Bill Mitchell — The so-called euro stability spawned banking system that caused havoc

In yesterday’s short blog post – Some Brexit dynamics while across the Channel Europe is in denial (January 2, 2019), I noted that various European Commission officials were boasting about how great the monetary union had been over the last 20 years. European Commission President Jean-Claude Juncker had the audacity (and delusion) to claim it had “delivered prosperity and protection to our citizens. it has become a symbol of unity, sovereignty and stability”. I think he was either drunk or in a parallel universe or both. I provided two graph (GDP growth and employment) to show how poorly performed the monetary union has been since its inception. Today, I want to bring to your attention a Bank of International Settlements (BIS) research report which categorically finds that the European banks during the pre-crisis period not only fuelled the massive boom in sub-prime loans and doomed-to-fail assets that were floating around at the time, but also “enabled the housing booms in Ireland and Spain”. Rather than the US banking system being primarily responsible for the pre-crash buildup of private debt, the European banks were also helping the “leveraging-up of US households”. The “European banks produced, not just invested in, US mortgage-backed securities”. This role is not well understood or recognised. And it was because the Single Market mentality of the neoliberal European Union which abandoned proper prudential oversight and regulation allowed it to happen. So much for “prosperity”, “protection” and “stability”....

Bill Mitchell – billy blog
The so-called euro stability spawned banking system that caused havoc
Bill Mitchell | Professor in Economics and Director of the Centre of Full Employment and Equity (CofFEE), at University of Newcastle, NSW, Australia

Bill Mitchell — Greece – the next bailout is just around the corner

When the latest Greek bailout deal between the Greek government and the European Commission/IMF) was concluded on June 16, 2017, I concluded that it was designed to fail. Please read my blog – Latest Greek bailout – a recipe designed to fail. Despite all the statements from the European Commission and the IMF to the contrary, the terms of the deal with the Greek government confirms that these institutions had abandoned any pretense to being interested in serious economic policy. For the European Commission, the desired irrevocable status of the euro, as a political statement, is all it seems interested in when it comes to Greece. They just don’t want to admit that Greece cannot reasonably function in this monetary union. This deal only stalled reality for yet another day and the only goal it serves is to keep Greece using a currency it cannot afford to use. And now the reality is emerging that the Greek economy will need a further bailout to survive for another period. The latest analysis from the German research group – Centrum für europäische Politik – shows that Greece remains close to insolvent and cannot survive within the Eurozone on its own. One has to ask what has all the austerity been for if the patient is still on life support some 10 years later. We know the answer.

The characters within and outside of the European Commission that are bent on maintaining the Eurozone status quo no matter what have regularly told us that the Greek crisis is over....

Bill Mitchell – billy blog
Greece – the next bailout is just around the corner
Bill Mitchell | Professor in Economics and Director of the Centre of Full Employment and Equity (CofFEE), at University of Newcastle, NSW, Australia

Bill Mitchell — The EMU reform ruse – Part 1

On October 31, 2017, my blog – Europhile Left deluded if it thinks reform process will produce functional outcomes – countered some of the nonsense coming out of Europe (from the so-called progressive side) that the Eurozone hadn’t failed when judged by it bias towards mass unemployment and increasing precariousness of its citizens. I particularly noted the terrible record in terms of youth unemployment and NEETs. Yesterday’s blog – Massive Eurozone infrastructure deficit requires urgent redress – documented how much damage the austerity bias of the Eurozone has caused to essential productive infrastructure – human and physical and the ridiculous underinvestment by governments locked into mindless Stability and Growth Pact (and its recent derivatives) rules. Unphased, the Europhiles keep telling me that reform processes are underway and that we need to be patient. That the glorious vision outlined in the October 1990 European Commission Report – One Market, One Money Report, which, apparently outlined a vision of domestic-demand driven convergence bliss for the Economic and Monetary Union. I analysed that Report in detail in my 2015 book – Eurozone Dystopia: Groupthink and Denial on a Grand Scale – and have to say that anyone who holds it out as a plan for the future must have been reading a different report or affected by heavy drugs. Today, I am considering recent reform proposals put forward by German academic Fritz Sharpf, who considers the neoliberal Eurozone experiment has failed but can be resurrected without abandoning the essential mechanics of the monetary union. Tomorrow, I will conclude. It will not surprise regular readers to know that I disagree with Sharpf’s reform agenda....

