FT, Wolfgang Münchau: Italy debt burden is a problem for us all

 Wolfgang Münchau, FT

We need extreme and co-ordinated policy to make it possible for Italy to ultimately stay in the eurozone

Perhaps the biggest question facing the economic stability of Europe is what happens if Italy continues to stagnate as it had done for the past 15 years. Will everything just continue as it is now, just a little bit more depressed?

I think it is high time to address the consequences of failure with more clarity than is usually done. Put bluntly, Italy’s economic position is unsustainable and will result in eventual debt default unless there is a sudden and durable change in economic growth. At that point, Italy’s future in the eurozone would also be in doubt – and indeed the future of the euro itself.

What we are seeing in Italy is the brutal dynamics of debt deflation – where the fall in the price level raises the real value of debt. Between 2007 and 2013, the ratio of Italian public sector debt to gross domestic product rose from 103.3 per cent to 132.6 per cent according to Eurostat figures. For this year, the Organisation for Economic Co-operation and Development expects it to rise to 137.5 per cent.

If Italy continues to stagnate in 2015 and 2016, the debt-to-GDP ratio will be heading towards 150 per cent of GDP. /.../

We are in a situation where we need a lot of extreme and co-ordinated policy action to make it possible for Italy to grow, service debt and ultimately stay in the eurozone. But policy so far has been neither extreme nor co-ordinated. Matteo Renzi, Italian prime minister, has promised radical reform, but not yet delivered. However, this is not enough. Italian debt sustainability requires policies at eurozone level that have so far been ruled out. This is where the eurozone’s success or failure will be decided.
Jeigu Europoje ir toliau trūks ekonominės paklausos, didžiausia valstybės skola užsienio valiuta pasaulyje nebus sumokėta.

Eurozonos likimas spręsis Italijoje.


Kaip gelbėjo eurą

Financial Times artėjančių rinkimų į Europarlamentą proga publikavo jaudinančią esė kaip Europos nomenklatūra "gelbėjo" zoną nuo suirimo.

Gelbėjo susitarę, kad krizės metu visokie statutiniai ir demokratiniai apribojimai neturi būti kliūtimi didžiam tikslui, todėl galima atlikti vieną kitą perversmą. Vokietija leido Europos centriniam bankui (ECB) vykdyti ekonomikos stabilizavimo veiksmus mainais už paramos gavėjų "struktūrinių reformų" kontrolę.

Sodrios detalės, neviešinti faktai, "žmogiškas veidas".
“Das ist nicht fair.” That is not fair, the German chancellor said angrily, tears welling in her eyes. “Ich bringe mich nicht selbst um.” I am not going to commit suicide.

For those who witnessed the breakdown in a small conference room in the French seaside resort of Cannes, it was shocking enough to watch Europe’s most powerful and emotionally controlled leader brought to tears.

But the scene was even more remarkable, those present said, for the two objects of her ire: the man sitting next to her, French President Nicolas Sarkozy, and the other across the table, US President Barack Obama.

It would be the low point in a brutal, recrimination-filled night, one many participants would recall as the nadir of the three-year eurozone crisis.
Nelengvas tai buvo procesas... Malonaus skaitymo.


Demokratijos lopšyje

Graikija pirmininkauja Europos sąjungai.
Graikų premjeras Altonis Samaras vaiposi klausydamas, kaip Nigel Farage kalba apie Graikijos problemas, o patį vadina marionete.

