France, the European left and European austerity policies

Eva Roth writes in the Left Party paper Neues Deutschland (Europa: Hauptsache Sparen? 10.10.2017):

In der politischen Debatte war und ist selten davon die Rede, dass die Sparpolitik ein Problem für Millionen Europäer ist. Stattdessen werden Bürger gegeneinander in Stellung gebracht: Deutsche dürfen nicht für Griechen zahlen! Sozialleistungen werden zu Problemen umdefiniert: In Griechenland sind die Renten zu hoch! Frankreich droht an seinem Sozialstaat zu ersticken!

In Deutschland haben Politiker, denen soziale Fragen nicht wurscht sind, die Macron-Regierung zu Recht für die Arbeitsmarktreformen kritisiert. Dumm wäre es, wenn sie den Versuch der französischen Regierung, die europäische Sparpolitik zu beenden, deshalb nicht unterstützen würden.

[In the poilitical debate, there has been and is seldom said that austerity policy is a problem for millions of Europeans. Instead, citizens are set against each other: German shouldn't have to pay for the Greeks! Social services are redefined into a problem: In Greece, the pensions are too high! France is about to be smothered by its social state!

In Germany, politicians who are not indifferent to social questions rightly criticize the Macron government for its [austerian] labor market reforms. It would be dumb for that to become a reason not to support the French government's attempt to put an end to the Euorpean austerity policy.]

Sounds right to me. Or left, as the case may be.

French elections and austerity economics

French parliamentary elections took place on Sunday. François Hollande won the Presidency five years ago and his Socialists won a majority in Parliament by campaigning against Merkel's austerity policies. Then they got into office and spent five years trying to implement Merkel's austerity policies. The Socialists came in fifth place on Sunday. According to the estimates in Spiegel Online, they could wind up losing 88% of their parliamentary seats.

President Macron's conservative party that was formed a year ago, La République en marche (LREM) won first place. And it looks like Macron will have a solid majority of parliamentary seats, even without a coalition with the conservative Gaullist Republican Party, which came in a distant second place. (So mächtig wird En Marche Spiegel Online 12.06.2017)

BBC News reports (French election: How dominant will Macron party be? 06/122017):

With 32.32% of the vote, even if it was on a low turnout, LREM crushed its rivals on both the right and left.

Ahead in 400 constituencies out of the 577 that make up France's National Assembly, the party is heading for a convincing majority far higher than the 289 seats needed to control parliament. That does not even take into account the 100-odd seats where Mr Macron's centrist MoDem allies are in the lead.

His centrist alliance could control 415 to 455 seats after the second round on 18 June, experts predict. His first-round success is even more impressive than the first round of the presidential election, which he won with 24.1% of the vote.

Jean-Luc Mélenchon’s new, actually-left France Unbowed party came in fourth ahead of the socialists. This Guardianpiece by Angelique Chrisafis, Emmanuel Macron's party set for landslide in French parliamentary elections 06/11/2017, calls France Unbowed a "new hard-left movement." In Angela Merkel's EU, any party that advocates something like Richard Nixon's brand of Keynesian economics counts as "far left." The Socialists, though, came in fifth place and could wind up losing something like nine-tenths of their Parliament seats. (Stefan Simons, Der Durchmarche Spiegel Online 12.06.2017) This was a crushing defeat for the ruling party of the last five years.

The combined vote for France Unbowed (the English initials FU are kind of unfortunate) and the crushed austerian Socialist Party was bigger than that for the far-right National Front. That means that being identified with Trump and Putin has become a much bigger political liability in Europe in the last few months.

The BBC News report linked above explains some of Macron's proposals, which include the stock neoliberal budget cuts, pension reductions reduced work protections, cutting taxes for corporations.

Jakob Augstein (Jeremy Schulz oder Martin Macron? Spiegel Online 12.06.2017) says of Macron, "Er ist einfach ein Monsieur Merkel à la française. Und wie sozial dieser angebliche Sozialliberale seinen Landsleuten noch vorkommt, wenn er erst einmal mit ihnen fertig ist, das wird man sehen." ("He is simple a Monsieur Merkel à la française. And how social this alleged social-liberal will appear to his people if he gets the chance to do what he wants, we will see.")

Alex Main of the Center of Economic and Policy Research (CEPR) talks about Macron's challenges in France's New President Wins Parliament Vote, But Faces Problems Implementing Program The Real News 06/12/2017:

Jerry Brown on the Republicans' Herbert Hoover budget proposal

California Gov. Jerry Brown's press release today on the Trump/Republican austerity budget (except for the wealthy and arms manufacturers):

Governor Edmund G. Brown Jr. today issued the following statement on President Donald J. Trump's 2018 Proposed Budget:

"This budget proposal is based on utterly bogus economic assumptions. It gives a massive tax break to the wealthiest, while imposing painful and debilitating burdens on tens of millions of decent and hard-working people. It's unconscionable and un-American." [my emphasis]

Brazil: a nightmare neoliberal fiscal policy put into the Constitution

The Real News reports on a disastrous neoliberal policy enacted in Brazil as part of the result of the "soft coup" pulled off there by the rightwing in 2016, Brazilian President Temer Signs Constitutional Amendment Imposing 20 Years of Austerity 12/15/2016:

Getúlio Vargas is reported to be spinning in his grave.

Republicans endorsing Hillary

Bob McElvaine makes a plea for undecided and even Republican voters to support Hillary Clinton over Donald Trump on the basis of patriotic sentiment in Patriotism over partisanship Clarion-Ledger 10/01/2016. He lays great stress on the economic issues: "The truth is that what Trump proposes is a return to the policies — massive tax cuts for the richest and deregulation of the financial industry — that produced not only the 2008 collapse (which Trump cheered because he could make money off it) but also the Great Depression. The slogan for Trump’s trickle-down economics should be: 'Make America a Great Depression Again!'"

He cites endorsements of Hillary from traditional Republican newspapers like the Arizona Republic, the Dallas Morning News, and the Cincinnati Enquirer.

Bob doesn't mention this San Diego Tribune endorsement in the Clarion-Ledger column but he linked it on his Facebook page: Endorsement: Why Hillary Clinton is the safe choice for president 09/30/2016.

It's nice to see Hillary getting so many newspaper endorsements. But I can't say I'm thrilled by the reasons the San Diego Tribune gives for supporting her. Like: "As a U.S. senator, the Democrat showed she can collaborate with Republicans, using what Roll Call labeled an 'incremental approach' that 'could help restore a working relationship between the White House and Capitol Hill that has been in tatters' for years."

The only way that's going to happen is if Hillary wins the Presidency and mounts an unprecedented level of Democratic Party effort to beat the Republicans in House and Senate races in 2018. Until the elections take place and Republicans know they're electorally on the run at all levels, the Trumpified Republicans Party will keep up their obstructionism on domestic issues that we've seen the last eight years. Or should I say the Ross-Barnettified Republican Party?

Also: "Argentina is finally coming out of the chaos created by Cristina Kirchner and several of her predecessors. Trump could be our Chávez, our Kirchner." (!!!)

O.M.G.

I wish we could have a 12-year run of solid Keynesian economics like Néstor and Christina Fernández de Kirchner brought to Argentina in 2003-2015. After decades of neoliberal/Angela Merkel/Washington Consensus economics, during the first 10 years of the Kirchner era Argentina had one of the healthiest growth rates in the world, higher even than China's. And the healthiest in Argentina's entire history.

he usual Bipartisan Wall Street drone, I will seriously injure myself doing backflips of joy. As for Trump being "our Kirchner," it's hard to imagine anything less possible. Cristina's successor, the "safe" oligarch Mauricio Macri who took over in December, has returned to the disastrous Merkelist policies of the 1990s, and the Argentine economy has been in a nose-dive ever since. With no prospect of returning to Kirchnerist levels of health under these policies.

Now, Trump could certainly be our Macri. Only he would probably be worse. And he would be in command of a nuclear arsenal. This graphic of Macri is more likely what a President Trump would be.

"Identity" politics, economics, populism and the complicated relationships among them

Here are two very recent essays dealing with neoliberalism and its political manifestations: Joan Walsh, Can the Democrats Win Back White Working-Class Voters? The Nation 09/05/2016; and, Frances Coppola, Austerity and the rise of populism Coppola Comment 069/05/2016.