I appears to me that the problem in the EZ is not so much neoliberalism, which is chiefly Anglo-American, as it is German ordoliberalism.

Neoliberalism reflects the pragmatic nature of the Anglo-American world.

Ordoliberalism reflects the German preference for a rules-based system in which rules are strictly adhered to regardless of outcomes. This choice is based on the assumption that sticking to the rules will eventually produce the desired result. So far, Germany has been unbending on sticking to the rules (except when it suits Germany).

Bill Mitchell – billy blog
The EMU reform ruse – Part 1
Bill Mitchell | Professor in Economics and Director of the Centre of Full Employment and Equity (CofFEE), at University of Newcastle, NSW, Australia

Bill Mitchell — Jean-Claude Juncker in denial and somewhat delusional

Last week (September 13, 2017), the President of the European Commission, Jean-Claude Juncker, presented his State of the Union Address 2017 in Strasbourg before the European Parliament. My only query arising from the speech was which Member State has left, given that the President began his speech by thanking “the 27 leaders of our Member States” (joke). He opened by saying how unity among the Member States had “showed that Europe can deliver for its citizens when and where it matters”. I wonder which Planet he was referring to. I thought Europe was on the Mother Earth and it certainly hasn’t been delivering for its citizens, if the usual measures are considered. Juncker’s speech just continues what I considered to be ‘Groupthink and Denial on a Grand Scale’, which was the subtitle of my 2015 book – Eurozone Dystopia: Groupthink and Denial on a Grand Scale. It is amazing that the denial continues after 10 years and that guys like Juncker can still command an audience and a salary.…

Translation of the speech: The European elite is doing very well. The little people don't count. Welcome to capitalism, which is the system that favors capital formation and the accumulation of capital as foundational and the ultimate criterion.

Capitalism is oppsed to socialism as the priority of all the people, and environmentalism as the priority of land. These are means for increasing capital under capitalism, and their use is based on the priorities of capital.

Bill Mitchell – billy blog
Jean-Claude Juncker in denial and somewhat delusional
Bill Mitchell | Professor in Economics and Director of the Centre of Full Employment and Equity (CofFEE), at University of Newcastle, NSW, Australia

Bill Mitchell — Deepening the Economic and Monetary Union – no solution in sight

Periodically, the European Commission puts out a new report or paper on how it is going to fix the unfixable mess that the Eurozone continues to wallow in. I say unfixable because all of the proposed reforms refuse to confront the original problem, which, at inception, the monetary union builders considered to be a desirable design feature – a lack of a federal fiscal capacity. They now know that this is the major issue but cannot bring themselves to deal with it directly. The politics won’t allow that. Everyone knows that Germany will veto such a development immediately and that would be the end of it. The latest report (May 31, 2017) – Reflection paper on the deepening of the economic and monetary union – maintains the inertness that was characteristic of previous ‘grand’ statements, such as the White paper on the future of Europe and the way forward(March 1, 2017) and the The Five Presidents’ Report: Completing Europe’s Economic and Monetary Union (June 22, 2015). So not much has happened in 2 years, despite the unemployment rate still hovering around 9.5 per cent, other than many workshops, conferences, reports, speeches, meetings in salubrious surrounds where the catering is the highlight and the conclusions moribund.

The latest Report – Reflection paper on the deepening of the economic and monetary union – adds another 40 odd pages to the already high pile of talk with little meaningful action....

Macron thinks he can fix this by talking sense to Germany. Ha ha. The euro is a discounted DM without Germany being subject to external responsibilities of a fiscal union in addition to a monetary union, and the German elite like it that way.

Bill Mitchell – billy blog
Deepening the Economic and Monetary Union – no solution in sight
Bill Mitchell | Professor in Economics and Director of the Centre of Full Employment and Equity (CofFEE), at University of Newcastle, NSW, Australia

Bill Mitchell — Greece still should exit and escape the grip of the vandals

Greece is back in the news as the IMF, the Germans and the European Commission slug it out pretending to talk tough and propose solutions to the Greek tragedy. There is no solution of course. All the debate about whether the primary surplus target should be 3.5 per cent of GDP (European Commission position) or slightly lower (IMF position) is just venal hot air. Anybody who knows anything and isn’t protecting their past mistakes would assess that a fairly large and sustained fiscal deficit is required in Greece to rebuild some of the lost capacity and to provide an inkling of hope to the youth who are facing a lifetime of diminished prospects as a result of the decisions the adults around them took. All the talk about ‘deficits mortgaging the grand kids future’ – sick. The austerity has meant the grand kids might not ever emerge given the constrained circumstances their would-be parents will face as they progress through adulthood. The reality remains – firmly – Greece should exit the Eurozone, convert any outstanding liabiliites into a new currency at parity, and stimulate its domestic economy with expansionary fiscal policy. It should continue to impose capital controls. As part of the stimulus, it should introduce an unconditional Job Guarantee at a decent wage to provide a pathway back into employment for the many that the Troika have rendered jobless....

