Tag Archives: Olli Rehn

‘The optimists are finally silent’

It would be nice to be optimistic about Europe, but it is nigh impossible. This critical piece in the Financial Times, for the umptienth time, explains the real reason behind the ongoing European economic stagnation.

European citizens must hope that their policy makers, in Frankfurt and in Brussels, will abandon further attempts to reassure us, and abandon their one-sided mantra of structural reform. The acute, pressing problem is aggregate demand.

This article is also very much worth reading. Europe is doing worse than the Great Depression.

In the context of overwhelming evidence, I find it incredible that policy makers still stick to the stale argument of austerity and structural reform. I am not a great fan of Bob Dylan, but this lyric remains astute:

Yes, how many times can a man turn his head
Pretending he just doesn’t see ?
The answer my friend is blowin’ in the wind
The answer is blowin’ in the wind.

Yes, how many times must a man look up
Before he can see the sky ?
Yes, how many ears must one man have
Before he can hear people cry ?
Yes, how many deaths will it take till he knows
That too many people have died ?
The answer my friend is blowin’ in the wind
The answer is blowin’ in the wind.

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Simon Wren-Lewis: ‘France and the Commission ‘

Simon Wren-Lewis: ‘France and the Commission ‘

In the words of Paul Krugman:

“But the larger point here, surely, is that Rehn has let the mask slip. It’s not about fiscal responsibility; it never was. It was always about using hyperbole about the dangers of debt to dismantle the welfare state. How dare the French take the alleged worries about the deficit literally, while declining to remake their society along neoliberal lines?”

ETUC’s Open Letter to Commissionar Rehn – some thoughts

Here.

You could hardly write a more stinging critique. Of course, it is perhaps not very smart to go a particular person, but in the Eurocrisis Commissioner Rehn has had a very prominent and public role, even though in his work he has been supported by German, Finnish and Dutch politics as well as by his staff in the Commission.

Such an Open Letter is a kind of angry call, but it must also not be forgotten that the ECB is soon starting with an (apparently tight) Asset Quality Review of banks in Europe, which has not only Italian but also German and Dutch banks worried, so I would guess. Obviously, this is not directly connected with austerity policies but given that the capital flows to the South were a major factor in worsening of trade balances and wage inflation, it is from my point of view good that this aspect of the eurocrisis is in the spotlight.

Beyond that, I quite agree with the arguments in the Open Letter. The only thing they forgot to mention was that Irish and Latvian unemployment is very high despite rather dramatic migration.

But yes, I quite understand why labour unions and the ETUC in particular are angry.

“”Workers Of Europe, Compete!” by Ronald Janssen”

“”Workers Of Europe, Compete!” by Ronald Janssen” http://feedproxy.google.com/~r/social-europe/wmyH/~3/5Y5Yh1ShlfU/

I have to think about this issue, but I seem to remember there have been similar calls in Finland recently.

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Can Spain Achieve What Ireland And Latvia Did?

Can Spain Achieve What Ireland And Latvia Did?

‘Spain would do well to stay clear from the type of reform measures the Commission and the IMF are trying to sell to economies in distress.’

Some, especially in Finland, might find that there is a lot of critical posts regarding Olli Rehn (not as a person, as a representative of a certain set of policies). But please remember: all the talk of ‘recovery’ is extremely premature and in any case how can you call it a recovery when unemployment is so high (and rising in many places). Think of the Netherlands. Think of how things are going in Finland – not the aggregate numbers but the real-life stories of people losing their jobs.

 

In addition, as Simon Wren-Lewis writes, left- and right-wing extremism is surging thanks to the current politics. In the Netherlands the extreme right/populist Freedom Party as well as the extreme left Socialist Parties are surging in the polls. Also in Finland, especially now the crisis starts to bite, the political success of the True Finn party is virtually guaranteed in the next elections. This I have thought about earlier, and written on the blog here. The recent gallup by the Finnish daily shows that the opposition parties Center Party and True Finns are clearly on the rise, the former would be the biggest and the latter is as big as the National Coalition Party, which leads the current government. The Social Democratic Party is quite a lot smaller in this opinion poll that half a year ago (18,2% to 16,3%).

