Alemania eta EB, berriz

Bill Mitchell-en Der schwarzen Null continues to haunt Europe

(http://bilbo.economicoutlook.net/blog/?p=39403#more-39403)

(i) Alemania ez da aldatu, ez aldatuko1

(ii) Wolfgang Schäuble2

(iii Egonkortasun mekanismo europarra3

(iv) Dokumentuaren ezaugarriak eta Wolfgang Schäuble: kontrola eta diziplina4

(v) Olaf Scholz5

(vi) Emmanuel Macron eta François Hollande6

(vii) Brexit, EB eta Alemania7

(vii) Ondorio batzuk8

(ix) Frantziako erantzuna9

Ondorioak

(a) So it is on to the European Council summit in Brussels at the end of June for more talk. The Germans will wax lyrical about the importance of Europe to them and how Germany is a European citizen bar none.

(b) But they will not concede ground on the things that matter.

(c) And as the French economy minister said – “without reform the euro area won’t survive”.

(d) And that doesn’t mean making a few changes around the edge.

(e) Germany has to give up control and allow a full fiscal union to develop. That is the scale of the reforms that are required.

(f) It won’t agree to do that.

(g) Nor, for that matter will France.

(h) That has been clear for decades and is why Europe is in the state (mess) it is in.

(i) The clock is ticking!

Gogoratzekoak:

Ezkerra eta Brexit

Ahantz Europako erreforma


Ingelesez: “Last Tuesday (May 15, 2018), the new German Finance Minister Olaf Scholz stood up in the German Bundestag and delivered his first fiscal policy presentation. Not only was “der schwarzen Null” (Black Zero) sustained but in his address, the new German Finance Minister made it clear that Germany would not entertain any expansion of the EU fiscal capacity (thus rejecting Emmanuel Macron’s proposals) and wanted to delay other ‘reforms’ that Germany had previously suggested they would support (beefing up the Single Resolution Fund and the creation of the European Monetary Union). For those Europhile progressives who have been hanging their hat on the hope that the takeover of the German Finance Ministry by the SPD would be the deal breaker that the Scholz’s presentation was nothing short of a disaster. He reiterated Germany would not be shifting in any major way and that Member States just had to buckle down and follow Germany’s fiscal example – surpluses as far as the eye can see. None of this was a surprise to me. It has been clear for some time that Scholz is just a continuation of Schäuble. Indeed some pointed statements from Bundestag politicians next day in their responses suggested just that.

I wrote about why the elevation of Olaf Scholz will be a disaster for European reform in this blog post – Forget European reform – the Germans have anyway (April 23, 2018).

His Bundestag speech (May 15, 2018) just confirmed that assessment.”

Ingelesez: “On May 16, 2018, when the Bundestag President, Wolfgang Schäuble handed the floor to the spokesperson for Die Linke, Gesine Lötzsch to respond to the German fiscal statement that Finance Minister Olaf Scholz had delivered the day before, she opened by saying that Olaf Scholtz’s fiscal statement ran contrary to the “title of the coalition agreement” – “Ein neuer Aufbruch für Europa – Eine neue Dynamik für Deutschland – Ein neuer Zusammenhalt für unser Land” (“A new departure for Europe – A new dynamic for Germany – A new coheson for our country”.

She said that (Bundestag Protokoll, Wednesday, May 16, 2018, page 2898):

none of this is true in this budget. This is not only a disgrace for Olaf Scholz, but above all is fatal for our citizens. They continue to promote the black zero. I wonder why the SPD really wanted to take over the Ministry of Finance if it only wanted to continue the policy of Wolfgang Schäuble.

The black zero is the famous “schwarzen Null” or balanced fiscal state which Schäuble obsessed about.

In a similar vein, Leader of the Alliance ’90/The Greens, Katrin Göring-Eckardt asked Andrea Nahles (Leader of the Social Democratic Party (SPD) in the new German Parliament) (Bundestag Protokoll, Wednesday, May 16, 2018, page 2995):

Erst einmal habe ich mich gefragt: Warum haben Sie eigentlich 13 Stunden, glaube ich, um das Finanzressort verhandelt, damit am Schluss Wolfgang Schäuble Olaf Scholz heißt? Sonst ändert sich eigentlich nichts.

