Wednesday, September 18, 2013

Mr. Schäuble and the Euro Doomsday Machine

Ambrose Evans-Pritchard apologizes – tongue in cheek -- in The Telegraph for having “been wrong about everything” concerning the Euro crisis and German policies, in an article titled “My groveling apology to Herr Schäuble”, a response to Mr. Schäuble’s own article “Ignore the doomsayers: Europe is being fixed”, published in the Financial Times (September 16).

According to the German finance minister “the eurozone is clearly on the mend both structurally and cyclically” under the guidance of courageous German policies and following the example of their own earlier old-fashioned root-and-branch reform (which was social democrat (SPD) Gehrard Schroeder’s accomplishment, by the way).

Some excerpts from Evans-Pritchard stinging rebuttal:

“I apologise for mentioning that the debt trajectories of Spain, Greece, Italy, and Ireland have accelerated upwards under the austerity plans, and therefore that the policy has been self-defeating.

I apologise for suggesting that German reforms under Schröder have been vastly overblown, and that German competitiveness gains have been chiefly the result of a beggar-thy-neighbour wage squeeze at the cost of EMU trade partners.

It was unconscionable of me to say that Germany has locked in a semi-permanent trade advantage over Club Med, or for saying that the trying to close this gap by imposing deflation on the South is impossible because this will play havoc with debt dynamics.

How could any of in the eurosceptic camp have stooped to the historical pornography of the 1930s, suggesting for one moment that EMU replicates the worst errors of the interwar Gold Standard, or that the German-led creditor bloc is doing to Spain exactly what the US-led creditor bloc did to Germany from 1928-1933? Just sheer smut.

I should not have questioned his wisdom in thinking it is possible to harmlessly enforce contractionary policies on the South of a single currency zone without offsetting expansion in the North.

It was carping for me to suggest that recent charts showing a dramatic narrowing of unit labour costs in Spain et al are largely bogus, the mirror of mass unemployment that causes an automatic rise in apparent productivity; and nor should I have quibbled about the low trade gearing of Spain, Italy, Portugal, and Greece, or suggested that exports are too small a share of GDP to lift these countries out of the morass quickly. This is just pointy-headed, clever-clever, anorak stuff, and frankly laughable.

The eurozone is recovering. It is immune to the sharp rise in the exchange rate of the euro over the last six months. It is immune to a 70 basis point rise in borrowing costs imported from Fed tapering. It is immune to the emerging market crisis. It doesn’t matter that the M3 money supply has rolled over again, slowing to stagnation levels, or that EMU credit contracted at an accelerating rate of 1.6pc in July. None of this matters.”

And to conclude:

“I apologise personally to Mr Schäuble for calling him a dangerous mediocrity: arrogant, shallow, narrow-minded, provincial, and unscientific in equal degree. This was shockingly rude. It brings shame to Fleet Street.”

At last the euro war lets some British fresh air (and some fun) enter in a non-debate enforced by officials from all member countries (“politicians of all countries, unite!” (with apologies to Karl Marx) ) who cannot convincingly answer the mounting euroscepticism in public opinion, both North and South, while the election deadline approaches in Germany.

Read more.

Monday, September 2, 2013

How Much Europe?

An interesting post on Reuters (Sunday September 1) by Luke Baker. Excerpt:

“In the dark days of Europe's debt crisis in 2012, when it seemed Greece might be forced out of the euro and the single currency could implode, leaders believed "more Europe" was the only answer.
Only deeper integration can bolster the region to withstand future crises, they said. A more united Europe will punch its weight in the world, not collapse on the ropes.
Among the more fervent voices in support was German Chancellor Angela Merkel, whose declaration that "we need more Europe; we need more cooperation" prompted policymakers to draft plans for a banking union, closer fiscal ties and, in time, a more complete political integration of the union's 28 countries.

How times have changed.
A year on, banking union - the idea of providing a single backstop for all the region's banks - stumbles ahead but only as a shadow of its original self. Fiscal union is barely mentioned, while the steps that would have come after are long forgotten.
Instead of "more Europe", the more common phrase in Brussels these days might be "EU-lite". Rather than the relentless logic of "ever closer union" - the guiding principle of Europe's federalists for 60 years - the attitude among some member states is better described as "only as much Europe as we really need".”

Read  more.