Joan's piece deals with a perennial dilemma of left politics, center-left and otherwise: the conflict between "identity" politics (feminism, anti-racism, gay rights) and politics focused on economic issues of particular benefits to the working class. She's also the author of the informative and perceptive book What's the Matter with White People? Finding Our Way in the Next America (2012). She's done a lot of work and put a lot of thought into these issues.

In this piece, she argues against the position that Thomas Frank has been arguing for years, which she characterizes this way: "Frank has repeatedly argued that Democrats alienated their former base through their support for neoliberalism, NAFTA, and Wall Street deregulation."

Leaving aside whether that adequately characterizes Franks' position, Joan starts off seeming to argue that "identity" politics, particularly white racism, was decisive in moving so many white working-class voters into the Republican column. But she winds up suggesting that the dilemma, or contradiction if you prefer, is misleading. She sympatherically quotes  Karen Nussbaum of the AFL-CIO's Working America project:

“We try to fill the void with information,” Nussbaum explains. She avoids chicken-and-egg arguments about which came first: white working-class economic suffering or a misplaced resentment of racial minorities. She also believes that choosing between the Obama coalition and the white working class is a false dichotomy. “I believe in a multiracial progressive movement that includes white working-class people,” Nussbaum says. “We can’t govern nationally without them. We make either/or choices at our peril. It would be wrong to concede the white working class to an ever bigger, consolidating hard right. We can’t just defeat Trump—we have to defeat Trumpism, or else Democrats are not going to be able to govern.” [my emphasis]

Joan also provides some reality-check information that reminds us that the appeal of the Republican Party and Donald Trump to white "working class" isn't such a clear-cut thing as superficial punditry often suggests.

One frustrating complication in these analyses is the lack of a common understanding of who the working class is. My own operating definition is something like, anybody who would be eligible to join a union (or who should be eligible). Largely because of the kinds of background information pollsters collect on their samples, people without four-year college degrees are often taken as the functional equivalent of working class, which Joan also does in this essay. I strongly suspect that its a seriously inadequate definition.

Her arguments don't lead to any decisive results. But her cautious optimism on the following is justified: " The resurgent populist, pro-opportunity, and anti-oligarchy left wing of the Democratic Party has pushed politicians, including Clinton, to embrace many policies—on trade, union rights, Social Security, and education — that many hope will win back this cohort [white working class voters]." That's true. And it's an encouraging development.

Frances Coppola is looking at this set of issues from a different perspective. I plan to return to her long piece in a later blog post. Her focus is on how the economic policy dogma of austerity as a solution to the Great Recession set the stage for a populist reaction, especially in Europe. That dogma is also known as Herbert Hoover/Heinrich Brüning economics. As she explains:

But the prescription turned out to be voodoo. Seven years on, prosperity has not returned: many countries in Europe are still mired in austerity, some are deeply depressed, government debt is higher than ever and unemployment is still painfully high. Failure of austerity measures to deliver the promised prosperity is toxic: popular anger and fear fuel the rise of populist politicians. Rudi Dornbusch, in a wonderful paper about debt crises and populism in Latin America, observed that the roots of populism lie in austerity, often imposed by an external agent such as the IMF. Chancellor Brüning's austerity measures in the German Great Depression, designed to end Germany's debt crisis and restore foreign confidence, led to the rise of Hitler.

And here is how she frames the broad relationship between the effects of neoliberal policies and voter receptiveness to populist political appeals:

Thatcher's generation of populist politicians discarded the big state, "Keynesian" model that had dominated since WWII. They replaced it initially with austerity (to break unions power and defeat inflation). But in any democracy, austerity is short-lived unless you can find a way of convincing your supporters either that they are not really suffering (so you protect people who will vote for you) or that the good times will return "any day now". Thatcher's generation - or perhaps more correctly, Reagan's generation, since this comes from economic thinking in the USA - promised that globalisation would bring prosperity for all. We could say that they replaced a "big state" model with a "big world" one. Free trade, free movement of people, free movement of capital: these were the pillars on which the new golden age would be built. ...

But the Western middle classes saw no benefit. For them, globalisation brought stagnation and decline, as their jobs were offshored and their wages fell to the global mean. Their prosperity turned out to be an illusion, built on an insubstantial debt bubble. The promise made to them in the Reagan years has been exposed as a lie. And they are angry. Globalisation has failed - now it is time to "take back control". [my emphasis]

Voters and political activists are motivated by variety of issues and operate with sometimes conflicting beliefs. There is no simple and easy link between bad economic conditions and attraction to rightwing populism. But there are links. As I've mentioned before, people who have a well-founded confidence in their economic prospects are at the very least less likely to be looking for scapegoats for overall frustration that they feel about society and the government.

Simon Wren-Lewis explains "The Austerity Con"

Simon Wren-Lewis last year explained the marketing of The Austerity Con London Review of Books 37:4 02/19/2015. In it, he poses the question of how Herbert Hoover austerity policies gained such a hold on policy in Europe, and Britain in particular:

The place to begin is 2009. By then the full extent of the financial crisis had become apparent. Although the crisis originated in the US, it had spread around the world, leaving no country unscathed. The major UK banks had to be bailed out, not so much as a result of excessive lending to UK borrowers, but because of their unwise overseas investments. The main weapon used to fight recessions is interest rate cuts – lower interest rates encourage consumers to spend rather than save, and business to invest – and by 2009 interest rates had been reduced to nearly zero in all the advanced countries. Yet output continued to decline.

The response of governments and central banks was twofold. First, the Bank of England and the US Federal Reserve embarked on a programme of ‘quantitative easing’, which involves the temporary creation of money, thereby making it possible for central banks to buy long-term financial assets. Second, governments started to spend more or cut taxes, which economists call a fiscal stimulus. The last Labour government’s measures included a cut in VAT in late 2008, albeit for just a year. Barack Obama managed to enact a package of measures which included higher government spending as well as lower taxes, and even Germany undertook a fiscal stimulus package in 2009. The normally austere IMF agreed that fiscal stimulus was the way to go in 2009. [my emphasis]

The last part is very significant. Although Obama's foolish pursuit of bipartisanship and Republican obstructionism prevented the stimulus in 2009 being large enough to push the US economy back into healthy recovery as quickly as it could have, as Paul Krugman has explained repeatedly, it was large enough to make the US recovery notably more robust than that of the eurozone. But it's also important to note that Angela Merkel's government was more willing to apply at least limited stimulus in Germany, though they have insisted on brutal austerity in the southern eurozone, especially in Greece.

Wren-Lewis then goes into an accessible discussion of the basic macroeconomics of the need for counter-cyclical fiscal policy in a recession or depression. And he includes this description of how opponents of stimulus can use fear of deficit spending to prevent such a fiscal policy:

A sharp increase in government borrowing sounds bad. Opponents of fiscal stimulus like to invoke comparisons between individuals and governments. Most individuals are rightly cautious about borrowing, although many do so – for example, to buy a house. A firm may borrow to help fund an investment project. Government borrowing in a recession is neither buying an asset nor funding investment, so isn’t it common sense that it should be brought to an end as soon as possible? The view of nearly all economists is that the analogy between individual and government borrowing breaks down at this point. The name they give the process by which deficits rise in a recession – the ‘automatic stabiliser’ – itself explains why they think this way. If a recession is caused by consumers saving more and spending less, which in 2009 it was, then the fact that consumers are paying less in taxes and the unemployed are getting welfare benefits is a good thing, because it supports consumer incomes. If governments turn off the automatic stabilisers by cutting spending or raising taxes, they will reduce the income of consumers, who will spend even less, making the recession worse. Just as a fiscal stimulus helps in a recession, a fiscal contraction designed to reduce the deficit will make the recession worse.

He reminds us of how the term Confidence Fairy entered the economics vocabulary:

What about the problem that austerity would make the recession worse? Supporters of austerity put forward two counter-arguments. First, the prospect of a rising government deficit would worry consumers and firms so much that they would spend less as a result; if the government reduced the deficit, the confidence of the private sector would be restored, and it would start spending more. In other words fiscal austerity – cutting government spending or raising taxes – would help stimulate the economy. This flips conventional macroeconomic logic on its head; Paul Krugman dismissed it as believing in the ‘confidence fairy’.