Bill Mitchell – billy blog
Greece still should exit and escape the grip of the vandals
Bill Mitchell | Professor in Economics and Director of the Centre of Full Employment and Equity (CofFEE), at University of Newcastle, NSW, Australia

Bill Black — When will the EU and the ECB Stop Torturing the Greeks?

The troika refers to the European Union (EU), European Central Bank (ECB), and the International Monetary Fund (IMF). The IMF, traditionally, was the greatest proponent of any international entity of inflicting extreme austerity on nations suffering economic crises. The IMF’s economists have increasingly reviewed the evidence and concluded that austerity reduces growth and that putting nations into inescapable debt traps is stupid and harmful. The EU and the ECB, however, have been impervious to these economic studies and intent on hammering the Greeks. The purported EU “bailout” of Greece is an exercise in EU propaganda. Overwhelmingly, EU aid involving Greece goes to Greek banks – and the bank bailout bails out the creditors of Greek banks. Those creditors, overwhelmingly, are EU banks.

The EU and the ECB have forbidden Greece to use stimulus and locked Greece into a debt trap that will crush the Greek economy for over a half-century....

The troika is the EC, the ECB and the IMF. Should be "European Commission" instead of EU?

New Economic Perspectives
When will the EU and the ECB Stop Torturing the Greeks?
William K. Black | Associate Professor of Economics and Law, UMKC

Bill Mitchell — The Eurozone ‘house of cards’ to collapse – doomed from the start

There was an interesting interview published in the financial market journal Central Banking this week with Otmar Issing, who was the ECBs first chief economist and a former European Central Bank executive board member. He predicted that as a result of the political corruption of the monetary union ideal, “the house of cards will collapse.” He was referring to the claim that the ECB has become captured by politicians and technocrats in the IMF and the European Commission such that it is now violating essential central banking principles, in addition, to Treaty obligations that were designed to safeguard the financial stability of the system. I have some agreement with his overall view that a federal solution to the Eurozone ills is not viable. But I do not agree that the ills of the Eurozone stem from recent political decisions – to pressure the ECB to engage in QE or other interventions. The reality is that the flawed design of the Eurozone, which reflected the ideological hold of neo-liberalism on the integration discussions in the 1980s and beyond, meant that the only effective fiscal capacity in the currency union was held by the ECB. If the ECB had not started buying up government bonds in May 2010, the monetary union would have collapsed about then. The whole problem is that neo-liberalism brought these Member States together into a monetary architecture that was doomed from the start…

Bill Mitchell – billy blog
The Eurozone ‘house of cards’ to collapse – doomed from the start
Bill Mitchell | Professor in Economics and Director of the Centre of Full Employment and Equity (CofFEE), at University of Newcastle, NSW, Australia

Bill Mitchell — The European Commission and ECB outdo themselves in their quest for absurdity

Bill is on a tear.

As the years have passed, I have become inured to the depths of absurdity that the European Commission and the political elites its nurtures go to justify their existence. The Maastricht exercise in the late 1980s and early 1990s was comical. The convergence process towards Phase III of the Economic and Monetary Union in the 1990s was established a new norm for craziness. Who would believe the stuff that went on. Then the Goldman Sachs fiddle to allow Greece to enter the Eurozone two years later than the rest. What! Then the Stability and Growth Pact fudges in 2003 when Germany (and France) were clearly in violation of the rules they had bullied the other Member States into accepting. Look the other way and whistle! Then the GFC and the on-going mess. By now the Commission and the Council were outdoing themselves in pursuing absurdity. It was a pity that millions of innocent citizens have had their lives wrecked through unemployment and poverty as a result. And, now, perhaps, this lot have exceeded their own capacity for nonsense. I refer to the latest Convergence Reports published by the European Commission and the European Central Bank. Hypocrisy has no limit it seems. The Eurozone and EU is now firmly entrenched in austerity and deflation and the policy makers think that is the desirable benchmark for others to aspire to. Who could have invented this stuff! And, in relation to the upcoming vote in Britain – how the hell would any reasonable citizen want to be part of this sham outfit (EU) if they had a choice.