Which also asks why did the SPD bother trying to get hold of the Finance job when all that has happened is that Wolfgang Schäuble has morphed into Olaf Scholtz.

The day before, Olaf Scholz stood to the applause of the CDU/CSU and SPD members after former Finance Minister, Wolfgang Schäuble, now President of the Bundestag, invited Scholz to present the “Haushaltsgesetz 2018” (Federal Budget Act, 2018).

What followed was an almost final ‘nail in the coffin’ for any plans that the Europhile progressives might entertain to achieve meaningful reforms of the Eurozone.

But first some background.

Ingelesez: “The European Stability Mechanism

After an ad hoc approach to Member State insolvency in the early years of the GFC under the guise of the two programs – European Financial Stability Facility (EFSF) – and the – European Financial Stabilisation Mechanism (EFSM), the European Commission established the European Stability Mechanism (ESM), which was established as an intergovernmental agreement on September 27, 2012.

I emphasised its status as an Treaty Establishing the European Stability Mechanism – because it means the status of the ESM is not currently integrated into European Union law.

The ESM is an intergovernmental institution based in Luxembourg with the EMU Finance Ministers becoming the Board of Governors.

The ESMs role was to provide:

a permanent solution for a problem that arose early in the sovereign debt crisis: the lack of a backstop for euro area countries no longer able to tap the markets.

That is, it was established as a means of helping Member States unable to fund themselves.

It was an explicit recognition that the EMU nations use a foreign currency and can easily find themselves unable to raise sufficient amounts of that currency in bond markets to cover their fiscal deficits.

The ESM has “its own capital of €80 billion” provided by the Eurozone Member States, which cannot be loaned out. Its purpose it to provide financial markets with the confidence that the ESM is widely supported within the Eurozone.

In addition, it raises funds on financial markets which it then loans out under strict (neoliberal) conditionality to Member States in trouble.

Of the six tools available to it the ESM has used just two – loans to Ireland, Portugal, Greece, and Cyprus and some indirect bank recapitalisation in Spain.

The ESM thus currently provides a bailout mechanism, albeit one that enforces the austerity bias. Its purpose is to “keep the euro together” rather than provide any progressive policy space.

On December 6, 2017, the European Commission released its – Further Steps towards completing Europe’s Economic and Monetary Union – (the ‘Roadmap’) which offered two ‘concrete’ proposals:

1. “A proposal to establish a European Monetary Fund”.

2. “A proposal to integrate the Treaty on Stability, Coordination and Governance into the EU legal framework”.

I say ‘concrete’ because these were the only two proposals that have any sense of an action plan attached to them.

This document was really just a follow up on the – Five Presidents’ Report: Completing Europe’s Economic and Monetary Union (June 22, 2015).

That meant that the European Commission intended that these two developments would constitute its major ‘reform’ agenda for the EMU.

Which at the time indicated that very little meaningful reform was going to be countenanced.

The agenda set out was really about tidying up the developments noted above that were introduced on a sort-of piecemeal basis during the crisis and consolidating them under European Commission control and Treaty law.

It doesn’t mean that will be administered as the term “law” is taken to mean. As we know, the European Commission and related institutions such as the European Central Bank, regularly and systematically break the Treaty laws for political gain.

But the proposal was about further centralising control in the technocracy and taking away discretion from the Member States.

In other words, it constitutes the anathema of democratic reform and will increase the democratic ‘deficit’, that has become apparent with Europe over the last decades.

In fact, the ‘Roadmap’ proposed only one substantial change – the proposal to establish the European Monetary Fund.

That proposal is clearly about further centralising control of European matters within the European Commission.

That is the intent of converting an ‘intergovernmental agreement’ into EU law.