Farage: We Are Now Run By Big Business, Big Banks and Big Bureaucrats

HT +Andrius Misevičius


Antroji bankų sąjungos šuns koja

Senokai berašiau apie bankų sąjungą. Priminsiu kontekstą:
„Vienas didžiausių ES iššūkių – užtrukęs finansų sistemos susiskaidymas, neigiamai veikiantis ūkio raidą. Tik pašalinę jo priežastis, galėsime atkurti normalų finansų rinkos funkcionavimą ir taip paskatinti ekonomikos atsigavimą. Mūsų įsitikinimu, tai vienas iš svarbiausių Lietuvos pirmininkavimo tikslų, todėl šiandien ir rytoj vykstančiame susitikime išskirtinį dėmesį skirsime bankų sąjungos bei mažųjų ir vidutinių įmonių finansavimo klausimams“
... ponas Vasiliauskas gi nemeluos - negalėjo be bankų sąjungos būti normalaus finansų rinkos funkcionavimo. Labiau sofistikuotuose sluoksniuose buvo mėgstama pabrėžti, kad bankų sąjunga turėjo "to break the sovereign-bank feedback loop" - atskirti valstybių ir bankų krizes vieną nuo kitos.

Bankų sąjunga turėjo turėti tris kojas:
  1. ECB vykdomą centralizuotos bankų priežiūros mechanizmą,
  2. taisykles, ką veikti su "blogais" bankais,
  3. bendraeuropinį indėlių draudimo mechanizmą.
Ne paslaptis, kad vienas pagrindinių Lietuvos pirmininkavimo ES tikslų buvo rūpinimasis antrosios kojos sukūrimu.

Štai, sukūrė:

Trumpas angliškas aprašymas:
The decision making process will be thus: as supervisor the ECB recommends a bank be resolved, the board of national resolution authorities devises a plan and votes on it (any release of funds will require approval  two-thirds of voting countries contributing at least 50% of the common fund). This will then have to be approved by the Commission. If there is a dispute at any stage of this process the Council of EU finance ministers will decide on simple majority (if not then it will approve through a ‘silent procedure’).
... Visas pasaulis juokiasi.

Amerikoje FDIC banką penktadienį be įspėjimo uždaro, pirmadienį jis jau veikia kaip kito banko filialas. Balansus suvedinėja vėliau. FDIC turi neribotą FED kredito užnugarį.

Rusijoje "Nabiullina punches a red button and the bank drops through a hole in the floor" bankas sustabdomas "vienu CB vadovės mygtuko paspaudimu".

Lietuvoje sušaukiamas pasitarimas prokuratūroje, informacija nuteka, tai kitą dieną jau būna nutekėjęs banko likvidumas. Mes dar naujokai...

O Europoje bus vokiškoji biurokratinė romantika. Daugiapakopis demokratiškas pasitarimų ir derinimų kaip dalintis būsimus nuostolius darbas, apsimetant, kad tų nuostolių dydis žinomas iki perimant banką, informacija nenutekėjo ir nenutekės, o kai gražioji procedūra bus baigta, situacija banke bus tokia, kokia buvo viso to proceso pradžioje.

Visi supranta, kad absurdas, žino kaip reikia, bet daro kaip vokiečiai liepė - kad kol kas būtų gražu. Iki pirmo pritaikymo...

P.S. Dėl "mažųjų ir vidutinių įmonių finansavimo klausimų" kažkaip nieko perdaug nebesigirdėjo. Turbūt irgi išsprendė.


Suzerenitetai (ES kritika britiškojo išskirtinumo dvasia)

Dešinysis euroskepticizmas apeliuojant į kultūrinį pranašumą - teisės viršenybę anglakalbių visuomenėse. Skamba visai įtikinamai, nes logikos trūkumą tekste kompensuoja iškalba.

2013.11.29 The Telegraph, Daniel Hannan: The single most objectionable thing about the EU (in a crowded field)
Shall I tell you the worst thing about the EU? It’s not the waste or the corruption or the Michelin-starred lifestyles of its leaders. It’s not the contempt for voters or the readiness to swat referendum results aside. It’s not the way that multi-nationals and NGOs and all manner of corporate interests are privileged over consumers. It’s not the pettifogging rules that plague small employers. It’s not the Common Agricultural Policy or the Common Fisheries Policy. It’s not the anti-Britishness or the anti-Americanism. It’s not even the way in which the euro is inflicting preventable poverty on tens of millions of southern Europeans.