He also talks about how the supposed effectiveness of monetary policy failed in the depression conditions of interest rates being at what economists call the "zero lower bound."

This is one area one which New Keynesians like Krugman differ from more orthodox Keynesians and "post-Keynesians" including the Modern Monentary Theory adherents. The New Keynesians have considerable faith in the effectiveness of monetary policy in normal times and in smaller recessions, leaning even toward a preference for monetary over fiscal policy. The others are far more skeptical of the effectiveness of monetary policy. The late John Kenneth Galbraith used to say something to the effect that he would have loved to do away with the belief that monetary policy was any use at all.

Wren-Lewis also explains some of why the debt situation of individual countries within the eurozone was different than that of countries like Britain who borrow in their own currency.

He also uses a very servicable term, "miediamacro":

‘Mediamacro’ is the term I use to describe macroeconomics as it is portrayed in the majority of the media. Mediamacro has a number of general features. It puts much more emphasis than conventional macroeconomics does on the financial markets, and on the views of participants in those markets. It prefers simple stories to more complex analysis. As part of this, it is fond of analogies between governments and individuals, even when those analogies are generally seen to be false by macroeconomists. So after the 2010 election (and to some extent before it) mediamacro had bought with barely a murmur the view that reducing the government deficit was the top priority. It even bought a second story, which was that the previous Labour government had played a large part in creating the deficit problem in the first place. Like all good myths this was based on a half-truth: before the recession Gordon Brown had been a little less prudent than he should have been: he had been too optimistic about tax receipts, and followed a fiscal rule that allowed his progress in reducing debt in the early years of the Labour government to be reversed in later years. But as the chart shows, the impact of this on the deficit was dwarfed by the influence of the recession, and the recession was the result of a global financial crisis. Despite this, mediamacro allowed the myth of Labour profligacy to go unchallenged.

And even with a more left-leaning Labour Party under the current leadership, deficit fetischism is still very evident in British politics:

In many senses this echoes Labour’s original line that the coalition’s austerity policy was too far, too fast. Yet such is the influence of mediamacro’s alternative view that the Labour Party has abandoned that stance, and now wants to portray itself as being just as tough on the deficit as the coalition. This has led to a ludicrous situation as the election approaches. Respected economists and think tanks agree that there is a large gap between Labour and Tory plans on future austerity. Even under the most conservative interpretation, Labour’s plans involve fewer spending cuts, amounting to 1.5 per cent of GDP per year less than the Tories are proposing. That’s equivalent to half the UK defence budget, every year. Yet the Labour Party itself seems reluctant to acknowledge this fact, because it doesn’t want to appear weak on the deficit.

But: "Mediamacro still sees reducing debt as the number one priority." [groan!]

Argentine economic policy: sometimes a few words say it all

From EU lawmakers praise Macri administration Buenos Aires Herald 03/31/2016, on Argentine President Mauricio Macri's economic policies:

“The new administration is capable of returning Argentina to the world market. It’s on the right path and will allow the country to grow,” Elmar Brok, Chairman of the European Parliament Committee on Foreign Affairs, said during a press conference.”The economic reforms will lead to economic growth and attract more investments.”

Brok — a close ally to German Chancellor Angela Merkel ... [my emphasis]

I've posted about Herr Brok before:

New week for the euro crisis, and the Angiebots are grumpy 01/15/2012

Angiebot Elmar Brok on democratic failures in Hungary and Romania and on the value of the EU from a German conservative perspective 07/23/2012

Did I mention that our President even-the-liberal Barack Obama also endorses Macri's economic policies? Because Obama's Latin American is conservative, no matter how upset the Republicans may be with his Cuba diplomacy.

Need for fiscal stimulus in the eurozone

Ari Andricopoulos gives a macroeconomic commentary on Angela Merkel's austerity policies in A plan to turn the Euro from zero to hero Coppola Comment 03/31/2016:

As I've explained elsewhere, reasonably large government deficits are very important for sustainable economic growth. However, in the Eurozone this is prohibited both by the Stability and Growth Pact (SGP) and by the fear of losing market confidence in the national debt. At the same time credit growth for productive investment is constrained by weak banks and Basel regulation. And the Eurozone as a whole is already running a large current account surplus; the rest of the world will not allow much more export-led growth. Helicopter money would be a solution, but politically this is a long way away. Summing up, if economic growth cannot be funded by government deficits, private sector debt, export growth or helicopter money it is very difficult to see where nominal GDP growth can come from.

In a way, this can be seen as a Prisoner’s Dilemma. Every country knows (or should know) that if all states provided fiscal stimulus, the Eurozone would benefit from more economic growth. However, for any individual state, a unilateral fiscal boost would increase their own government debt whilst giving a fair amount of the GDP growth to other states (because some of the stimulus would go to increasing imports from the other nations). And if all others provide stimulus, then it is in an individual state’s interest to take the benefit of the other states’ stimulus, and become more competitive versus the rest. [my emphasis]

And he addresses the current debt problem of southern European countries who have sovereign debt denominated in euros, not in separate national currencies:

The debt owed to the creditor nations therefore gets larger in real terms. In the end, the debts owed by the South to the North are unpayable without the Northern countries running a current account deficit and using the savings built up during the amassing of the surplus to buy goods from the South. But the Northern surpluses are only getting bigger.

On top of this, all countries in the Eurozone are committing the "original sin" of borrowing in a foreign currency. This can only be a time bomb, waiting to devastate Europe.

By all appearances, though, the eurozone will continue their current march toward a collapse of the eurozone.

Do central banks need to be "independent"?

Simon Wren-Lewis has a wonkish post, The strong case against independent central banks Mainly Macro 03/05/2016 raising points I'm glad to see being discussed. He gives some background on the development of thinking about central banks and economic management. Here he describes the post-Bretton Woods state of affairs, which Yanis Varoufakis would call the birth of the Global Minotaur. But "delegation" here, he means "giving central banks the power to decide when to change interest rates (independent central banks, or ICBs)":

A story some people tell is that this all fell apart in the 1970s with stagflation. In the sense I have defined it, that is wrong. The Keynesian framework had to be modified to deal with those events for sure, but it was modified successfully. Attempts by New Classical economists to supplant Keynesian thinking in policy circles failed, as I note here.

The more important change was the end of Bretton Woods and the move to floating exchange rates. That was critical in allowing the focus of demand management to shift away from fiscal policy to monetary policy. The moment that happened, it allowed the case for delegation to be made. Academics talked about time inconsistency and inflation bias, but the more persuasive arguments were also simpler. Anyone who had worked in finance ministries knew that politicians were often tempted and sometime succumbed to using monetary policy for political rather than economic ends, and the crude evidence that delegation reduced inflation seemed strong.

And he notes that the conservative-leaning consensus before the 2008 crisis revealed its huge problems to a wider public:

However the consensus assignment had an Achilles Heel. It was not the global financial crisis (which was a failure of financial regulation) but the Zero Lower Bound (ZLB) for nominal interest rates. Although many macroeconomists were concerned about this, their concern was muted because fiscal action always remained as a backup. To most of them, the idea that governments would not use that backup was inconceivable: after all, Keynesian economics was familiar to anyone who had done Econ 101.

That turned out to be naive. What governments and the media remembered was that they had delegated the job of looking after the economy to the central bank, and that instead the focus of governments should be on the deficit. Macroeconomists should have seen the warning signs in 2000 with the creation of the Euro. There monetary policy was taken away from individual union governments, but still the Stability and Growth Pact was all about reducing deficits with no hint at any countercyclical role. When economists told politicians in 2009 that they needed to undertake fiscal stimulus to counteract the recession, to many it just felt wrong. To others growing deficits presented an opportunity to win elections and cut public spending.

Macroeconomists were also naive about central banks. They might have assumed that once interest rates hit the ZLB, these institutions would immediately and very publicly turn to governments and say we have done all we can and now it is your turn. But for various reasons they did not. Central banks had helped create the consensus assignment, and had become too attached to it to admit it had an Achilles Heel. In addition some economists had become so entranced by the power of Achilles that they tried to deny his vulnerability.

And that vulnerability is essentially the conservative obsessions that are part of Hoover Hoover/Heinrich Brüning economics that wound up having a pro-cyclical bias in a depression economy.