Ingelesez: “The document set out time schedule to operationalise the proposal:

1. Euro Summit (December 15, 2017) – while this meeting was dominated by Brexit considerations, the Summit did discuss “the future of the economic and monetary union (EMU) and banking union”.

The President of the European Council, Donald Tusk released a – Letter – ahead of the Summit, which “outlined a number of ideas on which there is a broad convergence” among the Council members.

These were listed as:

  • putting into operation a common backstop for the Single Resolution Fund, possibly in the form of a credit line from the European Stability Mechanism (ESM);

  • further developing the ESM, possibly to become a so-called European Monetary Fund

  • further developing the Ecofin Council Roadmap of June 2016 on completing the banking union, including the gradual introduction of a European Deposit Insurance Scheme

Note the ‘slippage’ in terminology – the proposal to create a European Monetary Fund, by the time the Summit arrived (one year after the ‘Road Map’ was released) was now being expressed as a “possibility”.

2. European Council (June 28-29, 2018).

3. European Council (March 21-22, 2019).

4. Sibiu Meeting (May 9, 2019) – Under the revolving Presidency of the Council of the EU, Romania will host this meeting which is expected to finalise the introduction of the European Monetary Fund.

Notwithstanding the uncertainty, the plan has some clear aspirations:

1. Integrate the ESM into the European Union Treaty – to give the European Commission more control. No reforms here.

2. A desire to kill the Troika – that is, keep the IMF out of any future bailouts in Europe.

3. Create a funding source for the – Single Resolution Fund – to buttress the “orderly resolution of failing banks with minimal costs to taxpayers and to the real economy” – nothing much new in that.

I considered the proposal in more detail in this blog post – The latest scam from the European Commission – the ‘roadmap’ – Part 2 (December 20, 2017).

The European Monetary Fund proposal clearly already reflected Germany’s aversion to any intra-Eurozone transfers. It states that its operations would be “fiscally neutral”, which means there would be no permanent intra-Member State transfers, which are common in functioning federations (such as Australia, Canada etc).

This had Wolfgang Schäuble written all over it as I outlined in this blog post (October 16, 2017) – Wolfgang Schäuble is gone but his disastrous legacy will continue.

That blog post analysed Schäuble’s parting 3-page offering as German Finance Minister – Non-paper for paving the way towards a Stability Union – which argued that “there is little willingness” among Member States to move towards a true federation.

The creation of the European Monetary Fund (EMF), which would just extend the existing European Stability Mechanism, “to provide temporary financial support under strict reform conditionality”, was as far as he was prepared to go.

The operational significance was that under this vision, the EMF would entrench the practice of pro-cyclical fiscal policy (cutting public net spending when non-government spending is declining), which is the anathema of sound fiscal practice.

Wolfgang Schäuble’s non-paper told us exactly why the Eurozone will never become a functioning federation.

Further, Schäuble outlined the German requirement that the ESM would become a monitoring institutions over Member State policies and be allowed to discipline nations that were seen to be in violation of the Stability and Growth Pact.

In other words, technocrats working within the ESM would be empowered to delve into Member State finances and impose conditionality where it thought the State was likely to (or was) violating the fiscal rules (Fiscal Compact).”

5 Ingelesez: “Enter Olaf Scholz’s first fiscal statement – May 15, 2018

Scholz told the Bundestag that (translating in paraphrase form from the German):

1. “The debate about the correct management of government debt and financial markets has dominated European policy over recent years. Taxpayers should never again have to bail out the mistakes of banks through state budgets.”

2. “Europe is the most important national concern for Germany. A strong Europe is of primary interest to Germany.”

3. “As the most populous country with a strongly performing, export-oriented economy in the middle of the continent, we are dependent on a successful European Union. Everything that happens in Europe is important to us, and everything we do in Germany or what we do not do has an impact on our European partners. With this responsibility, we have to be smart and reasonable.”

4. “But the challenges for Europe are getting bigger … wars nearby, millions of people displaced … terrorism … the rise of nationalism … climate change … the list of challenges is long.”

5. “The problem is not that Europe is too dominant, rather it is that the EU seems to be too weak … the big politicial issue is about the sovereignty of Europe, as the French President Macron correctly notes.”