No, it’s something more objectionable than any of these things – and something which, bizarrely, doesn’t exercise us nearly as much as it should. Put simply, it’s this: the EU makes up the rules as it goes along.

Just think, for a moment, about what that means. It means that any deal you’ve signed can be arbitrarily altered later. It means that any plans you’ve made, on the basis of what you took to be binding agreements, can be retrospectively destroyed. It means, in short, that there is no effective rule of law.

Consider one current example: a breach of the law so flagrant, so brazen, that it ought to stir a free people to revolt – and yet which has received only the paltriest attention.

When the European Constitution Lisbon Treaty was negotiated, Britain secured an opt-out from elements of it, notably the EU’s Charter of Fundamental Rights. This opt-out was no token. It was repeatedly described by ministers as a “red line”: an issue on which, in other words, they must get their way if they were to sign up to the treaty at all. The opt-out was brandished as a major victory for the Labour government. Indeed, the PM cited it in Parliament as a reason not to concede the public vote he had earlier promised.

Here is Tony Blair at the Despatch Box on 25 June, 2007:
It is absolutely clear that we have an opt-out from both the charter and judicial and home affairs. Those were the reasons why people like the right hon. Gentleman were saying that they wanted a referendum.
Pretty unequivocal, no? The EU’s human rights code would not be justiciable in the UK. Euro-judges wouldn’t be able to impose it on us. It didn’t take long for Brussels to go back on the deal. In a series of rulings, the European Court of Justice drew explicitly on the Charter to force its decisions on Britain.
Pateikia iškalbingą seriją tikrų ES statizmo faktų, tą dalį praleidžiu - skaitykite originale. Baigia:
Anglosphere exceptionalism is summed up in the words John Adams used when designing the Massachusetts state constitution: “a government of laws not of men”. Actually, the phrase wasn’t Adams’s: he was quoting a seventeenth-century English radical called James Harrington – a reminder of the deep roots of our shared Anglosphere liberties. But the point holds: the Anglosphere miracle lies in the elevation of the law above the state rather than the other way around. How sad that, debilitated by 40 years of EU membership, we appear to have dropped that principle.
Tekstas išimtinai apie suzerenitetą. Privilegiją valstybių lygmenyje kitiems primetinėti taisykles, kurių patiems laikytis galima tol, kol naudinga.


Vokietijos atsakomybė

LEVY instituto post-keynesistai savaitgalį organizuoja konferenciją Atėnuose. Žiūrint į dalyvių sąrašą ir pranešimų temas, renginys bus turiningas. Temų ratas - nuo Vokietijos "nuopelnų" euro krizei aptarimo, iki pasidalinimo islandiškomis "kaip mes juos pasiuntėm ir nieko neatsitiko" patirtimis.

(Konferencijoje dalyvaus ir Már Guðmundsson, Islandijos centrinio banko vadovas. Skaitys pranešimą “Iceland’s Crisis and Recovery: Are There Lessons for the Eurozone and Its Member Countries?”)

Iš LEVY blogo kopijuoju Jörg Bibow interviu - pranešimo apie Vokietijos politikos klaidas anonsą.
You have been critical of German policy. How does it really affect the rest of Europe? In what ways does it cause harm to the peripheral economies?

Yes, indeed, German policy bears foremost responsibility for the euro crises and German policy is key to Europe’s future. Germany is Europe’s largest economy. For that reason alone whatever happens in Germany inevitably significantly impacts the eurozone economy. For instance, when Germany prescribed itself an extra dose of wage repression and fiscal austerity in the early 2000s, this had rather fateful consequences for the currency union. For one thing, stagnant domestic demand in Germany constrained its euro partners’ exports to Germany. For another, stagnation in Germany provoked some degree of monetary easing from the ECB, monetary easing which was both too little for Germany but too much for the euro periphery where wages and domestic demand were thereby propelled further. In other words, Germany undermined the ECB’s “one-size-fits-all” monetary policy stance. This happened alongside cumulative divergences in intra-area competitiveness positions, current account imbalances and the corresponding buildup in foreign asset and debt positions. Together this meant that the currency union was going to face trouble as soon as those imbalances would start to unravel. I started warning of these developments in 2005, but the euro authorities were sleeping at the wheel for many years to come.