Bill Mitchell – billy blog
The European Commission and ECB outdo themselves in their quest for absurdity
Bill Mitchell | Professor in Economics and Director of the Centre of Full Employment and Equity (CofFEE), at University of Newcastle, NSW, Australia

Julian Assange — IMF Internal Meeting Predicts Greek 'Disaster', Threatens to Leave Troika

The Greek situation is "evolving." 

Remaining in the Troika seems an increasingly hard sell internally for the IMF, because non-European IMF creditor countries view the IMF's position on Greece as a violation of its policies elsewhere of not making loans to countries with unsustainable debts.

Wikileaks
IMF Internal Meeting Predicts Greek 'Disaster', Threatens to Leave Troika
Julian Assange
h/t Don Quijones at Raging Bull-Shit

Philip Chrysopoulos — European Commission Denies Varoufakis’ Accusations of Controlling Greece’s Tax Agency

“On what Mr Varoufakis has been saying, the allegations that the Troika was controlling the general secretariat of public revenue are false and unfounded,” European Commission spokeswoman Mina Andreeva told a news briefing.

“The general secretariat of public revenue is a quasi-independent entity, responsible for tax administration, that is formally part of the Finance Ministry,” Andreeva explained.

“The Commission and IMF only provide technical assistance to the tax administration but certainly do not control [the agency],” she added. “Alleging that the Troika would be controlling the secretariat… is simply not true.” 

Greek Reporter
European Commission Denies Varoufakis’ Accusations of Controlling Greece’s Tax Agency
Philip Chrysopoulos

See also

Supreme Court Brings Lawsuits Against Varoufakis to Greek Parliament

Some contrast:

Ioanna Zikakou, Steve Jobs’ 100M-Euro Super-Yacht in Samos, Greece

Bill Mitchell — The European Project is dead

When the GFC emerged and confirmed what Modern Monetary Theory (MMT) proponents had been predicting for more than a decade, I initially thought that this might be the ‘paradigm-shift’ line in the sand with respect to economic theory and policy. The OPEC oil price hikes in the 1970s provided the ‘space’ for Monetarism to usurp Keynesian thinking – not as a triumph of evidence and facts but as an ideological shift in thinking. The ideological battle had been going on for three decades in the academy but the oil crises exposed policy flaws in the Keynesian orthodoxy that were exploited by the Monetarists to allow them to reintroduce ideas (and policies) that had been completely discredited during the Great Depression of the 1930s. In the same that the dominant paradigm collapsed in the 1970s, I thought the GFC would so destroy the public credibility of Monetarism’s latest iteration, which we call neo-liberalism, that we could find intellectual space to restore rigor to economic policy and the way economics was taught in the universities. I even thought that the pragmatic and dramatically successful use of fiscal stimulus in most advanced countries would provide the empirical reinforcement necessary to repudiate and expunge neo-liberalism forever. I was wrong. But what the GFC has achieved as neo-liberalism hangs onto the reigns of power in policy making circles is a major breakdown of the what is referred to as the European Project. The creation of ‘Europe’, which was conceived after World War 2 as a means to maintain peace and create prosperity among previously hostile nations, was a major human achievement in the C20th. That vision is now in tatters as the neo-liberals, blinkered by their own Groupthink, steadily dismantle the meaning and application of that great Post WW2 experiment. Jean Monnet and Robert Schuman would be turning over in their graves to see what their ‘Project’ has become under the domination of Wolfgang Schäuble and his lackeys in the Eurogroup. So we might see the demise of neo-liberalism after all as it destroys the grand European political project….

Bill Mitchell – billy blog
The European Project is dead
Bill Mitchell | Professor in Economics and Director of the Centre of Full Employment and Equity (CofFEE), at University of Newcastle, NSW, Australia

Brad DeLong — Must-Read: Karl Whelan: Alice In Schäuble-Land: Where Rules Mean What Wolfgang Says They Mean

The rules that Tsipras has broken are unwritten rules that reflect the power the euro area’s creditor states have to ruin any member states that don’t do as they are ordered.

