Pen, so they have each others' backs too.

    This bodes ill for immigrants but also for the Troika. Salvini is no economics whiz however and is unclear about how the transition back to the Lira would play out. It's all about political power for him, and I trust him no more than Renzi with regard to the fate of the country. Opportunism rules...

    Like Marine le Pen (and Farage), he has found a 'lucky wave' of populist sentiment to surf. I shudder to think of any of them attaining more political power, but if they are blunt instrument needed to break the Troika's hold they they have my cagy support on that score.

    Meanwhile I expect a surge of interest for the MV5* (who also would resort to canning the Euro but only if the threat didn't work) as they streamline their mediatic presence and spread their message, the only one in my opinion that carries genuine hope for the shake-up necessary to save this country for further perdition. Their platform is the only one sufficiently radical to upend the staus quo and give it a decisive, - dare I hope even conclusive - boot in the derriere.

    This could only happen if Beppe took a step back into commentary, as his narrative had jumped the tracks and was barreling nowhere. I suggested this back in the spring, now half a year has been mostly wasted, providing a vacuum into which Salvini has tidily side-stepped. The Movement's lack of decisional clarity has cost them many voters who have drifted into the Lega's vortex meanwhile, or given up hope or interest in politics, perhaps understandably!

    Meanwhile Renzi's obeisance to the Troika's every whim is rapidly plunging Italy further down the slope to default, thanks in part to Beppe's egomania. Thank FSM he has finally realised this...

    'The history of public debt is full of irony. It rarely follows our ideas of order and justice.' Thomas Piketty

    by melo (melometa4(at)gmail.com) on Mon Dec 1st, 2014 at 06:52:10 AM EST
    This bodes ill for immigrants but also for the Troika. Salvini is no economics whiz however and is unclear about how the transition back to the Lira would play out. It's all about political power for him, and I trust him no more than Renzi with regard to the fate of the country. Opportunism rules...
    Apparently the Lega has some more clued spokespeople.
    The - L'informazione indipendente Ageneparl - which is an independent news agency in Italy aimed at bringing the political and economic news to the general public in a simple, accessible language and format (le notizie sono scritte con un linguaggio semplice e mai specialistico ed hanno come obiettivo quello di avvicinare il grande pubblico all'informazione parlamentare ed economica") - published an article yesterday that caught my attention.

    The article (November 24, 2014) - Lavoro: Borghi Aquilini, inserire in costituzione prinicipio per piene occupazione - or "Jobs: Borghi Aquilini: wants to insert the principle of full employment into the constitution".

    What? Who is Borghi Aquilini - a left political leader perhaps? If only. Claudio Borghi Aquilini - is an economics lecturer at the Catholic University of Milan and writes for the the Italian news paper il Giornale on economic and political matters. He was previously the Managing Director of the Deutsche Bank in Italy.

    He also happens to be the chief economist ("il responsabile economico della Lega Nord") for the Lega Nord per l'Indipendenza della Padania who is prominent in their "Enough Euro, Another Europe is Possible" campaign ("Basta Euro, Un'Altra Europa è possibile!"). You can search it out if you want to know about that.

    (Billy blog)

    A society committed to the notion that government is always bad will have bad government. And it doesn't have to be that way. — Paul Krugman
    by Migeru (migeru at eurotrib dot com) on Mon Dec 1st, 2014 at 08:29:58 AM EST
    [ Parent ]
    Salvini has recently become uncommonly concerned with the suffering widows and orphans.

    As long as they are not Rom...

    'The history of public debt is full of irony. It rarely follows our ideas of order and justice.' Thomas Piketty

    by melo (melometa4(at)gmail.com) on Tue Dec 2nd, 2014 at 12:49:47 PM EST
    [ Parent ]
    Wehe, wenn Italien aus dem Euro austritt | Wolfgang Münchau | Der Spiegel
    Mit der Eurokrise hat sich dieser Konsens relativiert. In Deutschland sind Regierung und Opposition noch weitestgehend für den Euro. In Frankreich ist das formell auch so. Nur der Front National ist dort dagegen.