This is the background to the still unresolved euro crisis, which is primarily a balance-of-payments and banking crisis that only became a sovereign debt crisis as a consequence. Adding insult to injury, the crisis has left Germany in the driver’s seat in eurozone policymaking. Germany punches above its weight in current policy debates. Unfortunately, in misdiagnosing the true nature of the crisis, Germany’s policy prescriptions have focused on nothing but fiscal austerity and structural reform. The consequences are proving a disaster for Europe. In particular, since Germany refuses to adjust its massive external imbalance and continues to have very low inflation, the ongoing rebalancing process inside the currency union is proving deflationary for everyone else. Essentially, as average eurozone wage and price inflation has fallen to extremely low levels, euro crisis countries are forced into debt deflation. Predictably, the wreckage is truly enormous. Policies and consequences are akin to what U.S. President Hoover and German Chancellor Brüning attempted in the 1930s. As we know, this sad experiment in macro policy folly gave the U.S. FDR, the New Deal, and Social Security, while outcomes in Germany were far less benign. It is as yet unclear which path Europe will take this time; the constructive or the destructive one.

What drives then Germany’s current policy? Doesn’t its leadership recognize the danger it poses for the future of the eurozone?

Confusion, a load full of ideological baggage, and short-sighted vested interests, I suppose. Apparently the German authorities do not understand the futility of their favored policies. My reading is that they have never quite understood that Germany could only succeed with its peculiar economic model in the past because and as long as its key trading partners behaved differently. Today Germany is forcing Europe to become like Germany. The trouble is of course that not everyone can be super-competitive and run perpetual current account surpluses at the same time. Somehow the German authorities are stuck in a deep ideological hole on this issue – and they keep on digging.

If Germany continues practicing its current policies, what would be the most likely outcome? Will we head towards the dissolution of the eurozone or with the permanent two- or even three-tier Europe and with the periphery in a quasi colonial situation?

Without a fundamental U-turn in Germany policy I expect the euro experiment, which has clearly failed at this point, to end in full-blown disaster: dissolution. Germany can only run perpetual current account surpluses vis-à-vis its euro partners with fiscal transfers as their counterpart. But such a “transfer union” is precisely what Germany dreads most. Somehow the German authorities, supposedly under pressure from Germany’s powerful export lobby, have trouble seeing the inevitable link between the two. Or perhaps they have convinced themselves that, as Germany’s euro partners become just like Germany, the eurozone as a whole can from now on run up a large external imbalance. If this is the new master plan, they are kidding themselves. The U.S. Treasury has just fired a broadside at Germany for this foolish endeavor, making it very clear that repeating at the global level the very strategy which has wrecked Europe was unacceptable [plačiau apie tai - čia]. Let me add that the Germany finance ministry’s response that Germany’s seven-percent-of-GDP current account surplus was neither a problem to Europe nor the world is truly scary, once again highlighting that the German authorities are bathing themselves in delusion and denial.
Išeitis iš politinio akligatvio, autoriaus nuomone, būtų bendro iždo, aprūpinamo finansiniais resursais per obligacijų emisijas, įgalioto vykdyti stambias investicijas visoje eurozonoje, sukūrimas.
I do believe however that my Euro Treasury plan features a minimalistic but functional fiscal union that would finally put the euro on a viable track.