6. “Macron is correct in saying that confidence in Europe is not gained through back room collusion but by making it clear what we are doing.”

Ingelesez: “So all these statements are of the motherhood variety. The nuance is that the way Germany appear to be handling France under Macron is a little different to the way they short-changed François Hollande directly after he was elected on a ‘reform agenda’.

During his election campaign, Hollande had criticised Germany’s obsession with austerity, but when he made his trip to Germany, he was attacked for not proposing a major neoliberal reform agenda in France.

As a result of the delicate structure of the current GroKo in Germany, they have to treat their disdain over Macron’s European ambitions a little less directly.

Ingelesez: “After making all the usual ‘Germany loves Europe’ type messages, Scholz went on articulate what he thought should happen at the European level.

7. “There are very concrete steps to be taken in the area of ​​Economic and Monetary Union and the regulation of banks. The one thing we will do now is to expand the European Stability Mechanism. We (as the government) have stated that we want to develop it further towards a European Monetary Fund. This is important for the future stability of the euro area. Perhaps the ESM may also be the anchorage for the last hedge behind the single European bank resolution mechanism, to be introduced by 2024 at the latest.”

8. “This mechanism avoids taxpayers having to bailout a bank in trouble”.

9. “This should be done in two steps – first, shape the new ESM, and then, embody this new ESM into EU law”. (the AfD members were recorded as laughing at this stage).

10 “the decision of Great Britain to leave the European Union is unfortunate. We do not yet know what withdrawal means for us in the EU. However, it is clear that if the exit is sealed and completed, we will lose a net contributor to the EU budget. We have stated in the coalition agreement that Germany is ready to spend more on the EU budget after Brexit”.

11. How much more? “I have the impression that we can also make a difference with 1 percent of the economic output of the world’s largest trading bloc.”

Even with the paraphrased German translation, it is pretty easy to pick up the further uncertainty that Scholz was intending to introduce into the upcoming European Council meeting on June 28-29, 2018 in Brussels and beyond.

Remember that Wolfgang Schäuble had already indicated Germany would accept the incorporation of the ESM within EU law under the strict conditions noted above.

Let me emphasise Scholz’ intent, starting in reverse order of the issues he discussed above.

First, how much more? Well clearly Scholz recognises that while Britain will no longer be contributing billions to the EU fiscal capacity, he agreed that Germany would be “ready to spend more”.

But don’t be seduced by that promise. The 1 per cent of GDP should be the focus.

On January 8, 2018, the European Commission issued a discussion paper – A new, modern Multiannual Financial Framework for a European Union that delivers efficiently on its priorities post-2020 – which aimed to condition the upcoming EU ‘budget’ considerations in the context of Brexit.

The paper said that this “is a time for Leaders to commit financially to the kind of Union they want” and that the Commission considered the next seven-year financial agreement “will be a litmus test for the European Union”.

It outlined a host of challenges facing Europe and concluded that if “the Union decides to do less, a smaller budget will suffice” but:

Europeans expect a strong Union able to face the challenges of the future and a budget that can deliver for them. Leaders must play their part in meeting these expectations.

Well, Scholz’s speech in the Bundestag last week clearly indicated that Germany was only going to support the “less” option,

Do the sums!

The nominal GDP for the EU (28) was 15,326,468 million euro.

1 per cent of that GDP would represent 153,264.68 million euro.

The EU buget for 2017 allocated:

The EU budget for 2017 sets the total level of commitments at €157.86 billion and of payments at € 134.49 billion” [1 bilioi amerikar = mila milioi europar].

Ingelesez: “Conclusion: Germany is proposing a smaller EU ‘budget’ going forward, which makes all his concilitory statements about Emmanuel Macron look pretty false, given the latter clearly wants to expand the EU allocation.

So Germany does not intend to support any changes that might create a federal fiscal capacity for Europe.

Second, the ‘Roadmap’ saw the European Monetary Fund as providing “the common backstop to the Single Resolution Fund as part of the Banking Union”.