Another sad step toward failure for the EU (Updated)

British Prime Minister David Cameron won concessions from the other EU members that loosens Britain's ties and commitment to the Union, concessions that make him willing to campaign for Britain staying in the Union in the referendum coming up in possibly in June. (Daniel Brössler und Alexander Mühlauer, Cameron setzt sich bei Brexit-Verhandlungen durch Süddeutsche Zeitung 20.02.2016)

I don't want to be so pessimistic as to say it's another nail in the coffin of the EU. The EU may well continue to exist for many years. But its one-time promise is dying. Or rather it was killed by failure of leadership by people like Cameron, Angela Merkel and François Hollande on major issues like the euro crisis and the years-long refugee crisis.

This week I've been reading a paper by Jürgen Habermas that he delivered in November 2007, "Europapolitik in der Sackgasse" ("Europe at an Impasse"), published in Philosophie und Politik/Philosophy Meets Politics 9:2008. He was pleading for continuing the process of increasing European integration, emphasizing how the EU could become a major force offsetting US cowboy foreign policy, and how it could serve as a model worldwide for regional cooperation.

It reads now like nostalgia, a fond remembrance of a hopeful path not taken, and now the chance is gone.

Today we have the grandees of the EU congratulating themselves that they have encouraged nationalism within the EU by caving to Britain's demands for special treatment and less integration with its partner nations.

The refugee crisis grinds on, with no decent solution in sight.

And there's this, from Wolfgang Münchau, Four signs another eurozone financial crisis is looming Financial Times 02/15/2016:

The rout in European financial markets last week was a wat­ershed event. What we witnessed was not necessarily the beginnings of a bear market in equities or an uncertain harbinger of a future recession. What we saw — at least here in Europe — is the return of the financial crisis.

Version 2.0 of the eurozone crisis may look less frightening than the original in some respects but it is worse in others. The bond yields are not quite as high as they were then. The eurozone now has a rescue umbrella in place. The banks have lower levels of leverage.

But the banking system has not been cleaned up, there are plenty of zombie lenders around and in contrast to 2010 we are in a deflationary environment. The European Central Bank has missed its inflation target for four years and is very likely to miss it for years to come.

He also observes:

Looking back, the cardinal error committed by the European authorities was the failure in 2008 to clean up their banking system after the collapse of Lehman Brothers. This was the original sin. Many other mistakes subsequently compounded the problem: pro-cyclical fiscal austerity, the ECB’s multiple policy failures and the failure to create a proper banking union. It is interesting that every single one of these decisions was ultimately the result of pressure brought by German policymakers.

You're doing a heckuva job, Angela Merkel, a heckuva job!

Italy and the euro crisis

Wolfgang Münchau writes about his expectation for the future of the European Union in Athens and Rome expose Europe’s greatest faultlines Financial Times 01/31/2016:

Greece may be the starkest example, but it is not the only country facing overlapping crises. It is not even the most important one facing this dilemma. That would be Italy. While Rome’s problems are different from those of Greece, the country’s long-term sustainability in the eurozone is just as uncertain, unless you believe that its economic performance will miraculously improve when there is no reason why it should.

Italy was overwhelmed by the increase of refugees from north Africa last year. On top of that it faces unresolved economic problems — no productivity growth for 15 years; a large stock of public sector debt that leaves the government with virtually no fiscal room for manoeuvre; and a banking system with €200bn in non-performing loans, plus another €150bn of debt classified as troubled. Then consider that its three main opposition parties have, at one time or another, all questioned the country’s membership of the eurozone. Even if none of them look like coming to power in the near future, it is clear that Italy only has a limited amount of time to fix its multiple problems.

Münchau notes that Italy's leadership is being open in its criticism of the EU under Angela Merkel's rule: "There are signs that Italy’s patience with the EU and Germany, in particular, is wearing thin . Matteo Renzi, prime minister, has been openly attacking the policies of the EU on energy, on Russia, on the fiscal deficits, as well as German dominance of the entire apparatus."

But I have to admit I'm puzzled by his concluding paragraph: "There is an element of bad luck in this. Europe’s policy of muddling through, of doing the minimum required, and hoping to mop up the rubble later, might even have worked if the refugees had stayed at home. The EU’s mistake was not to have chosen a path that would lead to invariable ruin, but to render itself defenceless against the next unforeseen shock."

I can't even figure out what he's trying to say with the last sentence. Does he mean it would have been okay "to have chosen a path that would lead to invariable ruin" if they had just left themselves a bit more flexibility for the next bump in the road that would require more muddling through? That "invariable ruin" wouldn't be quite so bad if it were delayed a bit?

The increasing pressure of the refugee problem no doubt made the EU's situation more complicated in 2015. But that acute phase was also a result of previous muddling through on the refugee crisis which had actually been going on for years. It's not unusual for politicians to overblow real crises or gin up phony ones for other purposes. But the refugee problem has been a visible crisis for years, while Merkel and the rest of the EU just didn't come up with good solutions. And still haven't.

I'm sorry to see that Münchau will no longer be providing a weekly column for Spiegel Online, as he notes in his final installment, Langsames Dahinsiechen 29.01.2016.

There he explains that he expects the EU will not collapse in a rapid and dramatic fashion. But rather that it will decay away, with "periphery" countries dropping off and a core of the wealthiest countries remaining:

Selbst beim besten Willen wäre eine Lösung unserer permanenten Krise schwierig, denn sie zu koordinieren, setzt eine Gemeinsamkeit von Interessen voraus. Wahrscheinlicher ist, dass die verschiedenen Krisen ihren Lauf nehmen und dass wir ihre negativen sozialen und wirtschaftlichen Konsequenzen mit dem Wischmop wirtschaftspolitischer Notmaßnahmen aufsaugen.

Im Verlauf dieser Entwicklungen drohen neben dem Ende von Schengen und der Verkleinerung des Euroraums ebenfalls eine Spreizung der Einkommen, eine Verarmung der Mittelklasse und eine damit einhergehende politische Radikalisierung. Damit ist nicht unbedingt die Demokratie an sich gefährdet, aber sicherlich die über die nationalen Grenzen hinausgehenden Vereinbarungen und Institutionen. Es ist kein gutes Umfeld für europäische Integration und die internationale Kooperation und Koordination. Die EU wird dabei nicht spektakulär zusammenbrechen, sondern an ihren Rändern zerfleddern und im Inneren.

[Even with the best will, a solution to our permanent crises would be difficult, because to coordinate them assumes a commonality of interests. It's more likely that the various crises will run their course and that we will absorb their negative social and economic consequences with the Whisk broom of political-economic emergency measures.

In the course of these developments, along with the end of Schengen and the shrinking of the euro area, {we are} threatened as well with a collapse of income, an impoverishment of the middle class and with a consequent political radicalization. That doesn't unquestionably threaten democracy as such, but it certainly does the agreements and institutions that cross national borders. It is not a good environment for European integration and international cooperation and coordination. The EU will thereby not collapse spectacularly, but rather tatter along the edges and hollow out in the center.]

I'm not at all confident that a crackup of the eurozone will be so minimally dramatic. But we will probably soon see.

Stiglitz on the massive need for Keynesian stimulus policies

"The obstacles the global economy faces are not rooted in economics, but in politics and ideology." - Joseph Stiglitz, 2016

He makes this case in the form of a sensibly Keynesian diagnosis of the state of the world economy in The Great Malaise Continues Project Syndicate 01/03/2015.

The politics in much of the West have been in hock to the gospel of neoliberalism (aka, free-market fundamentalism, Herbert Hoover economics, Angela Merkel economics) for so long now that bonehead textbook Keynesian economics sounds dangerously radical. But however one chooses to position it on the current political spectrum, Keynesian economic analysis address the kinds of problems many economies currently have and offer useful solutions. Not least among them is the need to flush what Stiglitz calls "deficit fetishism." That's why Keynesians like Paul Krugman, who tend to call themselves New Keynesians these days, and Post-Keynesians like Jamie Galbraith and Yanis Varoufakis find a lot to agree on in terms of immediate policy needs right now.

Krugman gives us a hint of what some of the difference would emerge in his post, Presidents and the Economy 12/30/2015:

After I put up my post comparing private-sector jobs under Obama and Bush, a number of people asked me whether I believe that presidents have a large effect on economic performance. My answer is no — but conservatives believe that they do, which is why this kind of comparison is useful.

