I will write a detailed account of my view on how to deal with the coronavirus from an Modern Monetary Theory (MMT) perspective next week. But today I want to highlight something that just ‘goes through to the keeper’ (cricket reference meaning no-one pays attention to it) but is significant in understanding what is wrong with the Eurozone. I refer to information that is contained in the latest – Annual Report 2019 – released last week by the Deutsche Bundesbank. If you juxtapose that with another report on the Greek health system you get a fairly clear view on what is wrong with the whole EU set up....Bill Mitchell – billy blog
Bundesbank remits record profits to German government while Greek health system fails
Bill Mitchell | Professor in Economics and Director of the Centre of Full Employment and Equity (CofFEE), at University of Newcastle, NSW, Australia
3 comments:
“In terms of the SMP portfolio, the Bundesbank is allocated a share of the overall Eurosystem purchases under that scheme – the allocation being based on “prevailing shares among the Eurosystem national central banks”.
Well that includes Greece too...iirc the shares are allocated based on population not GDP or some other financial variable...
He should compare the total interest paid by Greece to ECB vs how much the Bank of Greece gets back from the ECB as “profits” and if the amount is positive then it’s a fiscal transfer to Greece...
And the problem is not systemic... it’s a problem in Greece...
He is just assuming the flow is negative with no evidence...
Figure it out...
https://www.ecb.europa.eu/ecb/orga/capital/html/index.en.html
"The NCBs’ shares in this capital are calculated using a key which reflects the respective country’s share in the total population and gross domestic product of the EU. These two determinants have equal weighting. "
Germany has 21% and Greece 2% of ECB capital...
Germany GDP is 17x Greece... so Germany only has 10x the capital but 17x the GDP...
Germany GDP is 28% of EZ but only has 21% of ECB capital...
So ECB is probably conducting net fiscal transfers to Greece from Germany...
Greece should simply use those fiscal transfers for Healthcare in Greece...
figure it out...
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