Tag: Austerity

Cross posted from The Stars Hollow Gazette

The current policy of austerity that is being forced on the European Union by Germany and England has been called “financially futile, economically erroneous, politically puzzling and socially irresponsible” by economists and monetary experts. Author and derivatives expert, Satyajit Das, writes in the first part of his series on “The Road to Nowhere, Part 1 – Fiscal Bondage” at naked capitalism that the December 2011 European summit to resolve the euro crisis was a failure:

The proposed plan is fundamentally flawed. It made no attempt to tackle the real issues – the level of debt, how to reduce it, how to meet funding requirements or how to restore growth. Most importantly there were no new funds committed to the exercise.[..]

The plan may result in a further slowdown in growth in Europe, worsening public finances and increasing pressure on credit ratings. This is precisely the experience of Greece, Ireland, Portugal and Britain as they have tried to reduce budget deficits through austerity programs. This would make the existing debt burden even harder to sustain. The rigidity of the rules also limits government policy flexibility, risking making economic downturns worse.[..]

The fiscal compact did not countenance any writedowns in existing debt. It also did not commit any new funding to support the beleaguered European periphery. Germany specifically ruled out the prospect of jointly and severally guaranteed Euro-Zone bonds. Instead, there were vague platitudes about working towards further fiscal integration.[..]

Instead of dealing with the financial problems of the central bailout mechanism (the EFSF – European Financial Stability Fund), European leaders chose the re-branding option.

Actions, or rather inactions, have consequences.

As I predicted in a message to Credit Writedowns Pro subscribers on Monday, statistics have shown that the German economy has finally succumbed to the deflationary economic policy of the euro zone.

   Germany showed first signs of feeling the pain from the euro zone’s debt crisis as the economy shrank in the last three month of 2011, despite outperforming its peers for main part of the year thanks to strong domestic demand and exports.

   Gross domestic product (GDP) grew 3.0 percent in 2011, preliminary Federal Statistics Office data showed on Wednesday, below the previous year’s growth rate of 3.7 percent – the fastest since reunification – and in line with a Reuters poll estimate.

   But GDP contracted by around 0.25 percent in the fourth quarter of 2011, an official from the Statistics Office added.

   “Germany cannot isolate itself so easily from tensions within the euro zone. In addition the export sector is facing a difficult period given the fall in global demand,” said Joerg Zeuner, chief economist at VP Bank.

Harrison wrote in November in the New York Times

that Europe is already in a double-dip recession. Already two months ago, the Markit Eurozone Manufacturing Purchasing Managers Index, which measures activity across Europe in services and manufacturing, had fallen to 50.4, the lowest since September 2009. The divider between expansion and contraction is 50, so Europe was still expanding. But last Wednesday, Markit data indicated that the situation has since deteriorated; the latest data showed a drop in private sector activity in the euro zone for the first time since July 2009. Moreover, the data are poor in the core of the euro zone as well as in the periphery, with Germany and France’s economies stalling as well. The sovereign debt crisis and the fiscal consolidation implemented to deal with it have taken their toll.[..]

Until the banks take substantially more credit write-downs and recapitalize, this crisis will continue and get worse.

The downward spiral is evident throughout Europe with even the strong German economy feeling the effects of erroneous policies

The German economy expanded faster than any other Group of 7 nation last year, official data showed Wednesday, but the stress of the euro crisis and a slowing global economy appear to be already weighing on output.

Germany expanded by 3 percent last year from 2010, the Federal Statistical Office said in Wiesbaden. It noted, however, that the growth came mostly in the first half of 2011, and estimated that the economy actually contracted by about 0.25 percent in the fourth quarter from the prior three months.

Some economists now predict another contraction for Germany in the first three months of 2012, which would meet the usual definition of a recession as two consecutive quarterly declines in output.

And austerity measures in Greece are making their budget deficits even worse:

Greece’s budget deficit widened last year as an austerity-fuelled recession cancelled out much of the extra revenues the government was hoping to raise through emergency taxes, data showed on Thursday. The central government budget gap widened 0.8 percent year-on-year to 21.64 billion euros ($27.45 billion) last year, according to figures from the finance ministry.

David Dayen at FDL News Desk thinks it is probably worse since “the EU uses a different measure to assess the Greek budget.”  He points out that even with increased taxes, the fall in tax compliance from an already lax system has reduced income. It all looks good on paper but that’s not the reality of what is actually in the treasury.

There is some hope that Europe’s leader are waking up to reality that there needs to be a growth strategy, although it may not be enough, or soon enough, to reverse the spiral.

It is a crisis in the € zone. The divergent trends in the € zone are too large. It is not an “optimum currency area”

It’s not just government, to “sovereign debt” but also excesses in the financial sector, real estate etc.

We must do everything to avoid recession. … We need a fiscal strategy that is “growth friendly”

Fiscal consolidation will not tell us to say “no” to all or which is cut everywhere. We must “prioritize”

We ask each member state to establish a “job plan”, we make commitments we can evaluate

The next meeting of the Eurozone member is the end of this month where a tax on financial transactions will be considered and, hopefully, they will discuss job creation and debt reduction.

