Bill Mitchell: Alemania (azken albisteak)

(a) Alemania: exit?

German threats of exit rely on the ignorance of others reinforced by Europhile progressives

(http://bilbo.economicoutlook.net/blog/?p=49008)

I read a story in the German press – Der Euro auf dem Prüfstand (‘The euro on the test bench’, published January 7, 2022) – which reinforced my view that progressives who think the harsh austerity-bias of the Economic and Monetary Union (EMU) have vanished with the invocation of the ‘general escape clause’ within Article 126 of the Treaty of the Functioning of the European Union when the pandemic arrived are off the mark. And when the same commentators/thinkers welcomed the end of the Merkel era and the dawning of the new German government, their assessment reflected that they are trapped within the TINA to the euro thought process. Well, economists with influence in Germany certainly don’t think that and one of the bosses of the Kiel Instituts für Weltwirtschaft (IfW) (Kiel Institute for the World Economy), which is a German research institute, has called for the topic of German exit from the EMU to be debated. He believes that this will put pressure on the other Member States (particularly the so-called “Achse Paris-Rom” (Paris-Rome axis) to abandon any thought of relaxing the economic and monetary rules and force the ECB to tighten monetary policy again. The iron gauntlet of ‘schwarze Null’ is still firmly gripping the European debate.

When the so-called “traffic light coalition” (“Ampel-Koalition”) was formed between the SPD, Bündnis 90/Die Grünen and FDP, I read some preposterous assessments that the terrain had irrevocably changed in German politics and this would lead to a major revision of the fiscal rules that blight the common currency.

I will come back to that.

But what also happened is that the Eurosceptics in Germany, who still fume over the decision to enter the EMU, were also unleashed because they feared the new German government would fall into populist causes aimed at relaxing ‘fiscal discipline’.

The cited article was based on an interview with Stefan Kooths from the IfW who demanded that the “highly indebted countries” of the eurozone be disciplined (“Disziplinierung hochverschuldeter Staaten”).

He claimed that with inflation becoming the threat (his view not mine) that the other EMU states had to be firmly reminded that Germany has alternatives – including exit.

He also demanded that the ECB abandon its ‘ultra expansionary direction’ (“ultraexpansiven Kurs”) as quickly as possible, which was reference to the various bond-buying programs and the maintenance of low interest rates.

He claimed the ECB was ensuring the currency union survived by printing money (“den Währungsraum über die Notenpresse zusammenzuhalten”) and this had allowed Member States to build up unsustaintable debt levels to deal with the pandemic.

He said that now Member States had to enforce fiscal discipline and come back within the Stability and Growth Pact rules.

The alternative was for the ECB to allow some states to become insolvent (“Insolvenzordnung für Staaten”).

Back in June 2015, the ECB, as part of the pernicious Troika (European Commission, IMF and ECB), used its monetary capacity to engage in political blackmail against the Greek government.

The ECB threat to send the Greek banks broke unless the Greek government abandoned its plan to oppose the austerity plans was, in my view, a contravention of the central banks primary charter – to ensure financial stability.

But it was one of the several things that brought the Greek government to heel, after the people had voted on a referendum to oppose austerity, and condemned that nation to almost permanent hardship.

The demands from Stefan Kooth, have those overtones.

Either the southern states (Italy, in particular) come to heel or the ECB and the European institutions will send them broke.

His suggestion that a German exit threat is more of the same.

The article concludes that it should be understood as a power play in upcoming discussions about monetary policy in the EMU (“ein Machtmittel”).

In other words, if the southern states don’t play ball, German will take its bat home and those nations will be on their own.

For me, the surprise is that a German would think the other states (like France or Italy) would see that as a bad thing.

They have become so conditioned to believing in the euro as TINA that they cannot see how such a move by Germany would free their nations from the tyranny of the ‘frugal four’ and the Germany-Dutch axis.

That is how far the dysfunctional nature of the eurozone has penetrated the capacity of policy makers to exercise sound judgement.

Before we jump to think that these views are broadly shared by German economists, one should note that Kooths is the chairman of the Freidrich von Hayek Gesellschaft (Hayek Society), and a member of the Mont Pèlerin Society.

His views are firmly neoliberal.

But it is much more than that.

The new Finance Minister in Germany, Christian Lindner, who is leader of the liberal Free Democratic Party (FDP). Such are the spoils of being the leader of a minor party that was important in ensuring the SPD could gain government.

Lindner was – wait for it – a major critic of the former finance minister Wolfgang Schäublefor being too lenient with Greece during the GFC.