To expand on my own views, in normal times the economy’s macroeconomic performance mainly depends on monetary policy, which isn’t under White House control. Now, we’ve been in a liquidity trap for the whole Obama administration so far, giving fiscal policy a much more central role — and the initial stimulus did help quite a lot. Since 2010, however, fiscal policy has been paralyzed by GOP obstruction, so we’re back to a situation where the WH has little influence. [my emphasis in bold]

The last book of John Kenneth Galbraith's (1908-2006) published during his lifetime was The Economics of Innocent Fraud (2004). He devotes one of the chapters in this short book to what he calls "our most prestigious form of fraud, our most elegant escape from reality." That, he explains, is that, "Quiet measures enforced by the Federal Reserve are thought to be the best approved, best accepted of economic actions. They are also manifestly ineffective. They do not accomplish what they are presumed to accomplish. ... Here is our most cherished and, on examination, most evident form of fraud."

This is a major difference between New Keynesian and Post-Keynesian economics. The former have faith in the effectiveness of monetary policy, the latter have little or none. I assume that some in the post-Keynesian camp don't go quite as far as Galbraith senior did in dissing monetary policy. However, when it comes to addressing a recession or depression - specifically in economist-speak when the interest rate is at the lower bound, i.e., near zero - New Keynesians and Post-Keynesians alike recognize that monetary policy isn't much use in restoring growth. And not just monetarists, who have declined tremendously in their number of adherents since the 1970s, but the other various forms of conservative/neoliberal economic theories are still devoted to the notion of the Fed's magical monetary powers. As are many investment advisers and people who try to follow the stock market closely on their own with no specialized training.

But getting back to Stiglitz, he's right on the mark here:

Former US Federal Reserve Board Chairman Ben Bernanke once said that the world is suffering from a “savings glut.” That might have been the case had the best use of the world’s savings been investing in shoddy homes in the Nevada desert. But in the real world, there is a shortage of funds; even projects with high social returns often can’t get financing.

The only cure for the world’s malaise is an increase in aggregate demand. Far-reaching redistribution of income would help, as would deep reform of our financial system – not just to prevent it from imposing harm on the rest of us, but also to get banks and other financial institutions to do what they are supposed to do: match long-term savings to long-term investment needs.

... It makes sense for countries like the US and Germany that can borrow at negative real long-term interest rates to borrow to make the investments that are needed. Likewise, in most other countries, rates of return on public investment far exceed the cost of funds. For those countries whose borrowing is constrained, there is a way out, based on the long-established principle of the balanced-budget multiplier: An increase in government spending matched by increased taxes stimulates the economy. Unfortunately, many countries, including France, are engaged in balanced-budget contractions. [emphasis in original]

Long-festering problems in the EU

The unsolved major problems of the EU and the eurozone continue to snowball in a way that makes the survival of the former and even more so of the latter more problematic all the time. Cooperation within the EU has broken down over the refugee problem and the influx of refugees is providing a newly growing target for far-right parties. Germany has joined its very junior EU/eurozone partner France in participating directly in the Syrian civil war, the prolongation of which will worsen the refugee problem. France may use its war costs to demand loosening of its requirements under the stone-conservative Fiscal (Suicide) Pact of 2012, which could lead to further conflict with Merkel and the stone-conservative Herbert Hoover/Heinrich Brüning economic policies to which she is committed. Not to mention the incredibly complex and risky politics of the Syrian civil war itself.

The devastating extent of the post-2008 depression in the eurozone "peripheral" countries like Greece, Ireland, Italy, Portugal and Spain is largely due to the effects of the Hoover/Brüning policies Merkel imposed on them. Especially Greece. Merkel's insistence on the Hoover/Brüning policies led to various "regime change" operations in pursuit of them, including actual regime changes in Greece in 2011, Italy in 2011, even in Greece of 2015. The Merkel-bot President of Portugal in 2015 tried to block a majority left coalition from taking power after they won a majority in the elections. We'll see what happens in Spain as the new left majority there seeks to form an anti-austerity government. Such high-handed efforts to dominate and impose on other "partners" a highly destructive and massively discredited economic policy has naturally given reason for them to suspect the value of German domination of the EU and the eurozone.

Now Merkel needs other countries in the EU to support her refugee policy, which is a genuinely European problem. In particular, the Germans want Greece to do a better job in retaining refugees from outside the Schengen Area there so they won't come to Germany. But they are getting the best cooperation from their partners! Who could have foreseen such a thing?

All these problems are the culmination so far of Merkel's nationalist approach to EU affairs, by which she insisted on retaining maximum influence and advantage for Germany at the expense of the "partners." And which led to her characteristic approach to EU and eurozone problems, "extend and pretend." Postpone reaching a substantive and permanent solution to the problem, whether it is bank regulation, refugees or the unending euro crisis. Just to mention a few.

The euro crisis is still likely to be the one that provokes formal splits. Wolfgang Münchau continues in his weekly columns to point out the various reasons for his. (Daran wird der Euro zerbrechen Spiegel Online 25.12.2015

But it can't be seen in isolation to the other problems. The crass xenophobia against Greece and other "periphery" countries encouraged and in a real way propagated by the German government, including Merkel's junior coalition partner the SPD, was picked up not just by the Stammtisch (good ole boy opinion) but by both the boulevard and the "quality" press. The Austrian government was as extreme in promoting nationalist hostility as Merkel's has been. But a very similar process took place in Austria.

That nationalist sentiment carried over to the refugee crisis, which in turn reinforced it. It has led to new border controls, which partially removes one of the most concrete benefits most people have seen from the EU. Münchau puts it even more strongly: "The influx of refugees into Germany and the terrorist attacks in France have put a de facto end to Schengen. National border controls have been reinstated in many places." (Fighting Brexit with fear will backfire Financial Times 12/20/2015) Even new walls along national borders, like in the good old days of the Berlin Wall, though so far with less lethal enforcement. And the increased nationalism presents a problem for security cooperation among EU members against terrorism, while terrorist attacks increase xenophobia against immigrants, which in turn strengthen nationalism and xenophobic fear.

You're doing a heckuva job as EU leader, Angie, a heckuva job!!

Jürgen Habermas has been a sympathetic critic of the EU for a long time. In the conventional political vocabulary, "Eurocritic" has referred to supporters of the Union who argued for urgent reforms to integrate the members countries more; "Euroskeptic" has referred to usually nationalist/rightwing opponents of EU membership. After Germany's handling of the Greek negotiations in 2015, it is clear that as long as Merkel remains in powers and/or her austerity doctrine in force, any country seeking to put an end to austerity for themselves will need to be prepared to leave the eurozone if they don't get agreement. Because without a thoroughly credible threat to exit, they have to expect to be crushed like Greece was.

A 2006 article by Habermas, "Die Bewährung Europas" Blätter für deutsche und internationale Politik 12/2006, serves to illustrate the long-standing and chronic nature of the EU's current problems. The euro crisis hadn't yet broken out, and it is not on Habermas' 2006 list. A number of economists had warned that the construction of the eurozone was flawed from the start in a way that made it particularly unsuited to deal with a depression crisis like the one that struck in 2008. But Habermas pointed to real problems that today are intertwining with the euro crisis. In a perceptive observation, he described there nine years ago how neoliberal economic assumptions were already promoting a nationalism among EU nations that has now become toxic to the point of threatening the entire "European project," as it is called:

Die Rückwendung zum Nationalstaat hat in vielen Ländern eine introvertierte Stimmung gefördert: Das Europa-Thema ist entwertet, man beschäftigt sich lieber mit der nationalen Agenda. Bei uns umarmen sich in den Talkshows Großväter und Enkel in der Rührung über den neuen Wohlfühlpatriotismus. Die Gewissheit heiler nationaler Wurzeln soll eine wohlfahrtsstaatlich verweichlichte Bevölkerung für den globalen Wettkampf „zukunftsfähig“ machen. Diese Rhetorik passt zum gegenwärtigen Zustand einer sozialdarwinistisch enthemmten Weltpolitik.

[The return to the national state has promoted an introverted mood in many countries: The theme of Europe is devalued. One prefers to concerns themselves with the national agenda. With us [Germans], grandfathers and grandsons hug each other with emotion over the new feel-good patriotism. The certainly of healthy {heiler} national roots is expected to make an welfare-state-produced effeminate population "ready for the future" of the global competition. This rhetoric belongs to the present situation of an unleashed Social Darwinist world politics.]

