I don’t have much time today as I am travelling from Lisbon back to London for a series of meetings. My next public speaking engagement is on Saturday in Germany (see below). But I read an interesting report yesterday, which confirms the belief that Germany is a long way from ever permitting any wholesale reform of the Eurozone, along the lines necessary to make it functional.
The research paper – Attitudes towards Euro Area Reforms: Evidence from a Randomized Survey Experiment – was published by the European Network for Economic and Fiscal Policy Research (econPOL) in June 2018. Even a weak sort of ‘federal’ move – to implement a European-wide unemployment benefit scheme – is rejected by a strong majority of German citizens. The same respondents firmly believe a Member State that finds itself in financial trouble should not be bailed out by the other Member States but should be allowed to go broke (exit the Eurozone).
These sort of results are consistent across time. They were present when the Eurozone was initially designed, which is why the foundations were rotten from the start. And they condition all the talk since of reform once it is generally agreed that the system is dysfunctional. Which is why we see deeply flawed changes such as the bank union and the like. It is the differences in cultures and economic structures that preclude genuine reform. And so it will always be.
The Europhile Left, who hang on to the eternal hope of eventual reform, should drop the Europhile bit and start acting like the Left....Always comes down to Germany.
Bill Mitchell – billy blog
German citizens firmly against any (even weak) federal reforms to the EMU
Bill Mitchell | Professor in Economics and Director of the Centre of Full Employment and Equity (CofFEE), at University of Newcastle, NSW, Australia
10 comments:
“A strong majority of German citizens firmly believe a Member State that finds itself in financial trouble should not be bailed out by the other Member States but should be allowed to go broke (exit the Eurozone).”
Agreed. This would be the best thing that could happen to Greece, for example. Every time that Greece gets another “bailout,” the party bailed out is not Greece, but the bankers who lend to Greece.
Here’s how it works…
The Greek government cannot create euros out of thin air, although banks can. Since Greece has a trade deficit, Greece has no euros coming in from abroad. Instead, Greece keeps hemorrhaging euros outward. Therefore the Greek government must borrow all its euros from banks. The banks in turn are paid back (bailed out) by the ECB in Frankfurt. Greece retains the debt, but now Greece owes the ECB, not regular banks.
Thus, each “bailout” is another debt bomb. Each “bailout” increases Greece’s already monstrous debt load, plus its obligatory austerity and privatization.
Meanwhile when stupid and arrogant German peasants hear that Greece is getting another “bailout,” they think that money is being taken from righteous German pockets to service the “lazy” Greeks.
In this way, stupid and arrogant German peasants are made to fiercely defend the euro scam that benefits Germany at the expense of Greece.
Greece must declare bankruptcy -- i.e. Greece must dump the euro, go back to using the drachma, and declare that all previous debts will now be paid in drachmas, which the Greek government can create out of thin air. In this way Greece will break out of the Eurozone’s death grip.
Stupid and arrogant German peasants who say that Greece should exit the Eurozone don’t know what they are saying. If Greece actually did leave the Eurozone, then stupid and arrogant German peasants would suddenly reverse themselves, shouting “The lazy Greeks can’t be allowed to secede! They owe us in euros!”
Because of the euro scam, Germany is Europe’s largest parasite.
The Eurozone is doomed in any case, because it is a monetary union, not a fiscal union. It is ruled by criminal bankers.
The US and UK are likewise ruled by criminal bankers, but not totally. The federal government still has fiscal power, and therefore has some say in how things are run.
“The banks in turn are paid back (bailed out) by the ECB in Frankfurt.“
It’s the German govt that has to keep adding capital to Deutsche Bank... not the ECB... it’s via German fiscal policy not ECB monetary policy.
You are totally confused.
The Deutsche bank (established in 1879) is a separate entity from the European Central Bank (established in 1998).
Deutsche Bank is a private bank that only has jurisdiction over its own assets. The European Central Bank has jurisdiction over the 19 states of the Eurozone. The ECB administers those 19 states' monetary policy, whereas Deutsche Bank only administers the monetary policy of its private loans.
Likewise German fiscal policy has nothing to do with ECB monetary policy.
Thank you for playing.
-- OFF TOPIC --
U.S. Ambassador to the United Nations Nikki Haley suddenly resigned today.
Here tearful farewell is quite inspiring. I was moved...
https://www.youtube.com/watch?v=kPIdRJlzERo
Konrad:Greece must declare bankruptcy -- i.e. Greece must dump the euro, go back to using the drachma, and declare that all previous debts will now be paid in drachmas, which the Greek government can create out of thin air. In this way Greece will break out of the Eurozone’s death grip.
Doesn't (or didn't) even have to do that. All it had to do was leave the Euro. Greece under Syriza could have left the Euro back in 2015, AND paid its Euro debt in full in Euros- it had been renegotiated at low rates and long terms already, and it was not running trade or current account deficits, and Greece has two world class fx earning trade in services industries - shipping and tourism. Just shows how stupid Tsipras was. He had won. His armies held the field. And then he surrendered.
I guess that's why he was reelected. A variant of the Big Lie. The Big Stupid. Nobody could imagine that anyone could behave as stupidly he had, so he convinced enough that he wasn't stupid at all.
“Therefore the Greek government must borrow all its euros from banks. ”
By your same logic you would have to say that US Treasury also borrows from US banks via Primary Dealer operations...
The U.S. government creates its spending money out of thin air, unlike the Greek government.
With each attempt to be witty, you further embarrass yourself.
Matt wrote "By your [Konrad] same logic you would have to say that US Treasury also borrows from US banks via Primary Dealer operations..."
Matt - The US or other sovereign currency issuers...no, of course not.
But the Euro is indeed that screwed up, the ECB rules all. It would be as if we let the Fed rule the US with no congressional fiscal spending at all.
Incidentally, has given a massive boost to the power of Banks in the EU (and by extension, the world to some extent).
https://corporateeurope.org/sites/default/files/attachments/open_door_for_forces_of_finance_report.pdf
http://bilbo.economicoutlook.net/blog/?p=37150
“creates its spending money out of thin air,”
More reification.... and it’s not technically descriptive...
Greece uses the same fiscal processes as the US... they have their own CB and Dealers and a Treasury same as US for fiscal operations...
Only Monetary policy and Monetary operations are different...
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