The – Single Resolution Mechanism – was introduced on August 19, 2014 and provides a formal process through which failing banks can be either restructured or closed without requiring massive bailouts from the fiscal resources of specific Member States.

The Single Resolution Fund was the fiscal support to that process – in other words, it provides a fiscal indemnity to Member States facing bank failures.

Its operations began on January 1, 2016 and its fund was to be built up, over 8 years, to be in excess of one per cent of the deposits of all banks in the EU (noting that Britain and Sweden opted out).

Germany was a reluctant participant in the process and rejected the EU’s further plan to incorporate a EU-wide bank deposit insurance scheme, which the European Commission had considered to be the “third pillar” of the European banking union.

One might say, the most crucial pillar.

Germany considered that if such an insurance scheme was introduced it could use its funds to guarantee deposits of citizens across Europe. Germany already has its own deposit insurance scheme and resented having to provide funds to allow other Member State governments, who had not taken a decision to introduce their own scheme, to benefit.

Scholz’s speech indicates that he wanting to play for time in relation to the Single Resolution Fund and its incorporation into EU law.

As he said, Germany does not want the matter resolved until 2024, which by then, will mean Germany is in the next political cycle and no responsibility would be taken by the current government for decisions that might be made by a new German government.

Third and related, Scholz now wants to separate the ESM proposal – the move to create the European Monetary Fund and incorporate it into EU law into two steps (“zwei Schritten”), whereas the European Commission wanted the whole package to be done and dusted by May 2019.

According to Scholz, the first debate would concern the conditions under which the European Monetary Fund would be structured and operated.

The second debate would then concern whether the European Monetary Fund would transcend its current intergovernmental agreement status and become EU law, which would take it out of Germany’s direct control – given it can veto intergovernmental agreements.

There is no way those debates can be finalised by May 2019.

Ingelesez: “French response rather swift

The French response was articulated

On May 10, 2018, a few days before Olaf Scholz stood up in the Bundestag and effectively ruled out any serious reform in the Eurozone, French President Emmanuel Macron told an audience in Aachen (Germany) while he was receiving the Charlemagne Prize for European Unity, that (Source):

Germany can no longer remain attached to maintaining budget and trade surpluses, as they are always achieved at someone else’s expense.

Well they can and they will.

After Scholz’s devastating speech to the Bundestag, the French Minister of Economic Affairs Bruno Le Maire responded by saying that “The eurozone cannot withstand economic divergences among its member states … It is now or never”.

Well Olaf Scholz thinks ‘now’ is 2014!

Same old!

As an aside, the ‘Charlemagne Prize’ is very discriminating. Its past recipients include Martin Schulz, Herman Van Rompuy, Wolfgang Schäuble, Jean-Claude Trichet, Donald Tusk, Angela Merkel, and to cap it all off – The euro was awarded the Prize in 2002.

Given it is awarded for promoting European Unity, you would have to think that the famous quote by Groucho Marx – “Please accept my resignation. I don’t care to belong to any club that will have me as a member”.”

2 erantzun “Alemania eta EB, berriz” bidalketan

  1. Jeremy Corbyn’s Labour vs. the Single Market
    By Costas Lapavitsas

    If the next Labour government is to be truly transformative, it has to free itself from the constraints of the single market.
    (https://jacobinmag.com/2018/05/corbyn-labour-eu-single-market-economic-policy)

    “Workers in Britain remain broadly in favour of Leave, but need information, arguments and, above all, political leadership from the Left, which used to be their voice. Unfortunately, the state of discourse on the Left shows that many have failed to come to terms with the underlying realities of the referendum decision. It is time to stop clinging to some imagined status quo ante. The Left should see this moment as a historical opportunity to transform Britain’s economy, free from the constraints of the Single Market.”