Habermas nine years ago pointed to the following visible, major problems in the construction of the European Union:

1. The "democratic deficit," the phrase Habermas uses here. More and more decisions were being take at the EU level that were obligatory on the members without the same kind of meaningful electoral input the citizens have at the national level being in effect at the EU level.
2. The failure to achieve a cohesive foreign policy. Only a united Europe could successfully lead the pressure on the United States for "die Fortentwicklung des klassischen Völkerrechts zu einer politisch verfassten Weltgesellschaft" ("further development of the classical international law to a politically secured world community.")
3. The ongoing "Unterminierung menschenwürdiger sozialer Standards" ("undermining of humane social standards.")
4. The culturally fundamentalist divisions within Europe and within EU members states. This is a reminder that integration of national, ethnic and religious minorities as well as the handling of new immigrants certainly didn't first become evident in 2015: "Es geht darum, die Angehörigen fremder Kulturen und fremder Religionsgemeinschaften gleichzeitig in ihrem Anderssein zu respektieren und in die staatsbürgerliche Solidarität einzubeziehen." ("It has to do with respecting the members of unfamiliar cultures and unfamiliar religious communities in their difference and bring them into the solidarity of citizens.") And he makes the important point that the success of social integration of minorities within member countries also contributes to the success of international integration within the EU.
5. Habermas doesn't make the following a separate point, though in my mind it needs to rank with the others as (5): "Wir sollten George W. Bush nicht auch noch in der Militarisierung des westlichen Geistes folgen." ("We [Europeans] should also not follow George W. Bush in the militarizing of the Western spirit.")

Habermas' comment on the intersection of the second and third problems is revealing:

"Erst eine Europäische Union, die außenpolitisch handlungsfähig würde, könnte auf den Kurs der Weltwirtschaftspolitik Einfluss nehmen. Sie könnte die globale Umweltpolitik vorantreiben und erste Schritte auf dem Wege zu einer Weltinnenpolitik machen. Damit könnte sie anderen Kontinenten für den Zusammenschluss von Nationalstaaten zu supranationalen Mächten ein Beispiel geben. Denn ohne Global Players dieser neuen Art kann ein Gleichgewicht zwischen Subjekten eines gerechteren Weltwirtschaftsregimes nicht entstehen."

Here the failure of the one-time center left parties, the Social Democrats, is a central component of this interweaving of problems. With reference to Germany, Albert Scharenberg wrote in 2007 ("Dem Morgenrot entgegen?" Blätter 5/2007):

Die regierende Sozialdemokratie brachte durch ihre den Sozialstaat deformierenden „Reformen“, insbesondere durch Hartz IV, ihre ureigenste Klientel gegen sich auf – Gewerkschafter und Arbeitslose.

[The ruling Social Democracy through their "reforms" that deformed the welfare state, especially with Hartz IV {that allowed for lower-paid and less secure jobs than before in Germany}, turned their most basic supporters against them - unions and the unemployed.]

This is not just true of the German SPD, but also of the social democrats in France and other countries, including Spain. The latter party, the PSOE, has the chance to form a government in Spain after this month's elections. But their ability to do so and their ability to successful press an anti-austerity program in office has been significantly compromised by their previous embrace of Merkelnomics. (Antoio Avendaño, Un muerto viviente llamado Pedro Sánchez Andaluces.es 27.12.2015)

EU:intersecting crises

Wolfgang Münchau continues to chronicle the tangle of crises in which the EU and the eurozone find themselves (Europe needs a sense of strategic direction to survive Financial Times 11/29/2015):

... there are too many crises occurring simultaneously for which the EU is unprepared: refugees, terrorism, Russia’s invasion of Ukraine, eurozone sovereign debt, Britain’s future in the EU, Greece’s future in the eurozone, the Portuguese constitutional crisis, Catalonian independence, Italian banks, Volkswagen. We will soon need a crisis database to keep track.

And he discusses how the refugee crisis has exposed the limits of Merkel's extend-and-pretend crisis management style in a much broader way than the euro crisis had previously:

Ms Merkel committed a significant error in the way she opened the doors to refugees. She did not consult other political leaders nor even her own party. She underestimated the impact and failed to make logistical preparations. Are we really surprised that some EU countries refuse to accept even the modest quotas proposed? ...

The EU is überfordert — overwhelmed — by global and regional military conflicts, the co-ordination of macroeconomic policy and humanitarian emergencies. ...

At present the EU response to all these crises is to fudge forward. As we saw in the euro crisis, this can work for a time. But, while you can play tricks of smoke and mirrors with debt, it is hard to make this work with refugees. If the external border is not sufficiently well controlled, countries will ultimately have no choice but to impose their own domestic controls. And so they should. [my emphasis in bold]

Business press hails new Macri govenment

The newly-elected President of Argentina, Mauricio Macri, is already enjoying the celebration of the financial press. And likely will continue to do so.

This is one example: Charlie Devereux, Ex-JPMorgan Banker Confirmed as Argentina's Finance Minister Bloomberg Business 11/25/2015. Devereux reports:

A former JPMorgan Chase & Co executive and central bank president, Alfonso Prat-Gay, will be Argentina’s new finance minister, responsible for rolling back a decade of state intervention in the economy. ...

“They’re building a great team with solid technical grasp, it’s way superior to what we’ve had previously,” said Fernando Jasnis, a money manager at Explorador Capital Management. “It’s a good signal, this team is going to promote trust. They’re people with a great track record and reputation in the market.”

Peña also confirmed that Federico Sturzenegger, a lawmaker from Macri’s Pro party who was president of Banco Ciudad, the bank owned by the Buenos Aires city government, would become president of the central bank. Macri economic adviser Rogelio Frigerio will become interior minister, while Francisco Cabrera, the head of a think-tank linked to the party of the incoming president, will become production minister.

When you start seeing talk in the business press about policies to promote "trust" and "confidence" among corporate investors, ordinary people need to start worrying.

The article concludes with a paragraph fretting over whether ordinary people might to start doing just that: "'On the economic side, Macri’s team is top notch," Daniel Kerner, head of Latin America research at Eurasia Group, wrote in a note today. 'The main challenge for Macri will be to minimize the political cost of the economic adjustment. His institutional and political weaknesses will become more problematic if he loses support rapidly because of the adjustment.'" (my emphasis)

Devereux also notes, "One of [Prat-Gay's] first tasks would be to find a resolution to a decade-long legal battle with disgruntled creditors from the 2001 default that’s blocking Argentina from international capital markets."

They plan to cave in to the vulture funds, in other words.

Alfredo Zaiat reports on a complicated story of possible problems in Prat-Gay's financial disclosures: El ministerio de la city Página/12 29.11.2015.

Argentina's ride with a One Percenter government committed to austerity economics will begin with Macri's inauguration on December 10.

"De-Kirchnerization" in Argentina

Edgardo Mocca writes about the soon-to-be government on Mauricio Macri in El operativo deskirchnerizador Página/12 29.11.2015. He argues that there was a continuing tensions since 2003 in the innovative kirchnerista approach of energetic popular mobilization and aggressive advocacy of social-democratic programs, on the one hand, and the traditional structures and relationships within the Partido Justicialista (PJ) and the Peronist movement, on the other.

He sees Macri's strategy as aiming to exploit the differences within the Peronist movement and to roll back the popular gains of the last 13 1/2 years as a project of de-Kirchnerization aimed at going to back to the neoliberal program enacted during the 1990s, which ended in a cinematic failure in 2001. He describes the strategy of Macri and his followers this way:

Los anuncios iniciales y las caras y apellidos de los ministros designados insinúan que la intención es derribar los pilares fundamentales del rumbo de estos años: el desendeudamiento, las políticas contracíclicas, la regulación de los mercados de cambios y de capitales, la mejora del salario real y la extensión casi universal de las jubilaciones. Así también se insinúa un giro en política exterior orientado, como era de prever, por un regreso a la prioridad de la armonía con Estados Unidos; la cuestión no es menor porque si logran revertir la actual política y comprometer al país en acuerdos globales de “libre comercio” se habrán construido en la Argentina las bases de un largo período de dominación signado por la agudización de la desigualdad y la exclusión, y por la entrega total del patrimonio nacional a los capos del orden capitalista financiarizado global.

