"The European debt bubble will become larger and the danger increases, that this bubble will burst with a much larger bang than the bang if Greece would have gone default properly" (Hans-Werner Sinn, CEO of the Ifo economy research institute in Munich). He is sure: Only the menace of going default and high interest rates can achieve enough discipline of the deficit spending countries. But Europe has forfeited this instrument with its decision for the financial rescue package. If he is right, the future of the Euro looks gloomy. Rüdiger Dornbusch, an economist who died in 2002, summarized it: "It can´t happen. It´s a bad idea. It won´t last."
(SZ 23.6.10, S.20)
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Posts mit dem Label financial crises werden angezeigt. Alle Posts anzeigen
Posts mit dem Label financial crises werden angezeigt. Alle Posts anzeigen
2010-06-14
The catastrophe of the so-called "Rescue Packages" and Alternatives
Here is a summary of my judgement about the fancy Berlin-Paris so-called "Rescue Policy" in favor of the PIGS-states payed by German pension receivers and taypayers:
What happened in May 2010?
(summary only)
1) Berlin decided about a (far too) large rescue package for bankrupt Greece.
2) Berlin decided for a huge rescue package for the other PIGS states
3) Both decisions will be an enormous burden for Germany far beyond the current generation and includes the danger, that those financial mega-obligations will generate tax increases and decreases of retirement pensions and social welfare payments. So once more the poor people which are totally not to blame for the Greek non-solidarian behavor pay for its compensation though the efficiency of those rescue packages is by no measn guaranteed
4) Berlin and Paris, the masterminder in the EU have more or less dissolved the ECB, at least they have abolished its independence (which - remember - was the main argument for us eurosceptics (and our scepticism turns out to be justified by now) to say yes to the euro. Berlin and Paris have nont only authorized the ECB to print bank notes as its liking (which was strictly forbidden when the ECB was established) but have directly instructed it to do so quickly and intensively. They also require that the ECB shall buy junk bonds extensively, i.e. that the ECB shall compensate losses for which the ECB is not responsible.
This deformation of the ECB, but already the rescue package for Greece Berlin and Paris violate the EU treaty which - with good reason (as economy directive) - excludes any mutual debt compensation in the EU. This EU-article was put into the EU treaty exactly for that reason, that such PIGS-behavior would get rewards via rescue money from other non-pigs-countries.
These are the facts.
Now the necessary alternatives / what has to be done:
(now after Bruxelles has made its decision, I refrain from a very detailled operationalisation of these alternatives)
1) anulation or at least large reduction of both (the Greek and the general European) rescue packages and much more severe threats via sanctions, if the PIGS countries do not implement necessary economic and financial disciplin.
2) Re-inauguration of the ECB in its status as it has been at its founding: as an absolutely independent safety body for the Euro currency without the right to print Euro bank notes and to buy junk bonds.
3) Sincere bankruptcy handling for the PIGS-countries identically as it is for bankrupt companies and indivduals. There have been drafted solid blue prints by economy experts how the PIGS can go bankruptzu handhaben wäre, wurden bereits genügend in der Wirtschaftsexpertenpresse vorgestellt. What is lacking is the political courage in Bruxelles.
4) Re-Introduction of Drachme, Escudo, ir.Pound und Peseta for the PIGS countries.
5) With all those measures above: a new start of the EU, this time as an EU with diffent speeds. Which is no new or shameful idea for Europe but has been recommended already 10 years ago by Euro-sceptics when the Euro has been started.
Thus every country in the EU can decide how much monetary and economic disciplin it want to achieve. Correspondingly all EU-countries will be classified and there is no mutual liability. This was the good order for decades and only the profit aims in the European economic establishment has lured us to the Euro with its problematic consequences of which we all are now the victims.
Every politician should be asked by now, wheter s/he is for the Paris/Berlin decision and why and why s/he does not plead for alternatives. So we can have an intensive controversial political debate in Germany. I would like that.
(text for the cartoon below: "The saving policy continues. We abolish the German president post and change the castle where he resides into a casino")
(summary only)
1) Berlin decided about a (far too) large rescue package for bankrupt Greece.
2) Berlin decided for a huge rescue package for the other PIGS states
3) Both decisions will be an enormous burden for Germany far beyond the current generation and includes the danger, that those financial mega-obligations will generate tax increases and decreases of retirement pensions and social welfare payments. So once more the poor people which are totally not to blame for the Greek non-solidarian behavor pay for its compensation though the efficiency of those rescue packages is by no measn guaranteed
4) Berlin and Paris, the masterminder in the EU have more or less dissolved the ECB, at least they have abolished its independence (which - remember - was the main argument for us eurosceptics (and our scepticism turns out to be justified by now) to say yes to the euro. Berlin and Paris have nont only authorized the ECB to print bank notes as its liking (which was strictly forbidden when the ECB was established) but have directly instructed it to do so quickly and intensively. They also require that the ECB shall buy junk bonds extensively, i.e. that the ECB shall compensate losses for which the ECB is not responsible.
This deformation of the ECB, but already the rescue package for Greece Berlin and Paris violate the EU treaty which - with good reason (as economy directive) - excludes any mutual debt compensation in the EU. This EU-article was put into the EU treaty exactly for that reason, that such PIGS-behavior would get rewards via rescue money from other non-pigs-countries.
These are the facts.