    Anders in Italien. Dort sind jetzt alle Oppositionsparteien gegen den Euro. Zunächst hat das nichts zu bedeuten. Die italienischen Sozialdemokraten unter ihrem Chef Matteo Renzi haben eine große Mehrheit im Parlament. Und sie genießen eine große, wenn auch nicht mehr überwältigende Zustimmung in der Bevölkerung. Aber in Demokratien kommen Oppositionen irgendwann einmal an die Regierung. Und dann ist es natürlich wichtig zu wissen, ob eine solche Regierung ihre Anti-Euro-Politik umsetzen würde.

    by gk (gk (gk quattro due due sette @gmail.com)) on Tue Dec 2nd, 2014 at 06:19:09 AM EST
    Euro: Was passiert, wenn Italien austritt? - SPIEGEL ONLINE  Euro: What happens when Italy leaves? - SPIEGEL ONLINE
    Ob der Euro nach einem italienischen Austritt überhaupt überleben kann, ist alles andere als klar. Das europäische Finanzsystem wäre zu dem Zeitpunkt akut gefährdet. Die Märkte würden möglichweise darauf spekulieren, dass andere Länder ebenfalls das Weite suchen. Will Frankreich weiterhin an Deutschland gekettet sein, wenn Italien den Euro verlässt? Die Antwort ist möglicherweise sogar Ja. Nur kann man sich dessen nicht sicher sein, denn die Situation wäre dann sehr unübersichtlich.Whether the euro can survive an Italian exit at all is far from clear. The European financial system would be seriously jeopardized at the time. The markets would possibly speculate that other countries are also contemplating a similar move. Will France want to continue to be chained to Germany when Italy eventually leaves the euro? The answer may be yes. Only one cannot be sure because the situation would be very confusing.
    Was wir in Italien jetzt erleben, ist die Konsequenz einer Anti-Krisen-Strategie, die alle Probleme aufschiebt und nichts löst. Die nächste Krise kommt. Sie wird schlimmer sein als die letzte und noch mehr Anstrengungen erfordern. Und irgendwann kommt eine dieser Anti-Euro-Parteien an die Regierung. Und das war's dann. What we are experiencing now in Italy, is the consequence of an anti-crisis strategy, postponing all problems and solving nothing. The nearest crisis comes. It will be worse than the previous one and will require even more efforts. And then one of those anti-Euro-parties comes to power. And this is it.
    by Bernard (bernard) on Tue Dec 2nd, 2014 at 04:10:13 PM EST
    [ Parent ]
    I just want to make clear that I do not support leaving the Euro now (talking from a perspective of a small country that imports most of its food and non-electric energy). I was not explicit enough: I said I support leaving the Euro "in theory". Why in theory?

    The Euro does not work and does not work for 3 reasons:

    i) conjectural (mismanagement) I suppose there is a consensus on this site on this. but also

    ii) structural. There is no such thing as a EU as a unified cultural block. Even if the management was sound, the differences among the nations would make it a complicated endeavour and there would be discordance because there are different ways of doing things that are hard-wired culturally

    iii) philosophical. I prefer a world where there is diversity of ways to deal with problems. A unified Europe (even one with "good" intentions) would be a step in the opposite direction.

    So, in theory, I think this should stop. As an aside, if people do not agree with points 2 and 3, I think we do agree on point 1.

    In practice:

    There is a massive amount of interdependency and (e.g. in the case of Portugal) food and energy dependency. There are 3 practical options for exit:

    1. A country wants to exit and the EU supports it. This would be against the prevailing ideology (left or right) and the interests of the financial oligarchy. Therefore this is not possible. If this was possible, exit would be complicated, but not impossible. Notice that countries like the US (with their financial oligarchy also invested in globalization) would not come to help also. Not realistic

    2. A country wants to exit and the EU is neutral. This would be very complicated (with debt restructuring) but possible. In several cases this would be feasible because while there might be food/energy dependency the trade balance is not that bad (e.g. in Portugal with austerity it is actually going net positive). This is politically unlikely (due to the ideological and oligarchical investment in globalization), but not impossible.