[The initial announcements and the faces and surnames of the designated ministers suggested that the intention is to demolish the fundamental pillars of the course of these {last 13} years: the reduction of debt, the contra-cyclical {economic} policies, the regulation of the exchange and capital markets, the improvement of real salaries and the near universal extension of pensions. Similarly, they suggest a turn in foreign policy orientation, as was to be foreseen, with a return to the priority of harmoney with the United States; the issue is no less significant if they manage to revert the current policy and commit the country to global "free trade" agreements that would construct in Argentina the basis of a domination characterized by the worsening of inequality and exclusion, and by the total delivery of the national patrimony to the capos of the financialized global capitalist order.]

Macri's "Cambiemos" electoral alliance have a majority of 130 in the 257-seat Chamber of Deputies (lower House) of the Argentine National Congress. But they likely won't caucus as a single bloc, instead initially sitting as three cooperating blocks: Macri's PRO, the Unión Cívica Radical (UCR) and the Coalición Cívica. (Cambiemos no será un bloque en el Congreso Página/12 29.11.2015)

With a majority, though, Macri can be expected to be enable much of his program.

Here is a post-election discussion of the significance of Macri's Cabinet selections from TV Pública argentina.

678 -Repercusiones del Gabinete de Macri - 27-11-15 (1 de 2):

678 -Repercusiones del Gabinete de Macri - 27-11-15 (2 de 2):

This is a report from July, 678 - El verdadero plan económico de Macri - 28-07-15 TV Pública argentina 07/28/2015:

This one is from August, 678 - La campaña de la oposición contra el modelo de inclusión - 02-08-15 08/03/2015:

Snowballing crises for Merkel and the EU

The euro crisis began in 2009 and has become a chronic condition, with periodic acute phases.

The refugee crisis has also been going on for years, entering an acute phase in 2015.

The Paris terrorist attack of November 13 was understood in the EU as a new crisis, interpreted especially by the French government as a reason to escalate military operations against ISIS in the complicated situation in Syria. And this week the Syrian situation got even more complicated with Turkey shooting down a Russian fighter under circumstances that are disputed, as one would expect in such a case. (Robert Perry flags a notable discrepancy in Turkey's account in Turkey Provokes Russia with Shoot-down Consortium News 11/24/2015.)

Now the crises are converging in a way that highlights the serious flaws in the EU, the construction of the eurozone and especially in the leadership of Angela Merkel and her fondness for extend-and-pretend short-term fixes instead of substantive solutions.

Dan McLaughlin reports (Refugees in Balkan limbo as crisis deepens EU divisions Aljazeera America 11/27/2015):

The Nov. 13 attacks in Paris transformed a huge political, economic and humanitarian challenge into an acute security crisis and widened already major divisions between European Union states over how to handle an influx of refugees that the onset of winter has failed to halt.

The suspicion that one of the Paris attackers was a Syrian who came to Europe among refugees deepened distrust of the new arrivals and turned more EU states against German-led efforts to welcome people fleeing the world’s war zones.

In the week after the carnage in the French capital, which left 130 dead, several countries on the so-called Balkan route into Europe closed their borders to all refugees other than Syrians, Afghans and Iraqis, who have the best chance of receiving asylum in the EU.

McLaughlin also notes, "Not for the first time in this crisis, however, states took drastic action without warning or coordination with each other; they left thousands of people stranded on remote frontiers with inadequate facilities, no idea of what to do next and a rising sense of panic as the first snow of winter fell."

In that context, this story is as interesting as it is odd, Flüchtlingspolitik: SPD tadelt Juso-Chefin für Merkel-Lob Spiegel Online 27.11.2015. Johanna Uekermann, the head of the Young Socialists (Jusos) group of the SPD, made a public comment defending Angela Merkel on the refugee crisis, "In dieser Frage muss man echt sagen, dass sie zum allerersten Mal in ihrer zehnjährigen Kanzlerschaft so etwas wie Rückgrat zeigt" ("In this matter, one must really say that finally in her 10-year Chancellorship, she has shown something like a backbone.")

It's not unusual that an SPD leader would endorse Merkel's position on the refugees. That's part of the larger political Kabuki Merkel and her CDU/CSU have been playing on the refugee crisis: some party leaders bitch and moan about the scary foreigners, Merkel plays the Compassionate Pastor's Daughter, and the SPD presents itself as supporting their Chancellor on the refugee problem against the cold-hearted Christian Democrats. No one who has been following the course of the SPD over the last several years should be surprised that they are more eager to appear as Angie-bots than Angie's own party. Cartoonist Klaus Stuttman saw this development in full swing when the SPD fell all over themselves after the 2013 election to become junior partners yet again to Merkel's CDU/CSU in a Grand Coalition, aka, GroKo:

But to make it weirder, several prominent figures in the SPD blasted Uekermann instead! Hubertus Heil, the deputy leader of the SPD Bundestag parliamentary caucus (Fraktion) was pretty harsh: "Juso-Bundesvorsitzende geht CDU-Vorsitzender auf den Leim und fällt eigener Partei in den Rücken. Unlogisch, unsolidarisch, unklug." ("The national Juso chairperson is out of line with the CDU Chairperson {Merkel} and hurting her own party. Unlogical, unsolidarish, not clever.") The head of the SPD Fraktion joined in the criticism along the same lines.

But, wait, you may say, wasn't Uekermann praising the Compassionate Pastor's Daughter?

Spiegel Online quotes the SPD General Secretary, Yasmin Fahimi, from the Rheinische Zeitung, Viel Ärger für Juso-Chefin Johanna Uekermann 27.11.2015. It's a bit confusing. Spiegel is apparently quoting verbatim and indirect quote from the RZ, without clearly identifying it as such. Anyway, the indirect quote in question is:

Sie lobten damit die Frau, die die Transitzonen von CSU-Chef Horst Seehofer unterstützt habe, die den Familiennachzug für Syrer nicht wolle und die schwangeren, minderjährigen und behinderten Flüchtlingen keine angemessene medizinische Versorgung geben wolle.

[Thereby she {Uekermann} is praising the woman {Merkel} who supported the transit zone of CSU head Horst Seehofer, who doen't want family unification for Syrians and don't want to provide pregnant, underage and disabled refugees proper medical treatment.]

Here it sounds like the leadership is criticizing Uekermann for not being critical enough of the Compassionate Pastor's Daughter!

Johanna Uekermann, Chairperson of the Young Socialists (SPD)

We have to allow for the fact that being in the mouth of the crocodile can lead to some confusion. Here's my best guess how to read this particular burst of criticism against the Juso Chair.

First, it's Uekermann has been a critic of the SPD Angie-bot course since late 2013, when he was first elected Juso chair. As I wrote at the time (The SPD and a possible new Grand Coalition government in Germany 12/08/2013):

The Jusos formally voted against the coalition agreement and elected as their new leader a Bavarian social democrat, Johanna Uekermann, who is vocally opposed to a new Grand Coalition. ...

The Jusos' opposition is scarcely decisive. But it's also significant. Opposing a key national national policy of the SPD leadership like this is no small thing for ambitious young SPD politicians. (Wolfgang Wittl has a biographical sketch of Uekermann, Adams Zankapfel Süddeutsche Zeitung 25.10.2013) And Christoph Hickmann writes, "Die Jusos sind der harte Kern des sozialdemokratischen Widerstands gegen die große Koalition." ("The Jusos are the hardcore of the Social Democratic resistance to the Grand Coalition.") (Im Herzen des Widerstands SZ 07.12.2013)

In a Juso Blog post, Andro Scholl warns, "Europe is going kaput and the Grand Coalition will do nothing about it!" (Stell Dir vor Europa geht kaputt und die Große Koalition ändert nichts dran! 25.11.2013)

So the Angie-bot leadership has never much liked Uekermann in her current role. I'm thinking the criticism from two sides - she criticized the Compassionate Pastor's Daughter! She didn't criticize the Compassionate Pastor's Daughter enough! - is also political Kabuki. The main irritation is that the SPD leadership is so subservient to Merkel that they wanted to take a whack at Uekermann and snivel to the Compassionate Pastor's Daughter in response to Uekermann's clearly backhanded comment. "In this matter, one must really say that finally in her 10-year Chancellorship, she has shown something like a backbone" clearly assumes that it's obvious that she hasn't shown any backbone before, which is really the core of Merkel's EU critics more generally. Her extend-and-pretend approach to critical problems has involved avoided describing them as they are and backing away from confronting the nationalist element in her own party over European unity. We've seen that clearly in the euro crisis, in the refugee crisis, and now in the latest military escalation in Syria.