Back in 2017, when Angela Merkel was facing the possibility of having to form a coalition with the FDP, Lindner, who had just taken on the leadership role demanded much tougher EMU fiscal discipline and said Germany should not use debt to reduce taxes or deal with its need to upgrade its appalling digital infrastructure.

He said the third aid package to Greece that Schäuble had agreed to was a mistake and that Greece should have been sent broke.

More recently (December 2021), Lindner told the press that Germany would not fall into a regime of ‘fiscal dominance’ (“Situation fiskaler Dominanz”), which would allow the ECB to reign in its programs.

His views are becoming more broadly held in Germany, which have dubbed the ECB boss (Madame Lagarde) “Madame Inflation”.

As the new Finance Minister, Lindner will be influential in shaping the direction that the EMU takes. Like Kooths, Lindner is a member of the Hayek Society which promotes the inflation anxiety in Germany and calls for ever more deregulation.

Lindner’s aversion to any form of fiscal dominance and his willingness to impose the harshest austerity on what he sees as recalcritant Member States is the German view of old.

It hasn’t changed a bit.

There is no nuance here.

These Austrian economics organisations have become covers for the Alt Right in Europe, so they are much more than being purist Austrian School organisations.

The rest of Europe doesn’t seem to like Lindner – which is no surprise given his outrageous demands for more punitive austerity during the GFC.

This Capital article (November 5, 2021) – Warum ein Finanzminister Lindner in Europa auf Skepsis stößt – details how Lindner is poorly thought of in other European countries.

He is seen as being the proponent of an austerity mindset that is now unfashionable (“Vertreter einer aus der Mode gekommenen Sparpolitik.”)

The European branch of Politico posed the question in an article last year (November 3, 2021) – Christian Lindner as German finance minister: Does he add up? – challenged Lindner’s qualifications for the job and asked the question:

Finance minister or “fuck-up”?

Oh, how liberal we have become in the media.

Politico thinks that apart from the question of whether he is qualified for the job, Lindner’s “hawkish fiscal views represent a mortal threat to the euro”.

He built a career as a media personality driving a “black Porsche” and charging huge speaking fees.

But his political position is frugality – demanding the German debt brake be reinstalled and spending throughout the EMU be severely cut to fund tax cuts.

He is also among a growing group of influential characters who want to stop the bond buying programs of the ECB.

The appointment of Joachim Nagel as the new Bundesbank President, brought calls from the likes of Lindner for the ECB to reassert a stability-oriented monetary policy (“stabilitätsorientierten Geldpolitik”), which is code for raising interest rates and abandoning its bond-buying programs.

The tagesschau article (December 20, 2021) – Nagel soll neuer Bundesbankpräsident werden – quoted an economist from the Zentrum für Europäische Wirtschaftsforschung (ZEW) (Centre for European Economic Research) as saying:

Hoffnungen in Südeuropa, dass nun auch die Bundesbank sich unkritisch für unbegrenzte Anleihekäufe einsetzen könnte, sind damit erledigt.

(“Hopes in Southern Europe that the Bundesbank will uncritically advocate unlimited bond purchases are now over”).

Nagel need to be the ECB “Verstärker von Christian Lindner” (amplifier of Christian Lindner) and resist the “Begehrlichkeiten aus Frankreich und Italien” (desires of France and Italy).

The situation is now interesting.

France and Italy have formed a sort of power axis while the German political situation took some time to resolve and they are now trying to shift the policy focus somewhat away from the harsh frugal mentality.

But my bet is that they won’t get far.

Ondorioak

Bullying is the hallmark of politics in Europe it seems.

Germany knows it is the most powerful influence in the design of the EMU, despite the delusions that France held that it would become a more powerful state within Europe.

But, Germany’s power, to some extent, relies on the citizens of the Member States being conned into believing the TINA mantra – that the euro is a success and nothing else is possible.

So the threat of a German exit is a power play to play on that fear that the world will collapse in the other Member States if the euro is abandoned.

Progressives, who oppose austerity, give succour to that power play by continually playing the ‘Europe’ card.

They would be better off educating the public (after they eduate themselves) that there is life after the euro and the progressive policy space would open up if the EMU was disssolved.

Then the German exit threat would just fall on deaf ears and their blackmailing strategies would come to nought.