  2. Alemania, Europar Batasuna eta langabezia
    Bill Mitchell-en European-wide unemployment insurance proposals – more bunk!
    (http://bilbo.economicoutlook.net/blog/?p=39642#more-39642)

    The Europhiles have been tweeting their heads off in the last week or so thinking that the corner has been turned – by which they mean that Germany is about to get all cuddly with France and agree to fundamental shifts in thinking which will make the dysfunctional Economic and Monetary Union (EMU) finally workable, without the need for the ECB to break Treaty law by propping up the private bond markets. The most recent incarnation of the ‘saviour’ is a few words that the new German Finance Minister, Olaf ‘Wolfgang Schäuble’” Scholz said during an interview with Der Spiegel (June 8, 2018) – ‘Germany Has a Special Responsibility’ – about his support for a new unemployment insurance scheme for the Eurozone. It seems even the smallest things excite those who remain in denial about the long-term viability of the common currency. The proposal that Scholz was advancing has been out in the public debate for some years and is nothing like an effective solution to the terminal design flaws in the EMU. It is just an application of the same thinking that led to the creation of that flawed architecture in the first place and reinforces the conclusion that the main players in Eurozone policy setting have no intention of creating an effective federated monetary system. Just more of the same. Tomorrow, the tweets will be extolling the virtues of some other erroneous plan that some Europhile has come up with to save the system. And so it goes.
    In his interview with Der Spiegel, Scholz claimed that Germany should hold Europe as its “most important national interest”. He claimed that “Germany should push forward projects to continue strengthening solidarity in Europe”.
    Der Spiegel then asked the obvious question:
    SPIEGEL: That sounds like additional cash flow from north to south.
    Scholz: No, that’s too simplistic. In social policy, the principle of self-responsibility applies first and foremost. Every eurozone member state should have functioning unemployment protection, a social safety net and appropriate minimum wages.
    So, inching away from a ‘federal’ concept.
    Then, when asked to be more specific, Scholz replied:
    I’m in favor of supplementing national systems for unemployment insurance with a reinsurance for the overall eurozone. A country in the midst of an economic crisis that is resulting in significant job losses and placing a heavy burden on its social-security system could borrow from this joint reinsurance fund. Once the recession is over, the country would pay back the funds it borrowed. At the same time, all countries should make efforts that their safety nets are as prepared for crisis as possible.
    Which then prompted this exchange:
    SPIEGEL: And Germany bears the risk.
    Scholz: No, Germany profits. The German Federal Employment Agency’s reserves would remain untouched, and no debts will be communitized.
    And, Der Spiegel asked, isn’t this just “a further step into a ‘liability union’”, which would be politically difficult to gain support for in Germany.
    Scholz failed to answer that question directly, instead claiming that the Eurozone unemployment insurance scheme would just be like the “reduced-hours compensation program” introduced by the German government in 2008 which saved “many jobs”.
    While not particularly important to this discussion, the German stimulus applied in 2008 to subsidise wages and allow workers to retain jobs with less hours of work as activity fell was not similar to the various configurations of proposed European-wide unemployment insurance schemes.
    Scholz also went on during the interview to say he supported the introduction of a “European financial transaction tax” and repeated his call for the “transformation of the European Stability Mechanism into a monetary fund based on the IMF model”.
    I dealt with the ‘IMF-style’ proposals in these blog posts (among others):
    1. Forget European reform – the Germans have anyway (April 23, 2018).
    2. Die schwarze Null continues to haunt Europe (May 21, 2018).
    (…)
    Enderlein told Le Monde in 2014 that “Dans le monde post-wesphalien actuel, L’Etat nation est un anachronisme.”
    Which is the central claim by neoliberals and deluded progressives that we critiqued in out 2017 book – Reclaiming the State: A Progressive Vision of Sovereignty for a Post-Neoliberal World (Pluto Books, 2017).
    Just the assertion that we are in a post-Westphalien world is now accepted uncritically by many progressives along the TINA lines.
    Sort of, ‘oh well, the nation state is dead, we have to have a post-national world’ – as if that is a valid description of reality.
    As we argued in the 2017 book, the state is very much alive and all major policy decisions are still made via the legislative capacities of the nation states.
    There is no post-Westphalian world.
