Tuesday, January 31, 2012

European criticism of Angie's Greek policies

What happened the last few days with German Chancellor Angela Merkel's policies toward Greece is really remarkable. She proposed what can only be described as a dictator for Greece, responsible in theory to the EU but all but surely to be controlled by her. It would have given the new Gauleiter (the title for area chiefs for the Nazi Party back in the day) for Greece complete power over the Greek national budget with the restriction that repaying the sovereign debt would be the top priority over all others.

The good news is that the negative reaction from Greece and other EU members finally made Angie back off, though she was still pushing the idea on Monday. And the fiscal restrictions that the current EU summit may agree upon seem, according to the news reports, to be modified to the point that Germany won't have a routine veto over all the EU national budgets, which is what Angie actually wanted.

Yes, there are leading European politicians opposing neoliberalism: here, Austria's Laura Rudas
The Social Democratic Party (SPD) Sigmar Gabriel publicly opposed the proposal and said explicitly that such an official would be like a "dictator" who would be in a position "to abolish democracy in Greece". He went on to say, with sarcasm and surprise, that the only thing left would be to appoint a German to the position and put him in a "uniform". ("Sparkommissar" für Griechenland wäre "Diktator" Stern Online 30.01.2012)

This is encouraging to see that the major opposition party, the SPD, is still capable of opposing something like this.

But what the Hölle was going with the SPD guy Martin "Gustav Noske" Schulz who is President of the European Parliament instead endorsing Angie's Greek Gauleiter idea? That jerk must be like the Ben Nelson of German Social Democracy. They should kick him out of the SPD altogether. He would have been better off to imitate Sgt. Schulz of Hogan's Heroes and just say, "I know nothing, I see nothing!"

I was encouraged to see that Austrian Chancellor Wehner Faymann (Social Democratic, SPÖ) on his Facebook page clearly, if more diplomatically than his German colleague, criticize Angie's Greek Gauleiter scheme saying, "democratic values should not be hollowed out."

Faymann also talks about the larger eurozone problems in an English language article: Christoph Schult, Interview with Austrian Chancellor Faymann: 'Don't Overestimate the Fiscal Pact' Spiegel International 01/30/2012. Faymann supports a "debt brake" being added to the Austrian Constitution to limit the amount of debt the country can take on relative to GDP, a really bad idea in itself. But given Angie's current course, in the short run protecting Austria's national independence may require minimizing the debt burden more than sensible economic policy would otherwise allow.

Faymann favors a modified version of the idea of having the European Central Bank (ECB) act as a buyer of last resort for eurozone sovereign debt, something that would have been necessary for the eurozone to continue functioning if the EU had acted sensibly enough and early enough to save it. (The last pessimistic part is my view.) The short-term effect on Austria and most EU countries is likely to be bad when the euro ends (to put it mildly!), so Faymann is understandably still trying to take the position of saving it. I certainly hope he's making plans for a quick transition back to the Austrian schilling when the time comes, though. That idea for the ECB, though, is something that Angie completely rejects.

And I'm sure the Princess Angie von Merkel wouldn't be pleased to hear him be realistically modest about the likely benefits of the fiscal pact that is the supposedly big accomplishment she wants to see come out of the current summit: "one shouldn't overestimate the fiscal pact. Because of the narrow corset created by the Lisbon Treaty, one can't claim that we're reinventing the euro zone." And, of course, reinventing the eurozone - and fast - would be what it would require to save the euro.

And Faymann won back some credibility in my mind with this exchange:

SPIEGEL: With this Social Democratic agenda, you are rather in the minority among the EU's state and government leaders.

Faymann: Actually this agenda should be consistent with Christian Democratic or Christian Socialist values. I see the biggest difference with the neo-liberals.

SPIEGEL: In Davos Chancellor Merkel said that stricter rules are needed in Europe. It sounds more like a punishment than solidarity.

Faymann: Rules aren't positive or negative, it's about the content. I would welcome it if we regulated the financial markets more strictly, cut down on speculation and founded a European ratings agency. Yes, our high debts make us vulnerable, but speculators have intensified the crisis. Therefore, in the form of the transaction tax, they should also be involved in overcoming the crisis. [my emphasis]
He also makes what is an important point to keep in mind with this whole euro business. Everyone has had a few months now to think seriously about what would happen when a country leaves the euro. (I say when, not if, because I'm a pessimist on this.) But no one has a really good idea what it will look like, in no small part because the extent of credit default swap (CDS) exposure by major financial institution is unknown to everyone, even the fabled Gnomes of Zurich. Faymann says: "All of the experts with whom I speak say they can't reliably promise an orderly insolvency. Contagion is incalculable. It would be like a real-life experiment ..."

And not a fun one.

Faymann's interview and Facebook comments make me think he sees the proverbial writing on the wall and he is expecting the proverbial s*** to hit the proverbial fan soon.

My favorite Austrian Social Democratic leader, Laura Rudas, who is one of the main figures currently trying to expand the Party's appeal to younger voters, had an even more interesting piece on her Facebook page, "Schuldenabbau als Weg zur Unabhängigkeit" ("Debt Reduction as a way to independence"). Also in Aktuell 27.01.2012. She is the co-business manager for the SPÖ. She summarizes her points in slogan form at the start:

Finanzmärkte regulieren. Finanztransaktionssteuer einführen. Bildung, Forschung und Gesundheit voranbringen. Intelligent investieren. Wirtschaftswachstum ankurbeln. Alle diese Agenden brauchen vor allem eins: Autonomie in der politischen Prioritätensetzung. Das ist nur möglich, wenn wir uns aus den Fesseln der Finanzmärkte befreien!

[Regulate the financial markets. Introduction a financial transaction tax {aka, a Tobin tax}. Improve education, research and health. Crank up economic growth. All of these agendas require above all one thing: autonomy in the setting of political priorities. That is only possible, if we free ourselves from the chains of the financial markets!]

Dang! That sounds downright Jacksonian to me!

Her article goes on to argue in explicit terms that Austria's political priorities cannot be determined by the financial markets, which of course is Angie's goal and approach. She explicitly defends taxes as necessary for retirement funds (which are basically all run through the state in Austria), education, the health care system and other parts of what we call the social safety net in the US. And she calls for progressive tax increases to achieve agreed-upon debt limits.

She also criticize Austrian banks for implicating themselves in poor risk bets in eastern Europe.

Politics is politics, and as a Party figure she has to defend even suboptimal policies, like new debt limits during a depression. But I'm reading what she says in the current Austrian and eurozone context. And it sounds like a strategy primarily directed at protecting Austria against (1) bond speculators and (2) Angie's Anschluss economics:

In jedem Dilemma aber gibt es meist auch Profiteure. Und so hat auch die Abhängigkeit ganzer Staaten und das damit einhergehende Zurückdrängen der Politik ihre Profiteure. Oder ist es sogar Kalkül mancher, dass diese Abhängigkeit gegeben ist? Oder auch, dass man Finanzmärkte kaum regulieren kann, wenn man in ihrer Abhängigkeit steckt?

[In every dilemma, there are also usually profiteers. And so the dependence of whole countries and the suppression of political priorities that comes with it also has profiteers. Or is it even the calculation of some, that this dependence just is so {i.e., that it should be that way}? Or also, that one can scarcely regulate the financial markets if one is stuck in dependence to them?]
In the current context, this is clearly directed against both the bond speculators and Angie's ordoliberal policies.

It's very encouraging to see the SPÖ's sounding so aware of the issue and so ready to deal with it.

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