(b) Europar eskuindarrak eta ‘ezkertiarrak’

The European conservatives are organising while the progressives fight among themselves

(http://bilbo.economicoutlook.net/blog/?p=49033)

I read an article in the Frankfurter Allgemeine Zeitung (FAZ) yesterday (January 16, 2022) – Ich hoffe auf Deutschland – which made me laugh really. Comedy in absurdity. It also told me that the forces in Europe are firmly against any major progressive change. I considered this issue last week in this blog post – German threats of exit rely on the ignorance of others reinforced by Europhile progressives (January 11, 2022). I know progressives thought that the invocation of the Stability and Growth Pact escape clause in 2020 as the pandemic took hold might have been a sign that things were changing in Europe after years of austerity bias. But as the days pass, more evidence mounts that there is a statu quo that is being managed and it won’t be long before we see the familiar claims about excessive deficits and debt. The latest input comes from Austria’s new Finance Minister, Magnus Brunner who was reported in the FAZ article as saying that he rejects a debt union outright and hopes to win over the new German government to ensure they hold the fort. With the new German finance minister also of a similar if not more extreme persuasion about sound finance, I do not think he will have much trouble convincing the German. He also signalled that he wants to use a coalition – the “Staaten der Verantwortung“ (States of Responsibility) to maintain discipline in the Eurozone. The short period of fiscal flexibility is coming to an end. Meanwhile, with the French Presidential election approaching, the Left is fighting among itself for peanuts. The old guard is not about to fall yet.

(1) Austeritatezaleak biltzen ari dira

The conservative austerians are organising

The new Austrian Finance minister said that as opposed to the previous statements by Chancellor Sebastian Kurz to have an open cheque to deal with the pandemic, the new government will be more frugal in its fiscal approach.

It plans to withdraw aid in March 2022 as it expects the crisis to be abating by then.

He indicated that while several critics of the previous government pointed to wasteful spending, there was an understanding that the government aid had to be quickly dispensed and so some waste was to be expected.

He said in response to hardline anti-government moralists that:

Aber wir sollten die Kirche im Dorf lassen

(We should leave the church in the village!)

This reflected his preference for providing corporate support to save companies from insolvencies.

But now was the time to pay for the support.

He noted that the OECD in its latest Economic Outlook was starting to bear down on public debt levels – so nothing much has changed from organisation.

Austria debt is around 82 per cent of GDP, which is above the SGP threshold level of 60 per cent.

The new government (ÖVP – Austrian People’s Party) reflects a conservative liberal-leanding Christian (Roman Catholic) ideology and has been in power for years in one coalition or another. Since 1945 it was been in opposition from 1970 to 1986 but in government otherwise.

It reflects the hard-right anti immigration and Islam thinking that many of these conservative parties in Europe propagate.

Its economic mantra is ‘balanced budgets’ and Brunner indicated the government was committed to restoring that state in the medium-term, once the pandemic eases.

He reaffirmed Austria’s commitment to the SGP and was critical of discussions at present at the European level which were focusing on relaxing fiscal rules, were “Manche Diskussion auf europäischer Ebene geht für mich in eine vollkommen falsche Richtung” (going in the wrong direction).

This was a direct shot at the so-called Paris-Rome connection.

Rather than relax the rules, Brunner claimed that:

Wir müssen zurückkehren, zu den strengen Regeln einer nachhaltigen Budgetpolitik.

(We must return to the strict fiscal rules of sustainable budgets).

There was no mention of reducing unemployment. His focus is on fiscal numbers.

He claimed that the nations that have dealt with the crisis the best (Germany and Austria) are those which enforce these strict rules.

He clearly senses that the Paris-Rome nexus is becoming influential and so the frugal nations have to lobby together.

That is why he “hopes that Germany” will demonstrate fiscal leadership – along the lines of the CSU/CDU government under Angela Merkel and join with Austria in opposing any relaxation of the fiscal rules.

He considered the new Germany government will not support a debt union – where European debt is issued and permanent transfers are made to struggling states.

He interestingly tied that into climate policy and eschewed any notion that European debt, issued under mutual responsibility, should be used to develop carbon cutting energy investments in Europe.

He said that:

Deshalb lehnen wir ja auch den aktuellen Taxonomie-Plan zur Finanzierung der Energiepolitik ab. Es kann nicht sein, dass wir mehr Schulden machen, um die Atomkraft zu unterstützen.

(We reject the current plan for financing energy policy. We cannot take on more debt to support nuclear power).

To counter the Paris-Rome nexus, he claimed he was seeking to put the ‘frugal four’ (Netherlands, Denmark, Sweden and Austria) back on the road even though electoral shifts have occurred in those nations since they last put out a statement early in the pandemic.