    3. A country wants to exit and the EU will do whatever in its power to make life miserable. Even if you have a neutral trade, if you are dependent on your neighbours for most of your food and energy, you are in a very fragile position (as extreme trade barriers could be lifted). I think that if a small country goes in this direction, it will be in this situation as there would be strong interests to demonstrate its failures.

    So, while in theory the Euro is a disaster, getting out is not easy if you are a small, dependent country.

    Rock, meet hard place.

    by cagatacos on Tue Dec 2nd, 2014 at 09:41:33 AM EST
    The corollary of this is that for quite a few Southern European countries (especially the small ones, but not only), if they go the way of "debt renegotiation" (as in Syriza, Podemos, ....) and opt for exit at some stage then the pain and turmoil will be unbearable in those countries. To the point that we will see suffering and the end of liberal regimes (as the necessary effort to put things "in place" will require some form of authoritarian ruling).

    So no, I would not be for immediate exit. As I said: Rock, meet hard place.

    by cagatacos on Tue Dec 2nd, 2014 at 09:49:17 AM EST
    [ Parent ]
    You can leave the Euro if your government has a primary surplus.

    If you institute capital controls, you can leave the Euro if your economy is running a current account curplus.

    A society committed to the notion that government is always bad will have bad government. And it doesn't have to be that way. — Paul Krugman

    by Migeru (migeru at eurotrib dot com) on Tue Dec 2nd, 2014 at 10:27:21 AM EST
    [ Parent ]
    Mesa thinks you are dead wrong.

    If ones leaves the euro, it does not matter if ones has a primary surplus or not. If people flat out refuse to sell food and energy to you. This could even be disguised as punitive levy to recover the debt (which would have to be restructured when a country would leave the Euro and going into massive devaluation). Border controls (even refusing to buy your stuff killing the surplus), etc.

    Whilst you are probably thinking the economics right, you are forgetting the (more important) political dimension of it: if a small country leaves the Euro there will be strong political forces trying to force that case to be a failure.

    Short of autarky, leaving the Euro for a small country would be a massive gamble (probably a suicidal one).

    by cagatacos on Wed Dec 3rd, 2014 at 06:53:33 AM EST
    [ Parent ]
    Er, this is getting a little paranoid.

    Argentina did rather more than what would amount to Portugal leaving the Euro.
    And many people were very, very angry at them.

    I don't recall, though, any army patrolling their borders to ensure that no willing trading partner could trade.
    If you are going to entertain those thoughts are likely, well then you can just as well write a scenario where France invades Ireland because of its low company tax rates.

    Earth provides enough to satisfy every man's need, but not every man's greed. Gandhi

    by Cyrille (cyrillev domain yahoo.fr) on Wed Dec 3rd, 2014 at 07:42:39 AM EST
    [ Parent ]
    If you are going to entertain those thoughts are likely, well then you can just as well write a scenario where France invades Ireland because of its low company tax rates.

    Will they bring wine and promise to mandate decent bread?

    by Colman (colman at eurotrib.com) on Wed Dec 3rd, 2014 at 11:58:29 AM EST
    [ Parent ]
    Why, sure. Last time we were invaded by Irish people, did they not bring smoked salmon?

    Earth provides enough to satisfy every man's need, but not every man's greed. Gandhi
    by Cyrille (cyrillev domain yahoo.fr) on Wed Dec 3rd, 2014 at 12:04:08 PM EST
    [ Parent ]
    I think people fail to see the symbolic importance of leaving the Euro: it means the unravelling of a centralizing project.

    Up to now things would are going in a single direction: more globalization (which essentially means more control by a small cadre). The Euro is a part of that narrative (with the implicit notion that democratic control is replaced by the "specialists in Brussels and Frankfurt").

    So, irrespective of the monetary value (and I would dispute that it would be less than Argentina, because it would make all the debt void - due to devaluation and obvious inability to pay - PLUS making the Euro very unstable - who would follow next?). Irrespective of the money issue, there would be a symbolic unravel of a project. That is ideologically intolerable.

