Thursday, 5 July 2012

Stiglitz on the Euro deal

Paul Sweeney: We need vision and leadership in Europe. The lack of this leadership among the Europe elite/authorities, of which its citizens are fully aware (and will punish them for it), finally appears to have forced this “leadership” to realise that there was a threat unless it acted decisively. It appears that some major decisions may have, at long last, been made at the 20th summit last Thursday which could get Europe moving again and may give hope to Ireland – if executed.

However, as the Irish government leaders have admitted a lot more needs to be done, around the opportunities provided in the deal for this country. Ireland did get a leg up, but as Joe Stiglitz says here, the deal will not stabilise the euro. Much more needs to be done, overall. I think we are in an era where the role of the state and states acting together makes markets. This is an era of real political economy at work. At present, markets, in crisis due to governments’ continuing indecision on the rules governing them, are causing chaos. This is understandable.

I don’t blame “Germany” but I blame those conservatives who are in power in Germany. They are wedded to 1930s economics.


Paul Hunt said...

Isn't it wonderful to have someone else to blame for the current problems. It totally avoids coming up with something, other than the usual hare-brained 'raid, tax and spend' proposals, that might promote a solidly based economic recovery in Ireland.

And I suppose it would be far too difficult for people to get their heads around the notion that markets are simply physical or virtual locations were exchanges take place subject to law, regulation and rules governing these exchanges. Yes, many commentators and parctitioners use 'markets' as a short hand for the behaviour and perceptions of market participants, but this Manichean distinction - states good, markets bad - is evidence of a sub-playground mentality.

It is capital market participants that matter in this crisis, not 'markets'. And some market participants, the vultures and disaster capitalists profit from chaos and from creating chaos. But the vast majority prefer oder, good governance and certainty. It is simply the case that the EU has not mustered the effectively infinite firepower to blow these chaos merchants out of the water.

And it won't be mustered until the debtor nations take responsibility for their fiscal incontinence and apply meaningful structural reforms to counteract the impact of the fical adjustments required.

However, what really disgusts and revolts me is this plausibly deniable linking of German conservatives and the 'policies' of the 1930s. The cruel irony is that German governing politicians are restricted from taking the actions required to secure a more timely and comprehensive resolution of this crisis by democratic shackles that are particulalry onerous and binding to ensure, almost absolutely, any repetition of what happened in Germany in the 1930s.

It is time for people to grow up, put this infantile jibes aside, and recognise Germany for the modern model democracy it is.

John B. said...

Well you are right that it is important for other European countries to acknowledge that Germany is one of the best modern democracies. But on the other hand, it does not mean to accept any proposals from them. European Union is in very hard situation since 2008 and Germany (with Merkel especially) was not able to motivate other countries to collaborate on the current project. So it is probably important to pass the hope on someone new, this time represented by new French president and the alliance of the southern states. And we enter again into the debate whether a huge bailout is necessary? I would say that no. As a Canadian, I fear that this bailout could negatively influence banks all over the world and the bonds would become very expensive. It would probably hike the interest rates on mortgages and lead to the inability to pay.

People would stop buying anything and this would decrease the productive economy, etc. And this will be the biggest problem since the Great Depression.