The US holds this power of the global economy to various degrees depending on conditions. Self-sufficient countries are less susceptible but no country is completely self-sufficient enough to be entirely independent of the US unless it is a backward country. The EZ is a replication of that on a smaller scale.

WCEG — The Equitablog
Must-Read: Karl Whelan: Alice In Schäuble-Land: Where Rules Mean What Wolfgang Says They Mean
Brad DeLong

Raúl Ilargi Meijer — The Troika Turns Europe Into A Warzone

...the referendum has a far broader significance. It is about what and who will rule Europe going forward, and we’re talking decades here.

It will either be a union of functioning democracies, or it will be a totalitarian regime in which all 28 nations surrender their independence, their sovereignty, their votes and then their lives to Brussels and Berlin.

Democracies are about one thing first and foremost: the people decide. If you can’t have that, than why would you have elections and referendums? Those then become mere theater pieces. Like we already have in the US, where if anyone can explain to me the difference between the Clintons and the Kardashians, by all means give it a go.

Since it’s clear that Berlin is by far the strongest voice in the three-headed monster the Troika has become, it’s no exaggeration to say that what we see unfold before our eyes is yet another German occupation of Greece. There are no tanks and boxcars involved yet, but wars can be fought in many ways. And scorched earth can take up many different forms too. It’s the result that counts.

In the meantime it has somehow become entirely acceptable for politicians and media from foreign countries to tell the Greeks what to do, who to vote for, and what to make sure happens after.

European Parliament chief Martin Schulz even dares claim that Syriza should resign if the vote is yes, and it should be replaced with a bunch of technocrats. It’s none of your business, Martin. Or yours, Bloomberg writers, or Schäuble, or anyone else who’s not Greek. Shut up! You’re all way out of -democratic- line.

It’s up to Greeks to decide what happens in their country. It’s both a sovereign state and a democracy. The utmost respect for this should be the very foundation of everything we do as free people, whose ancestors fought so hard to make us free.
How come we moved so far away from that, so fast? What happened to us? What have we become?

The Automatic Earth
The Troika Turns Europe Into A Warzone
Raúl Ilargi Meijer

Telegraph — George Osborne spearheads assault to stop Greece 'suicide'

Elite freak out underway as Sampson Syriza pulls down the pillars. Shades of Lehman looming.

George Osborne on Monday led attempts to strong-arm Greece into voting for a bail-out package as he warned that a Greek exit would threaten Britain’s financial stability.
Britain joined Germany, France, Italy and the European Commission in telling the Greek people that refusing austerity measures in next Sunday’s referendum would catapult them “from the eurozone and from Europe".

Jean-Claude Juncker, the European Commission president, warned the Greeks – who are on Tuesday night expected to default on a €1.5 billion (£1.1 billion) loan from the International Monetary Fund (IMF) – not to “commit suicide” by rejecting the proposed €12 billion loans-for-reforms package. The threat comes despite voters being asked only whether they support the bail-out.

Some £36 billion was wiped off the value of major British companies on the FTSE 100 as markets slid around the world, while Greeks queued in their thousands at cash machines, petrol stations and supermarkets for a third day....

Hold strong Syriza. Democracy is working.

Best line:

Greece on Monday published the ballot paper for Sunday’s vote, with No, or Oxi, at the top. The word carries powerful resonance in Greece from the day in October 1940 when it refused Mussolini’s ultimatum.

If this weren't so pitiful, I'd be laughing. The eurocrats are getting what they deserve. And no, they are still not willing to compromise one inch. That's the real neoliberalism on display. It's like catching a monkey by putting a banana in pot. The monkey grasps the banana and won't let go, so it is caught by its own greed.

The Telegraph
George Osborne spearheads assault to stop Greece 'suicide'

Matthew Holehouse, Brussels, Ambrose Evans-Pritchard, Justin Huggler, Berlin and Steven Swinford

Bill Mitchell — Germany’s serial breaches of Eurozone rules

Last week (May 5, 2015), the European Commission’s Directorate-General for Economic an Financial Affairs (ECFIN) published the – Spring 2015 European Economic Forecast – which provide a picture of what they think will happen over the next two years across 180 variables. To the extent that the forecasts reflect past trends (given the inertia in economic time series outside major cyclical events), they provide a clear picture of what is wrong with the Eurozone. The salient feature of the Forecasts is that the European Commission expects Germany to increase its already astronomical Current Account surpluses to peak at 7.9 per cent of GDP in 2015 and falling only to 7.7 per cent in 2017. The Commission has in place a set of rules that require nations to restrict external surpluses to not exceed 6 per cent of GDP. Germany repeatedly fails to abide by those rules, yet lectures the rest of its Eurozone partners about their failures to meet the targets, crazy as they are. The unwillingness of the European Commission to enforce their own rules in relation to Germany is one of the telling failures of the whole Eurozone experiment.