Now he is claiming that he wanted to form a group within Ecofin (the notorious finance ministers committee) which he referred to as the “states of responsibility” whose will lobby to restore the fiscal rules in their entirety.

Who are these states?

Well he wants the Frugal Four to expand to add Finland, then Germany, the Czech Republic, Slovakia, the Baltic countries, and indeed, any nation that is committed to the fiscal rules.

He was asked about the implications for the ECB in increasing interest rates and ending its bond-buying programs which have suppressed yields on EMU Member State’s debt.

He was fairly non committal.

His main policy focus was on lowering corporate taxes and implicitly attracting companies to move across the border from Germany, where tax rates were higher.

(2) Ezkerra bere burua galtzen

While the Left fights among itself

Meanwhile, the French Presidential election is to be held on April 10, 2022.

The – Opinion polling for the 2022 French presidential election – is interesting and depressing.

The progressive interests have a stack of candidates fighting among themselves over a handful of percentage points.

As each week passes, it seems a new candidate on the Left joins the fray, the latest being the former Socialist justice minister Christiane Taubira.

We now have:

1. Christiane Taubira (Radical Party of the Left) – former Justice Minister.

2. Jean-Luc Mélenchon (La France Insoumise) – hard left.

3. Anne Hidalgo (Socialist Party) – Mayor of Paris.

4. Yannick Jadot (Europe Écologie) – Green.

5. Fabien Roussel (French Communist Party).

6. Arnaud Montebourg (L’Engagement) – so-called Miscellaneous Left.

7. Philippe Poutou (New Anticapitalist Party) – Far Left, Union connected

8. Nathalie Arthaud – Lutte Ouvrière – Left, Union

They are fighting among each other for votes from progressive voters while the right and right-centre candidates stand alone.

In the – Poll of Polls – which brings together polling data from all sources, polls published on January 17, 2022, we learn that:

Candidate

Party

January 20, 2021

January 17, 2022

Emmanuel Macron

La République en Marche!

24%

26%

Marine Le Pen

National Rally (Hard right)

26%

17%

Valérie Pécresse

Les Républicains (Centre-Right, Liberal)

n.a

17%

Éric Zemmour

Reconquête (Right-wing)

n.a

12%

Jean-Luc Mélenchon

La France Insoumise

11%

10%

Yannick Jadot

Europe Écologie

7%

6%

Christiane Taubira

Radical Party of the Left

n/a

4%

Anne Hidalgo

Parti Socialiste

7%

3%

Fabien Roussel

French Communist Party

n/a

2%

Nicolas Dupont-Aignan

Debout la France (Right-Gaullist)

7%

2%

Jean Lassalle

Résistons! (Centre-right)

1%

1%

Philippe Poutou

New Anticapitalist Party (Far Left)

1%

1%

Florian Philippot

Les Patriotes (Right-wing, Nationalist)

n/a%

1%

Arnaud Montebourg

L’Engagement (Left)

n/a

1%

François Asselineau

Popular Republican Union (Hard Eurosceptic

n/a

1%

Note: a few other candidates have less than 1% standing – Nathalie Arthaud – Lutte Ouvrière (Left); Hélène Thouy – Parti animaliste (Animal Rights).

So do the sums.

The Left or Left-leaning candidates – of which there are 7 – command no more than 25 per cent of the intended vote and none will get to the second round.

If they all rallied behind one (say Jean-Luc Mélenchon, who is the most popular), then they would be ahead of the right-wing candidates – Marine Le Pen, Valérie Pécresse and Éric Zemmour.

The traditional Socialist Party has all but disappeared.

So 25 per cent of the voters will cast their votes in vein for this rag-bag of Leftist candidates.

It is a long way back to the days when François Hollande who was leader of the Parti Socialist, the traditional progressive party in France that had a serious chance of winning government at each election, won the 2012 election commanding all arms of government.

Why did his party go backwards so quickly?

The same reason that the Mitterand government in the 1980s fell into disfavour.

They played the neoliberal austerity game that damaged the well-being of the workers who had elected them.

So while the right wing politicial forces in Austria are plotting to strengthen and broaden the austerity alliance in Europe, the progressive interests in France are failing.

That juxtaposition is happening all over the world.

For example, see the decline of popularity for the Biden administration and the rumblings from a resurgent Trump.

Lack of action to protect workers will kill parties that claim to represent them.

Ondorioa

This is a sorry state of affairs.

Utzi erantzuna

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