Tag Archives: Angela Merkel

“What Merkel’s Third Term Means for Europe | Yanis Varoufakis”

“What Merkel’s Third Term Means for Europe | Yanis Varoufakis” http://yanisvaroufakis.eu/2013/09/28/what-merkels-third-term-means-for-europe/


“Merkel’s Victory, Everyone’s Loss: The Burden Of German Mercantilism On Europe”

“Merkel’s Victory, Everyone’s Loss: The Burden Of German Mercantilism On Europe”


Abenomics leads the Rehn-Merkel Doctrine 3.5 to -0.8

Abenomics leads the Rehn-Merkel Doctrine 3.5 to -0.8

A study in differences. Economists must have a field day when there are such clear ‘natural experiments.’ Shame politicians and other actors still don’t understand. Yesterday a local business representative said that he doesn’t ‘do’ theory and that in the real world things work different – we must tighten, slash expenses etc. otherwise we are on the road to Greece. Unfortunately, there was no time for a response in the seminar but people like that prevent recovery.


Rules are for…breaking? Stability and Growth Pact and beyond

Rules are for…breaking? Stability and Growth Pact and beyond

This link by Delusional Economics again shows how hard-headed German politics is. And not only politics, but also the Bundesbank. To recap: the Bundesbank is very much against the ECB’s OMT program, and challenges this before the German constitutional court. Outcome is unsure but it is possible that there will be such restrictions on the use of OMT that it will become useless. Furthermore, Berlin and the Bundesbank still believe in austerity. This is misguided, because other European countries cannot replicate the enormous trade surplus that Germany has. Not inside Europe, not with the rest of the world – the demand isn’t there and it is impossible in terms of accounting identities for Germany AND other countries to have such big surpluses – the trade deficits of the remaining countries would have to be so much bigger as well.

So, regarding the comment about agreed rules and to apply them: as the chart shows, Germany has broken those same rules many times over, in particular to come out of the slump in the early 2000s. The only countries that have some credibility here are Finland, Estonia and Luxemburg. Yup, really small countries – in terms of inhabitants and economic clout (although the Luxemburgian banking sector is a story on its own).

Next, this bit:

France needs more time to get its budget deficit under control. That much was made clear last Friday when the European Commission announced it was granting Paris until 2015 to bring its budget deficit below the maximum 3 percent of gross domestic product allowed by European Union rules ensuring the stability of the euro.

Later on it is stated that France will be in recession this year. Given the existence of a welfare state and rising unemployment, how on earth does Germany think France will get its deficit below 3% of GDP in two years? With a deepening downturn going on, this is just postponing the reckoning: France will not be able to do this, and France is really too big and too important to put it under ‘Troika stewardship.’

Delusional Economics says that this German politics is related to the German elections, but I have no confidence (ha ha) that after the elections German policymakers will soften up. They are (from my point of view) in a very dangerous case of group-think. It is even possible, given the rhetoric, that if the SPD wins, the policies will even turn harsher.


Meanwhile, millions of Europeans suffer, because of policy mistakes. What about solidarity, eh?

Italy needs Churchillian leader to fight ‘war damage’ of EU austerity – Telegraph

In particular the critique of the Commission’s op-ed and the AAA-powers is relevant. And indeed, nothing essential has changed. Italy is a really worrying case – game over for the euro may be near if Italy really crashes. http://www.telegraph.co.uk/finance/comment/ambroseevans_pritchard/10016431/Italy-needs-Churchillian-leader-to-fight-war-damage-of-EU-austerity.html

German ‘growth’

UPDATE, see this.

http://www.project-syndicate.org/commentary/the-eurozone-s-struggling-core-economies-by-ashoka-modyThe talk of the day is the decline of the German economy last quarter. Who knows if it will be revised even more, or if the expected growth of 0,4% will even shrink more than expected. As I have said, like many, many others, the German model is based on export-led growth, and given that Germany’s main export partners are the Eurozone countries, the German economy was bound to take a hit sooner or later. With Southern Europe almost beyond hope, and even the Netherlands and Finland in a fairly bad situation, Germany has no hope other than China and the USA. That is, unless it starts to acknowledge that austerity is so totally the wrong policy for the EU, especially now. Bill Black has the goods otherwise on this issue (and the role of the media):

Germany’s export-based strategy cannot work for the world. We cannot all be net exporters. Indeed, the more that Germany exports the harder it is for other nations to export their way out of recession. The journalists also fail to note the tremendous loss that the German export strategy imposes on German workers. Unemployment is low, but German workers’ wages have been reduced materially in real terms as productivity has grown. The result is very large corporate profits and ever higher inequality.

Germany is kind of operating on the basis of a compositional fallacy – we cannot all export our way out of the crisis (unless, as per Paul Krugman, we find a star system to export to).

It is a big catastrophe that European (and especially German, Finnish and Dutch) policymakers still don’t get this crisis, and the structural problems of the euro system (only shared currency, no shared fiscal regime, banking union etc). The policy making of the Euro’s designers AND current policy makers is the great failure of our time and already millions suffer from their delusions!