    That is just a clever construct that the neoliberals have advanced to justify the capture of the state’s legislative and regulative capacities to further there own ends rather than to advance the general welfare of the people.
    Progressives were duped into believing the idea that the nation state is powerless in the face of globalisation.
    (…)
    The proposal for a European-wide unemployment insurance scheme is similar to the “short-term lending facility” (…) and is used by the Europhiles as a synonym for ‘reform’ by which they mean progress.
    My assessment is that these proposals are all regressions to the mean – they just perpetuate the folly.
    The proposal for a European-wide unemployment insurance scheme is symptomatic of the Groupthink among European economists that led to the problem in the first place.
    A notable intervention from the Jacques Delors Institute in 2012 from a cast of authors including Henrik Enderlein, Peter Bofinger, Jean Pisani-Ferry, and André Sapir – Completing the Euro. A road map towards fiscal union in Europe – was representative of this type of ‘narrative’.
    Many of the authors of this report were involved in various studies that gave rise to the design of the EMU in the first place.
    (…)
    … the fiscal autonomy of the EMU Member States has been severely compromised by the SGP and the austerity packages forced onto many of the Eurozone economies during the crisis.
    It seems that democracy and autonomy can be violated when the Troika is imposing the terms, but then in other cases, it is upheld as a sacrosanct principle that cannot be compromised.
    That sort of hypocrisy has woven its way through the entire debate about economic and monetary integration in Europe and will continue to deliver sub-par outcomes.
    Enderlein and his cast of authors proposed a simple rule for the limits of democracy – “sovereignty ends when solvency ends” (p.7), which is astounding if you think about it.
    The application of this rule inevitably leads to a violation of democracy because the risk of insolvency is intrinsic to the flawed design of the monetary system.
    Member States are forced to issue debt in a currency they have no control over and the ECB is formally precluded from giving any guarantees (although of-course it has violated that prohibition via its huge bond-buying programs).
    Default risk and insolvency are always lurking, waiting for the next major economic downturn to arrive.
    Thus, according to the likes of Enderlein, as soon as a nation falls into crisis, its citizens lose the capacity to influence their own destiny and are, instead, at the behest of unelected officials in the European Commission, the ECB and the IMF.
    That vision has never appeared to me to represent a road map for a sustainable and prosperous Europe.
    While Enderlein and Co. proposed the introduction of a European-wide unemployment insurance plan, and hence they are now lauding Olaf ‘Wolfgang Schäuble’” Scholz’s recent support for the idea, their underlying approach to so-called “cyclical divergences” was to “enhance the real exchange rate channel” (p.28), which is code for making internal devaluation more responsive through increased labour mobility and wage cuts in declining regions.
    At the height of the crisis, Enderlein and Co. invoked the standard neo-liberal approach – that workers from recessed regions should move to growing regions and those who stay should worker harder for less pay.
    The virtue of stable social communities built on family structures and community spirit is ignored by this mainstream approach.
    The economy rules and workers are considered meagre pawns in the decisions by management on where to locate industry.
    One would think a primary aim for any durable solution to the European crisis is to keep regions viable, especially as Enderlein and Co. recognised that “Linguistic and cultural barriers are certainly important” (p.8).
    The belief (assertion) that labour mobility would be of sufficient magnitude to provide a semblance of equalisation in unemployment rates within the Eurozone is denied by the overwhelming evidence that between 2009 and 2011 there was no discernible movement among citizens who were already resident within the Eurozone (Source).
    Enderlein and Co. propose the European-wide unemployment insurance plan – “a cyclical adjustment insurance fund” (p.30) – because they acknowledge that a reliance on so-called ‘structural’ adjustments would be “unlikely to solve the inherent difficulties” facing the Eurozone during a major economic downturn.
    The characteristics of such an ‘insurance’ scheme would be:
    1. The fund would be managed by Eurozone finance ministers and build its kitty from contributions from nations experiencing above the Eurozone growth rates and pay out to nations in crisis.
    2. The scheme would thus force nations to reduce their domestic spending in times of buoyant economic growth and provide some relief in bad times.