    Furthermore, there is no need for patrolling any borders. There are plenty of (legal) ways to destroy a country. For instance, just see what what the current fall in price in oil is doing to some exporter-only countries. It would not be difficult to devise a set of informal things to have a devastating effect.

    And if you think this is paranoid, you probably have not been seeing what is happening in the so called periphery. Even it it was unintentional (and it was not: saving the banks of the centre was deemed more important than the lives of millions), the outcome was of "paranoid" impact: if somebody, 5 years ago, came to this site and suggested the disaster that is unravelling, that somebody would be labelled paranoid or crazy (extra paranoid, as almost no one was as pessimist as reality).

    by cagatacos on Wed Dec 3rd, 2014 at 08:12:07 PM EST
    [ Parent ]
    if somebody, 5 years ago, came to this site and suggested the disaster that is unravelling, that somebody would be labelled paranoid or crazy (extra paranoid, as almost no one was as pessimist as reality).

    I have to say, that personally I also did not expect things to go so horribly. I also think that there are clear mechanisms, of how Portugal would be attacked. One would be to sue against Portugal for lost property. All type of vulture funds would use this possibility. Most probably, all payments coming from Brussels would also stop.

    Yet, still I do not see how things can improve with a ECB that doesn't to its job. At the very least, politicians from Portugal should remind the ECB of its Mandate. The discussion here, has convinced me that a threat to leave the Euro if the ECB doesn;'t credibly commit to 2% inflation could even do some good.  

    I think the most important thing for a country leaving the Euro is how it treats its debts. If the debts gets payed, I do not think the repercussion would be such a disaster. If you leave the Euro you could in principle confiscate all savings of all your citizens and forcibly change them into new currency. The Confiscated Euro you can use to pay your debts. I understand clearly that this would be super unpopular. But as far as I can see it is the only clear way how to pay the debt and leave the Euro at the same time.

    by rz on Thu Dec 4th, 2014 at 03:36:08 AM EST
    [ Parent ]
    The debts can be paid years later. First of all It is way easier to pay the debts once your economy is operating at full capacity. I agree, It is gonna be a mess.
    by Kristjan on Thu Dec 4th, 2014 at 04:33:21 AM EST
    [ Parent ]
    While the project did not succeed in its primary objective, the USA did all it could to economically strangle Cuba after Castro took over. The Soviets came to Cuba's rescue. Perhaps Russia, China and the other
    BRICS would play the same role today. At least buying the needed oil should be cheaper.

    "It is not necessary to have hope in order to persevere."
    by ARGeezer (ARGeezer a in a circle eurotrib daught com) on Mon Dec 29th, 2014 at 11:01:56 AM EST
    [ Parent ]
    I'd like to note that leaving the euro, or rather break some of the rules in the EU collaboration surrounding the common currency, is punishable by a fine (if and when the EC takes the country to the Court).

    Trade embargoes are not a regulated punishment, and the countries doing a trade embargo would violate many more rules then the country violating the common currency does. It would also jeopardise the EU, not only the EMU. I don't think that would happen. I do think there would be trash talk in the economic papers, there could be runs on the new currency, and there would be loud support for the opposition that wants to re-enter the EMU. But I think that is about it. Oh, and the new government would not be welcome to the right parties.

    Sweden's finest (and perhaps only) collaborative, leftist e-newspaper Synapze.se

    by A swedish kind of death on Wed Dec 3rd, 2014 at 07:52:18 AM EST
    [ Parent ]
    the pain and turmoil will be unbearable in those countries
    It is unbearable for most of the population in (say) Greece, and getting worse. People are out of government, financial services because of debt, tax issues - they are just "lucky" that the state cannot handle them all. So they enjoy a cup of coffee per day on a primitive day to day living.

    Euro exit would be a big difference for those who still have office (etc) jobs, do good business on touristic spots. They rely on the government to keep the status quo (including the turmoil threat).

    by das monde on Wed Dec 3rd, 2014 at 08:36:51 PM EST
    [ Parent ]
    I call your ii) "cultural" and not "structural".

    "Structural" is the fact that some of the legal rules are insane and so fixing the management is not enough.