Now the necessary alternatives / what has to be done:
(now after Bruxelles has made its decision, I refrain from a very detailled operationalisation of these alternatives)
1) anulation or at least large reduction of both (the Greek and the general European) rescue packages and much more severe threats via sanctions, if the PIGS countries do not implement necessary economic and financial disciplin.
2) Re-inauguration of the ECB in its status as it has been at its founding: as an absolutely independent safety body for the Euro currency without the right to print Euro bank notes and to buy junk bonds.
3) Sincere bankruptcy handling for the PIGS-countries identically as it is for bankrupt companies and indivduals. There have been drafted solid blue prints by economy experts how the PIGS can go bankruptzu handhaben wäre, wurden bereits genügend in der Wirtschaftsexpertenpresse vorgestellt. What is lacking is the political courage in Bruxelles.
4) Re-Introduction of Drachme, Escudo, ir.Pound und Peseta for the PIGS countries.
5) With all those measures above: a new start of the EU, this time as an EU with diffent speeds. Which is no new or shameful idea for Europe but has been recommended already 10 years ago by Euro-sceptics when the Euro has been started.
Thus every country in the EU can decide how much monetary and economic disciplin it want to achieve. Correspondingly all EU-countries will be classified and there is no mutual liability. This was the good order for decades and only the profit aims in the European economic establishment has lured us to the Euro with its problematic consequences of which we all are now the victims.
Every politician should be asked by now, wheter s/he is for the Paris/Berlin decision and why and why s/he does not plead for alternatives. So we can have an intensive controversial political debate in Germany. I would like that.
(text for the cartoon below: "The saving policy continues. We abolish the German president post and change the castle where he resides into a casino")
Alternative link list about the Euopean economic crisis
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Greece: Such an over-armed country needs no solidarity
Bailing out Greece? = Start with Disarmament!
(Letter to the Editors)
(Letter to the Editors)
The Greece-backing article of Ms Nerger in the HamS of 23 May, p. 21 fails to present an important fact. By no means - as always if the top decision makers have failed - the bankruptcy of Greece is hard for the poor people and the masterminders of the current Greek crisis can easily detected in the mud of corruption, tax evasion and deficit spending in this country.
But what makes me much more angry and what is far too little known in the public: the horrible militarization of Greece. Having just a mere population number of the state of Baden-Würtemberg Greece has an army of uncredibly 150.000 (jobless) soldiers for decades now. And in addition via continuous arms imports (Greece ranks on number 5 of all arms importers worldwide) Greece has established a horrendeous military potential, spending every year about 7 billion euro for its miliary - far too much.
Greece pretends as if it is threatened every minute by an invasion from everyody. That is absolute crazy even for a person like me who is in favor for Greece.
With a substantial disarmament and demilitarization Greece would be able to rescue its state finances instead of being bailed out by foreign tax payers. Why does that not happen and why is the German government too coward to make pressure against the establishment in Athens? The issue is not "German neutrality" as Ms Dommach demands in the article above but a substantial rescue politic by the Greek government.
Ethics and Moral in the Current Monetary Crisis
Comment to a lecture of Prof. Hermann Sautter (University of Goettingen) "Moral and Economy - two worlds?" at 13 May 2010 = http://docs.google.com/View?id=ddtw99b5_388dkhjwzg7
Comment Summary:
What we experience in these weeks = the quick, irrational responses of politicians to regulate the economy with useless so-called "rescue packages" (and these always as burden for the poor, the retired persons, welfare benefit receivers and - in contrast to Greece - regular tax payers) shows well, what Niklas Luhmann has analyzed so convincingly: That politics is unable to regulate the economy.
Instead we see the well-known pattern: Profits (of houses, derivates, speculation trades etc) are privatized in the area of economy and losses (in the area of the economy) are socialized with horrendous state budget deficits, printing new bank bills thus generating inflation, with tax increases and cuts in the welfare state benefits and pensions and finally with currency devaluation. And the speculations are underway undisturbed:
In this situation it is ridiculous to believe in useless demands for "good will", moral or ethic or categories like: "be smart to each other" or "stay happy". Only one example: Managers are no longer hired to manage but only under the aspect how many workers they can lay off in maximum speed.
Ethic and moral does not fit for analyzing the current global economic reality. No single sentence of Kant or any other ethic philosopher could have avoided the Greek bankruptcy. The high number of Greek tax evaders, the huge corruption in the Greek society, the irresponsible Greek deficit spending, where under the safe umbrella of the euro houses and other speculators could generate guaranteed profits which they transfered quickly to safe offshore tax heavens; a Greek society with an unbelievable high level militarization - to argue against all that with "ethics" or "moral" is naive.
If Prof. Sautter really believes in ethic and moral, he should recommend his colleagues at the Athens university and the Greek state church what "ethic" would mean for Greece: a normal solid bankcuptcy, exit from the euro zone, re-introduction of the old Drachme. Then the Greek population can make their state and society solid again with Sautter´s ethical standards without speculating naively towards payments of German and French tax payers which have not generated the current Greek catastrophy. When the Berlin and Paris governments are now acting in quite the opposite direction = by senselessly injecting billions of so-called "rescue" euros into Greece - that will make the next European bankruptcy candidates in the PIGS group like Portugal, Ireland and Spain only smile.
The Greek economc decline was by no means a Tsunami or earthquake, but was generated on purpose for a long time and partially illegally. To reward those crimes with billions of newly printed euros, thereby bringing other still solid European countries also to the brink of insolvency, that exactly is, to use Sautter´s categories (which I think are nevertheless unfit to analyze the global economy) totally against any moral and ethic.
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