By the way, Germany’s role in all this is not to embark on a national fiscal expansion. Germany’s own fiscal space is actually too limited for that and, while the markets may chose to ignore this fact at their peril, Germany is actually in an extremely vulnerable position itself. What we need from Germany is to emerge from its current state of delusion and denial, and to allow and facilitate the regime reforms needed to put the euro on a viable track. Without the Euro Treasury, the “strengthened” so-called Stability and Growth Pact and the “Fiscal Compact” are nothing but the euro’s deathtrap. By contrast, the Euro Treasury to-be turns the flawed project into a viable one. Needless to say, this would be in Germany’s own national interest, while, ultimately, its current policies are not. Germany has much to gain from a viable euro regime – just as breakup of the euro would prove extremely costly to Germany.
Techniškai įmanomas planas, politiškai dar ne.

Papildymas. Žiū, visai linksma "vokiečių atsakomybės" polemika. Brussels Blog:
2013.11.11 Rehn siding with Washington in its battle with Berlin?
Over the last few weeks, the normally über-dismal science of German economic policymaking has unexpectedly become stuff of international diplomatic brinkmanship, after the US Treasury department accused Berlin of hindering eurozone and global growth by suppressing domestic demand at a time its economy is growing on the backs of foreigners buying German products overseas.

The accusation not only produced the expected counterattack in Berlin, but has become the major debating point among the economic commentariat. Our own Martin Wolf, among others, has taken the side of Washington and our friend and rival Simon Nixon over at the Wall Street Journal today has backed the Germans.

Now comes the one voice that actually can do something about it: Olli Rehn, the European Commission’s economic tsar who just made his views known in a blog post on his website. Why should Rehn’s views take precedence? Thanks to new powers given to Brussels in the wake of the eurozone crisis, he can force countries to revise their economic policies – including an oversized current account surplus – through something soporifically known as the Macroeconomic Imbalance Procedure.
2013.11.13 Rehn, Germany and US Treasury Dept: Round Two (Ko tie amerikonai kabinėjasi?)

OpenEurope, 2013.11.13 Reviewing Germany's surplus
Signs on this front so far show the potential for conflict. German reactions have already been quite hostile with CSU General Secretary Alexander Dobrindt warning that, “You don't strengthen Europe by weakening Germany” and CDU General Secretary Hermann Gröhe adding, “Our export strength is the corner stone of our prosperity”. Bundesbank President Jens Weidmann added that expanding Germany fiscal policy is also not the answer, saying, “The positive knock-on effects would be limited”.


Versalio dvasia

Italų ekonomistai Emiliano Brancaccio ir Riccardo Realfonzo pirmadienį FT paskelbė atvirą laišką-įspėjimą apie "taupymo politikos" (austerity) keliamą grėsmę eurozonai - The economists' warning.

Parašai kaupiasi. Cituoju paskutines pastraipas:
John Maynard Keynes opposed the Treaty of Versailles in 1919 with these far-sighted words: “If we take the view that Germany must be kept impoverished and her children starved and crippled […] If we aim deliberately at the impoverishment of Central Europe, vengeance, I dare predict, will not limp.” Even though the positions are now reversed, with the peripheral countries in dire straits and Germany in a comparatively advantageous position, the current crisis presents more than one similarity with that terrible historical phase, which created the conditions for the rise of Nazism and World War II. All memory of those dreadful years appears to have been lost, however, as the German authorities and the other European governments are repeating the same mistakes as were made then. This short-sightedness is ultimately the primary reason for the waves of irrationalism currently sweeping over Europe, from the naive championing of flexible exchange rates as a cure for all ills to the more disturbing instances of ultra-nationalistic and xenophobic propaganda.

It is essential to realise that if the European authorities continue with policies of austerity and rely on structural reforms alone to restore balance, the fate of the euro will be sealed. The experience of the single currency will come to an end with repercussions on the continued existence of the European single market. In the absence of conditions for a reform of the financial system and a monetary and fiscal policy making it possible to develop a plan to revitalise public and private investment, counter the inequalities of income and between areas, and increase employment in the peripheral countries of the Union, the political decision makers will be left with nothing other than a crucial choice of alternative ways out of the euro.