    A society committed to the notion that government is always bad will have bad government. And it doesn't have to be that way. — Paul Krugman

    by Migeru (migeru at eurotrib dot com) on Tue Dec 2nd, 2014 at 10:30:07 AM EST
    [ Parent ]
    I am sorry for wrongly characterizing your opinion in my diary. My list of 'who support what' was also not planned as a definitive every bodies opinion, but more as a structure for my discussion.
    by rz on Tue Dec 2nd, 2014 at 10:48:42 AM EST
    [ Parent ]
    Many of the problems to an exit could be ameliorated by A Two Monetary Union Solution to Problems in the EMU -- NEUROS AND SEUROS. As to legal obstacles, it is a common practice of realpolitik for countries to break or renounce treaties when adherence to that treaty involves real or perceived conflicts with their national interests. If Italy, Spain, Greece and Portugal decided to proceed with a common plan to exit from the EMU and into a SEURO and announced a meeting in Rome or Madrid to agree on a treaty of union it is certain that Berlin would notice. If proper reforms to the EMU resulted that would be great, but if not, the treat could be turned into referenda for the various potential entrants into the proposed SEURO.

    "It is not necessary to have hope in order to persevere."
    by ARGeezer (ARGeezer a in a circle eurotrib daught com) on Tue Dec 2nd, 2014 at 11:09:31 AM EST
    [ Parent ]
    We can keep the EURO and the Germans can have the NEURO.

    A society committed to the notion that government is always bad will have bad government. And it doesn't have to be that way. — Paul Krugman
    by Migeru (migeru at eurotrib dot com) on Tue Dec 2nd, 2014 at 11:11:44 AM EST
    [ Parent ]
    That would be optimal. But it likely would require the concurrence of France, Italy and, possibly, several smaller countries and France seems the least likely to join such an effort presently. Will it take a Le Penn government to consider such a plan?

    The advantage of the Seuro would be that it could be started with Italy and Greece, with Cyprus and Portugal being possible early entrants, followed by Spain after the next election, depending on how Podemus does.

    "It is not necessary to have hope in order to persevere."

    by ARGeezer (ARGeezer a in a circle eurotrib daught com) on Tue Dec 2nd, 2014 at 02:39:23 PM EST
    [ Parent ]
    Would the threat of Italy and Greece together negotiating their own currency union be sufficient to force the issue with Germany?

    "It is not necessary to have hope in order to persevere."
    by ARGeezer (ARGeezer a in a circle eurotrib daught com) on Tue Dec 2nd, 2014 at 02:42:32 PM EST
    [ Parent ]
    No way would Le Pen contemplate a currency union with Ritals and Spingouins. The Franc and nothing but the Franc.

    It is rightly acknowledged that people of faith have no monopoly of virtue - Queen Elizabeth II
    by eurogreen on Tue Dec 2nd, 2014 at 03:42:19 PM EST
    [ Parent ]
    ARGeezer:
    If Italy, Spain, Greece and Portugal decided to proceed with a common plan to exit from the EMU and into a SEURO

    ...They would need strong democratic leadership, as opposed to pseudo-left water carriers for Berlin like Hollande and Renzi.

    Great pains have been taken to ensure this does not occur, but they are betting on people continuing to take it lying down as 'good serfs' should.

    That remains the great unknown factor neo-liberalism compulsively pushes us towards deciding.

    I think they are aware there are limits, but cannot be pro-active about it because profits would be dented. So on we go...

    'The history of public debt is full of irony. It rarely follows our ideas of order and justice.' Thomas Piketty

    by melo (melometa4(at)gmail.com) on Tue Dec 2nd, 2014 at 12:45:17 PM EST
    [ Parent ]
    Why do you consider issuing the quasi money the most radical? I think this is the smartest thing to do and It causes the least suffering if you want to exit the euro. You don't even have to call It money to avoid the political pressures that word might create. government announces that times are economically difficult and that is why we are giving the economy a tax breake. we will issue tax certificates that we accept for payments of taxes. You know what G.W. Bush called the $500 check he sent to every American worker? It was called a tax credit. That is exactly what money is. Like they said there in the paper you provided the link for, It is perfectly legal and there is no European treaty that can prevent sovereign governments from doing that. This would end the neoliberal nightmare very soon. This is MMT idea.
    by Kristjan on Tue Dec 2nd, 2014 at 05:55:28 PM EST
    Welcome to ET!