Bill Mitchell – billy blog
Germany’s serial breaches of Eurozone rules
Bill Mitchell | Professor in Economics and Director of the Centre of Full Employment and Equity (CofFEE), at University of Newcastle, NSW, Australia

Don Quijones — Guess Who’s Designing Europe’s New Tax System?

Spoiler warning. HSBC.

Wolf Street
Guess Who’s Designing Europe’s New Tax System?
Don Quijones

Bill Mitchell — Eurozone unemployment – little to do with international competitiveness

The so-called ‘Informal European Council’ released a document on February 12, 2015 – Preparing for Next Steps on Better Economic Governance in the Euro Area: Analytical Note – which has been used as a background paper to batter the Greeks into submission in the latest round of the Eurozone crisis. It was published under the authorshop of Jean-Claude Juncker (President of the European Commission) with “close cooperation” with Donald Tusk (President of the European Council), Jeroen Dijsselbloem (President of the Eurogroup of Finance Ministers) and Mario Draghi (ECB boss). All that is missing is the Madame from the IMF to complete the Troika. This is a very dishonest document, deliberately framed to advance the austerity agenda and damage the living standards of some of the nations within the monetary union. It is hard how any serious economist would put their name to this sort of analysis.....

Well, we know that these people are not serious economists but serious politicians flogging an ideology they can't admit has resulted in failure. Perhaps, Christine LaGrande's signature isn't on this because she recognizes it. But if she doesn't speak up, silence is consent.

The Eurozone is now locked down in a straitjacket of economic austerity, driven by an economic ideology that is blind to the evidence of its own failure.

The concern:

The Keynesian era emerged out of the Great Depression, which taught politicians that without major government intervention, capitalism is inherently unstable and prone to delivering lengthy periods of unemployment.
Full employment came only with the onset of World War II as governments used deficit spending to prosecute the war effort.

Failing to recognize this and imposing fiscal austerity in the face of economic and financial crisis that is morphing into social unrest and political crisis, Europe is now sliding into instability and toward war, with a hot war raging on its eastern border with Russia. Is history rhyming? How many times do we have to run this?

Bill runs through the history.

Bill Mitchell – billy blog
Eurozone unemployment – little to do with international competitiveness
Bill Mitchell | Professor in Economics and Director of the Centre of Full Employment and Equity (CofFEE), at University of Newcastle, NSW, Australia

Ralph Musgrave — European Commission tells the UK what do about youth unemployment.

That’s “European Commission” as in “we lot who have managed to create 50% youth unemployment in Greece, 50% in Spain and 36% in Portugal, so we obviously know what we’re talking about”. 

See: Council Recommendation on the United Kingdom’s 2013 national reform programme

The European Commission’s – er – “advice” then descends from the ridiculous to the totally ridiculous: it tries to tell the UK what do about it’s deficit. Here it follows the standard IMF / OECD / Pete Peterson / Bowles and Simpson / Rogoff and Reinhart line, namely that a country should have a PLAN for deficit reduction.
The whole notion of a PLAN for reducing the debt or deficit is nonsense because it fails to get a point made by Keynes: “Look after unemployment and the budget will look after itself”.

In other words, a monetarily sovereign government should pitch it’s deficit (or surplus) at a level that reduces unemployment as far as is possible without exacerbating inflation too much. If the private sector happens to be in a fit of irrational exuberance, government may well need to run a surplus in order to confiscate financial assets from the private sector and quieten things down. Conversely, if the private sector is in subdued mood, government will need to run a deficit so as to boost demand and feed financial assets into private sector pockets.

And since it is impossible to predict what mood the private sector will be in in twelve months time (never mind three years time), it’s impossible to say what size deficit (or surplus) will be suitable in twelve months’ time or three year’s time.

European Commission tells the UK what do about youth unemployment.
Ralph Musgrave