The Low Countries sinking lower: new economic data on the Netherlands

Yesterday, Paul Krugman already did a quick comparison between Belgium and the Netherlands (link here in Mark Thoma’s blog). His conclusion was:

And in general, it’s hard to escape the impression that Belgium has been better served by political paralysis than the Netherlands has by its unified, effective determination to do exactly the wrong thing.

I am not sure if that is the only thing that is relevant (e.g. the Netherlands has thrown a lot more money around to save banks than Belgium, I think) but today a handful of new economic data has come out for the Netherlands, and it doesn’t look pretty. See also here.

First, GDP growth/decline: the Dutch economy has shrunk for four quarters; GDP is 1,8% less than last year in the same period. Investment has shrunk 9,4%, private consumption 2,3% and exports declined by 0,3%. Government consumption shrunk by 0,5%.

Second, jobs/unemployment: in one year’s time, 147.000 jobs have been lost (1,9% since last year and the biggest decline since 1995). Unemployment jumped from 6,5% last year to 8,7% this July. Unemployment has been rising rapidly since 2011. Also the number of job vacancies is at the lowest level in ten years.  Currently, there are 694.000 unemployed. Youth unemployment stands at 17%.

Third, budget deficit: next year the budget deficit is estimated to be 3,9%, which according to the Dutch Bureau for Economic Policy Analysis (CPB) means that the goverment should cut the budget by an additional 9 billion euros to stick to the European norm of 3%. As noted earlier, the Netherlands got a bit of relief for this norm, because it isn’t going to achieve it for this year. The government agreed to cut the budget by 6 billion euros at most for 2014. According to the politics editor of the NRC/Handelsblad newspaper, Commissionar Olli Rehn has promised that this 6 billion is enough, but that it is in particular the Liberal party in government that wants to stick to the 3%-norm. According to the editor this is because the Netherlands have been so tough with other countries it should give the right example now.

This might be exactly the foolish Doing the Right Thing that Krugman mentions. It is going to be a very rough time in the Netherlands because since the 1990s the social security system has been made much, much leaner. Even though there is a new Social Pact, some representatives of Dutch labour relations feel that the budget cuts amounts to the end of the very same Social Pact the Dutch prime minister used so much political capital for – because part of the Social Pact was a postponement of budget cuts amounting to some 4,3 billion euros.

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We can end the ‘Rehn of Terror’

We can end the ‘Rehn of Terror’

A very critical post by Ambrose Evans-Pritchard. But the ‘crimes agaist Greece and against economics’ rather invite this kind of writing. But remember:

Mr Rehn is a decent man, with an impossible task, carrying responsibility without power. The politicians of the northern EMU states and the ECB are chiefly to blame.

Especially this part is worth noting:

If no such resignation comes from Commissioner Rehn, we know the Rehn of Terror will go on. The regime will persist in destructive folly, adding 100,000 people to the jobless rolls each month.

Just a reminder of the scale of error, which I wrote about in this blog last year.

The Troika originally said that Greece’ economy would contract by 2.6pc in 2010 under the austerity regime, before recovering with growth of 1.1pc in 2011, and 2.1pc in 2012.

In fact, Greek GDP remained in an unbroken free-fall. It did not grow in either year. It contracted a further 7.1pc in 2011, 6.4pc in 2012.

Roughly speaking, the Troika misjudged the scale of economic decline over three years by 12pc of GDP. The total decline will be around 25pc, surely a Great Depression.

Don’t tell it was hard to foresee. The Greek Labour Institute and the think tank IOVE produced very accurate forecasts. The truth is that the Troika’s ideology of “expansionary fiscal contraction” is bunk, and doubly dangerous when compounded by tight money.

Like the Spartans, Thebans, and Thespians at the Pass of Thermopylae, the Greeks were sacrificed to buy time for the alliance.

Instead of applause, they were then vilified for their heroic efforts by ill-informed and self-interested Dutch, Finnish, Austrian, and German politicians. A squalid episode.