    A society committed to the notion that government is always bad will have bad government. And it doesn't have to be that way. — Paul Krugman
    by Migeru (migeru at eurotrib dot com) on Tue Dec 2nd, 2014 at 06:46:06 PM EST
    [ Parent ]
    thanks
    by Kristjan on Wed Dec 3rd, 2014 at 02:38:15 AM EST
    [ Parent ]
    Randy Wray: The Answer to the Unemployment Problem Is More Jobs (Economonitor, December 2nd, 2014)
    ... as Joan Robinson once declared, the only thing worse than working as a wage slave is to be unemployed. Just ask the Italians, who now have the highest unemployment rate since they started keeping records. Thanks to the EMU and German fiscal rectitude!
    After the obligatory jab on the Eurozone, here's the important bit:
    As my colleague Pavlina Tcherneva points out, for every social problem except unemployment, progressives advocate a direct solution.

    How do you solve the problem of lack of access to healthcare? The progressive advocates single payer.

    (Not, of course, Obamacare, which is just a scheme to turn more of your income over to Wall Street's insurance industry.)

    Hunger? Food stamps.

    Homelessness? Public housing.

    Old age poverty? Social Security.

    But Unemployment?

    More vacations. Pay the employed not to work.

    Unemployment compensation. Pay the unemployed not to work.

    Or, more ludicrously, BIG (basic income guarantee). Pay everyone not to work.

    What is missing? Jobs. The unemployed want jobs. But progressives will not give them jobs.



    A society committed to the notion that government is always bad will have bad government. And it doesn't have to be that way. — Paul Krugman
    by Migeru (migeru at eurotrib dot com) on Thu Dec 4th, 2014 at 07:04:51 AM EST
    Bleh. His "progressives" seem to be a synthesized from lots of people who disagree with him.
    Who advocates food stamps? People who don't want to trust the poor with actual money. Who advocates a BIG? Several groups, but I'd argue mainly ones who fundamentally disagree with the popular slave moral that everyone has to have a job to justify his existence.
    His policy proposal is sound of course, but he tends to oversell it. Just as means testing is not an inherent part of transfer payments nothing prevents the reigning misanthropes from turning the Jobs Guarantee into a caricature of itself.
    by generic on Sun Dec 14th, 2014 at 05:55:31 PM EST
    [ Parent ]
    Beppe Grillo's Blog

    fter just a year since the previous downgrade, Standard and Poor's yesterday reduced Italy's rating from BBB to BBB- and it's now expected that there'll be growth in GDP of just 0.2% in 2015, as opposed to 1.1% which was the expectation until yesterday. Thus even S&P is following in the foot steps of many institutions, organisations and commercial banks that have recently made significant changes to their predictions in relation to Italy's growth. And yet Renzi had been saying up until a few months ago that thanks to his charitable hand-out of 80 Euro, the government estimates for GDP growth of 0.8% in 2014 would even be too low. Now, however, we know that we are in a situation that the technical people call a "triple-dip recession", with expectations of seeing negative growth for 2014 as well. How is it possible that all the econometric models continue to fail unperturbed as they have been predicting a recovery for the last seven years? It's clear that up until now, it's been a matter of hope for a recovery with the aim of negating the evidence and that is that the issues of growth and employment are directly connected to the single currency.

    ...

    We are in Draghi`s hands: if he manages to charge forward and if he can impose QE on public bonds by the first half of next year, then he will manage to put off for a short time, the certainty of Italy's collapse. Otherwise, the year 2015 will be remembered as the year of the exit from the Euro and also default. There's no other solution and even S&P has understood that today.



    'The history of public debt is full of irony. It rarely follows our ideas of order and justice.' Thomas Piketty
    by melo (melometa4(at)gmail.com) on Sat Dec 13th, 2014 at 01:42:26 PM EST


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