  I’ll keep this short and to the point.

   First of all, the stock market had a horrible day BECAUSE of the budget deal.

MARKET SNAPSHOT: U.S. Stock Losses Intensify After Senate Vote

 I’m watching the numbers now, and stocks will be closing near their lows of the day. People are putting their money where their pocketbook is and saying that the budget deal will hurt the economy.

  How much will it hurt the economy?

JPMorgan Chase has an early answer to that question.

As we approach the 8th anniversary of a U.S. invasion of Iraq, and having just passed the 20th anniversary of another, it’s worth reflecting on what’s been accomplished through two wars and the intervening sanctions that former Secretary of State Madeleine Albright so famously approved of even at the cost of a half million children’s lives.

[snip]

Your tax dollars at work, my fellow Americans. You cannot destroy a nation and hire religious fanatics to attack other types of religious fanatics without creating hell on earth.

[snip]

As we busy ourselves denouncing the Republican budget for all of the traits it shares with Obama’s proposal, and as Obama fights off the teeny cuts to the Pentagon that the Republicans are seeking, bear in mind what that money is used for. If we really bear it in mind, if we really consider what the majority of every US tax dollar goes to fund, the day will come when Freedom Plaza in Washington DC resembles Tahrir Square in Cairo. May that day come before it is too late.

by David Swanson…

What I have copied over the fold is a declaration issued recently by a self organized group of French workers, a statement of solidarity and strategy in the face of the global neoliberal push (putsch?) for “austerity”.  They call for global resistance based on the following principles:  

– We can take control of our own struggles and organise collectively.

– We can discuss together openly and fraternally, we can speak freely with each other.

– We can control of our own discussions and our own decisions.

Can the workers of the world unite?

(Cross-posted at Wild Wild Left)  

A revolution is coming.  Europe is a powder keg and the fuse is burning.  The scenes of fire and fury in the heart of London, the riots in Athens, the mass protests in Ireland and Italy are only a preview of what’s coming next.  I’m not advocating revolution, revolution is a beast no one wants unleashed, but a revolution is coming.  It won’t be requesting permission from high and mighty pundits or media scribblers or presidents or prime ministers or anyone else to come pounding on their doors with a message, a message from the dead, a message from the dying, a message from the abused and betrayed and forgotten, a message written in pain on the parchment of time and stained with the blood of the innocent.  

It’s coming.

Revolution lurks no longer in the halls of the dead, it lingers no more in the rooms of ruin, its coming, it knows the way, it doesn’t need directions, it’s been here before, it marched with Cromwell, it crossed Concord Bridge, it bled at the Bastille, it stormed the Winter Palace of the Tsars, it remembers why, it remembers how, it knows who the guilty are, it knows who the enablers are, it knows where they live, it knows where we all live, and it’s coming.  

Bobby Kennedy . . .

Whenever we tear at the fabric of life which another man has painfully and clumsily woven for himself and his children.  Whenever we do this, the whole nation is degraded.  Too often, we honor swagger and bluster and the wielders of force, too often, we excuse those who are willing to build their own lives on the shattered dreams of others.

The degradation is far worse now than it was in the last year of Bobby Kennedy’s life.  Those who build their lives and careers on the shattered dreams of others control everything–the corporations, the banks, the media, the House, the Senate, the Supreme Court, and that presidency Obama has turned into a dream shattering ride into a firestorm.    

Welcome to Dresden.  

Welcome to the slaughterhouse of shattered dreams.

Where the only thing the votes of We the People determine is whether we burn or bleed to death.

Laura Flanders of GRITtv talks with political economist Professsor Richard Wolff about economic collapse, austerity programs, and the recent and growing anger and popular uprisings and street actions in Europe that we may soon be seeing spreading to North America:

“It’s a bizarre idea to fix a global capitalist crisis by breaking a long-term promise,” notes Richard Wolff, economist and author of Capitalism Hits the Fan of the “austerity” measures rocking Europe’s social democracies at the moment. Governments across Europe are implementing drastic cuts to social safety nets, raising retirement ages, all in the name of fiscal responsibility, and people have taken to the streets–in France, between 1.3 and 2.9 million people have come out in protest, a percentage that Wolff notes would be equivalent to between 6.5 and 14.4 million [in the U.S.].

So what’s going on in Europe, and what are the lessons we can learn from the European left? Wolff joins us along with Inez McCormack, Chair of the Participation and the Practice of Rights Project in Ireland, to talk us through the crisis, the lessons, and the ongoing struggle.

Austerity Fatigue and Action in Europe – GRITtv – October 29, 2010

  The most heated debate in Washington these days involves deficits and unemployment. There are lots of heated rhetoric, finger-pointing, and hyperbole.

  What there isn’t is a surplus of actual facts.

 For instance, this headline reads “U.S. should cut deficit to spur recovery, IMF says”. It implies that cutting the deficit would automatically increase economic growth.

  That sounds good to me. The problem is that the IMF never actually says that. In fact, the article spends most of its time warning about a drop in economic growth.

 The headline was misleading, as is just about everything said in this debate.