Tuesday, September 30, 2014

Bill Mitchell — Another Eurozone plan or two that skate around the edges

There was an article in UK Guardian last week (September 26, 2014) – Debt forgiveness could ease eurozone woes – which was interesting and showed how far the debate has come. The outgoing European Commissioner for Employment, Social Affairs and Inclusion, László Andor also gave a speech in Vienna yesterday – Basic European unemployment insurance: Countering divergences within the Economic and Monetary Union – which continued the theme from a different angle. While all these proposals will be positive rather than negative they essentially are not sufficient to solve the major shortcoming of the Eurozone – its design will always lead it to fail as a monetary system because they have not accepted that all citizens in each country have equal rights to avoid economic vulnerability in the face of asymmetric aggregate spending changes. That lack of acceptance means the political leaders will never create an effective federal fiscal capacity and the member nations will always be vulnerable to major recessions and wage deflation, which undermine living standards. 
I have received E-mails recently and there have been some comments posted in relation to some blogs I have written on the Eurozone which say essentially that I unfairly bracket those who propose solutions to retain the euro but ameliorate the consequences of that retention as being either explicit or implicit supporters of the common currency.
Various justifications are used for arguing within the neo-liberal ‘tent’ for ad hoc solutions, which retain the euro and the fiscal constraints that are associated with it, including – political difficulties in challenging the very existence of the euro, unfairness to international creditors and financiers if the euro is abandoned by any particular nation, increased cross-border transaction costs, and other claims.
All of which have elements of truth. But a progressive position that argues from within the mainstream ‘tent’ inevitably becomes captured by the essential elements of the mainstream view even if the underlying ideology is rejected.…
Bill Mitchell – billy blog
Another Eurozone plan or two that skate around the edges
Bill Mitchell | Professor in Economics and Director of the Centre of Full Employment and Equity (CofFEE), at the Charles Darwin University, Northern Territory, Australia

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