    3. Significantly, Enderlein and Co. stress the “the system cannot become a hidden instrument for permanent transfers” (p.31) and nations might only be permitted to “take out what they once paid in” (p.32).
    4. Once again the presumption is that the ‘federal’ redistribution would be neutral across the economic cycle and across space, a proposition for which there is no rationale other than fiscal conservatism.
    A later proposal from Jean Pisani-Ferry and Co. released on January 10, 2013 – Options for a Euro-Area Fiscal Capacity – rehearsed the same narrative of fiscal neutrality and no permanent transfers.
    In a recent Op Ed in Der Spiegel (June 6, 2018) – Fixing the Euro: The Time to Act Is Now – Enderlein reinforced the austerity narrative.
    He considers the current instability in Italy and its poor economic performance since joining the euro.
    Among the options for Italy he rejects exit, bailouts, the abandonment of austerity, debt restructuring and more, because:
    Every single one of these measures would likely initially lead to an additional crisis – either political or financial, either in Italy or in the rest of Europe …
    Most options, viewed soberly, aren’t really options at all.
    You get the picture.
    With high levels of entrenched unemployment, unsustainable inequalities across its regions, youth that are being denied any chance of a productive working life, zombie banks on the edge of insolvency, stagnant per capita income and decaying social institutions, Enderlein rejects fiscal stimulus as an ‘option’ because it would destabilise Europe.
    Words and phrases are used by Enderlein in relation to the options, such as:
    “plunge Europe into an even deeper crisis” (exit)
    “uncontrollable consequences for the European banking and insurance system” (if any debt relief)
    “unrealistic” (any state support for the crumbling banking sector)
    “unable to afford” (almost any progressive policy).
    He also rejects any further ECB bond-buying as “dangerous … It is not the central bank’s job to solve political crises”.
    One might ask who has the job when the currency-issuer is the central bank and the fiscal agents (the Member States) have no direct relationship with the central bank nor any currency-issuing capacity.
    And so we get what Enderlein calls “new forms of assistance” which must not be based on any concept of a “transfer union”, the very characteristic that makes working federations effective.
    He cited the “group of 14 French and German economists” of which he was one, which issued a statement on January 17, 2018 – Reconciling risk sharing with market discipline: A constructive approach to euro area reform.
    They include the European-wide unemployment insurance scheme among their ‘reforms’ and note that:
    Member countries would pay into a fund, with countries particularly prone to major economic disturbances paying disproportionate contributions.
    So the weaker EMU nations would be even more screwed during times of growth and not be able to spend on domestic initiatives as much as the growth might permit.
    And then when recession hits, they would still have to pursue fiscal austerity (obey the SGP rules) but be able to get some of their own funds back as long as the funds were repaid again later.
    This is just another inadequate credit provision along the lines of the proposal to create the European Monetary Fund.
    What nations need in times of crisis is the capacity to allow their fiscal positions to go into whatever deficit is consistent with the non-government saving desire (collapse in spending).
    In short, the proposal suggests it is like an automatic stabiliser but it lacks the essential characteristics.
    It would retard public spending when there was growth, even if that public spending was driving growth and it would not allow the deficit to grow to necessary levels in times of downturn.
    It is just a credit facility within the existing austerity framework. It would unlikely be sufficient in that regard to prevent elevated levels of unemployment.
    A far better way to strengthen the automatic stabilisers is to introduce a European-wide Job Guarantee funded by an enhanced Euro-level fiscal capacity tied in with the currency-issuance power of the ECB.
    But then pigs might fly!
    Conclusion
    Scholz made it clear – his support for a European-wide unemployment insurance scheme was conditional on it being fiscally-neutral and without any transfers between Member States being consolidated.
    The economists pushing for this sort of scheme also want to punish the poorer nations more than those that are less prone to crisis by further restricting their capacity to stimulate public service delivery in good times.
    For the Europhile cheer squad to think this sort of scheme will represent fundamental reform shows you how far removed they are from any reality.
    Groupthink and denial on a very large scale.

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