I'll give Uekermann credit for some perceptive political theater of her own. Her comment the SPD honchos singled out for attack pinpoints the key flaw in Merkel's leadership that may already have doomed the EU to more weakness or even disintegration. But it's not as though Merkel has failed to show "backbone" against her enemies, as her ruthless position against the elected Greek government in the first half of the year showed dramatically.

Yasmin Fahimi's criticism of Uekermann's statement quoted above is actually correct. But the SPD has been more supportive of Angie than the CDU/CSU on the subject, so phrasing her comment that way may well have been designed to put the SPD leadership on the spot over their defense of Merkel. It looks to me like it had that effect, anyway.

Timo Lokoschat responds to the anti-Uekermann criticism in Blanke Nerven Abendzeitung 27.11.2015; Uekermann herself retweeted it. So the attribution in the Abendzeitung may be an error, although it speaks of Uekermann in the third person. He uses the term "Genossen," the SPD word for "comrade," which they use on official occasions:

Es gehört zu den Forderungen jeder ordentlichen Sonntagsrede, dass in Krisenzeiten „Parteipolitik“ außen vor gelassen werden solle. Wie weit hier Anspruch und Wirklichkeit auseinanderklaffen, zeigen gerade wieder die unverhältnismäßig harten Attacken auf die Juso-Vorsitzende, die es gewagt hat, der Kanzlerin „Rückgrat“ zu bescheinigen.

Rückgrat! Liest man die hysterischen Reaktionen von Fahimi, Oppermann und Co., könnte man glatt denken, sie habe gefordert, der deutschen Sozialdemokratie selbiges zu brechen.

Der bizarre Streit zeigt vor allem eines: wie blank die Nerven bei den Genossen liegen. Seit Monaten dümpeln sie abgeschlagen und ohne Machtperspektive hinter der Union – und das, obwohl durchaus Akzente in der Großen Koalition gesetzt wurden. Trotzdem können viele Wähler den „Markenkern“ der Partei nicht mehr erkennen, beklagen ein gefühltes Desinteresse an ihrer Lebenswirklichkeit.

Das kann man ändern – aber sicher nicht durch Desavouierung der eigenen, immer etwas rebellischen Jugend.

[One of the requirements for every proper Sunday speech that in times of crisis, "partisan politics" should be left out. How far the demand and reality differ has just been shown again in the disproportionally harsh attacks on the Juso Chairperson {Uekermann}, who has dared to acknowledge the "backbone" of the Chancellor.

Backbone! Reading the hysterical reactions of Fahimi, Opperman & Co., one could easily think that she had called for the breakup of the German Social Democracy itself.

The bizarre conflict show one thing above all: how raw the nerves of the comrades are. For months, they bob around as though beheaded and without a perspective for power behind the Union {CDU/CSU} - and doing it, even though it clearly establishes accents in the Grand Coalition {i.e, provides visibility for the SPD}. Nivertheless, many voters can no longer recognize the "core branding" of the Party, {and} complain about a perceived disinterest {by the SPD} in their real lives.

One can change that - but certainly not be disavowing their own, always somewhat rebellious youth.]

In other words, Uekermann's criticism and the confused backlash from the leadership it provoked has illustrated the fecklessness of the current party leadership. They are comfortable being in the mouth of the crocodile, so comfortable that they freak out at straightforward criticism of the crocodile's disastrous failures.

Martin Schultz is a German SPD leader, President of the EU Parliament, and a shameless Angie-bot. So when he sounds like he's criticizing the GroKo, it's worth looking at his words closely. (EU-Parlamentspräsident: Schulz gibt Schäuble Mitschuld an Spaltung Europas Spiegel Online 27.11.2015) Schultz has gone so far as to publicly acknowledge the obvious, that Germany's domineering, nationalist handling of the euro crisis has damaged trust among EU partner nations, which has massively contributed to the lack of cooperation in the 2015 phase of the refugee crisis. "Es mag zynisch sein, aber es ist gerade Payback-Time in Brüssel," he says. ("It may sound cynical, but it's finally payback time in Brussels.")

Yes, it's too good to be true. Because Angie-bot Schultz doesn't blame Merkel's disastrous Herbert Hoover/Heinrich Brüning austerity economics. Or her nationalist posturing over it. And certainly not the SPD's disgraceful backing of those policies to the hilt. No, it turns out that Angie's Finance Minister, Wolfgang Schäuble, is the problem! Despite his being the Finance Minister, Schäuble was one of Merkel's political mentors who she cheerfully stabbed in the back as soon as she got the chance. Lately, he's been a pain in the rear to Merkel over the refugee crisis, even though his positioning has fitted well into the CDU/CSU's political Kabuki play over it. So Schultz' criticism of Schultz is just a continuation of the SPD's subservience to Merkel.

Another word on the euro crisis. Wolfgang Münchau continues his Cassandra warning to Germany and its leaders Währungsunion: Deutschland zahlt - oder das System explodiert 27.11.2015 that unless they abandon the spectacularly failed Hoover/Brüning policies, the eurozone's problems will continue to worsen. And he again points to the stagnation of Italy since the beginning of the eurozone as as major possibility to bring the next acute phase of the crisis. He worries "that it won't take much longer until Italy has a tangible interest in leaving the euro area" ("dass es nicht mehr lange dauert, bis Italien ein handfestes ökonomisches Interesse daran hat, den Euroraum zu verlassen").

He also recites basic facts about the euro currency zone that most of the German leadership and mainstream press seemed to have been strenuously attempting to avoid since forever. Including:

Deutschland hatte enorme Vorteile von der Währungsunion. Ohne sie wäre der deutsche Wechselkurs deutlich höher und die Warenausfuhren geringer. Ohne eine Währungsunion hätte Deutschland nie nahezu Vollbeschäftigung erreicht. Die Hartz-Reform hätte es möglicherweise gar nicht gegeben, denn die gesteigerte Wettbewerbsfähigkeit wäre wahrscheinlich durch einen höheren Wechselkurs wieder ausgeglichen worden.

Germany had enormous advantages from the currency union. Without it, the German exchange rate would have been distinctly higher and export of goods smaller. Without the currency union, Germany would never have reached near-full employment. The {neoliberal, anti-labor} Hartz-IV reform would possibly never have been, because the rising competitiveness {of Germay} would probably have been balanced by a higher exchange rate.]

Heck of a job, Angie, heck of a job!

New government for Portugal

Portuguese President Aníbal Cavaco Silva has designated Socialist Party leader António Costa as Prime Minister (PS). (La hora de los socialistas en Portugal Página/12 24.11.2015; São José Almeida, Governo de combate político coloca Assuntos Europeus no MNE Público.pt 24.11.2015

Portugal's political turmoil set to end as Antonio Costa named prime minister Euronews 11/24/2015:

This means that the left majority of PS, the Left Bloc, and Communists is effectively taking power. The actual arrangement is that the Socialists are forming a minority government with the tolerance (as it's called in parliamentary systems) of the other left parties. That means they vote to support the government and Costa as Prime Minister, but don't get ministries.

Andrei Khalip and Axel Bugge report in Socialist Costa to head Portuguese government with uneasy far-left backing Reuters/Yahoo! News:

The Socialist Party (PS) has promised to end years of harsh austerity, increase families' disposable incomes and help the poor, who suffered during Portugal's debt crisis and a bailout that ended last year, while still cutting the deficit in line with Portugal's European commitments.

Together with the far-left Communists and Left Bloc, Costa two weeks ago toppled the minority centre-right coalition that had returned to power after winning most votes in an election on Oct. 4 but losing its overall majority.

Left Bloc deputy Marisa Matias is understandably optimistic about the present moment. She tells an interviewer, "A new Portugal is being born." (Maria João Lopes, “Há um Portugal novo que está a nascer” Público.pt 24.11.2015)

But getting António Costa as Prime Minister is scarcely the storming of the Bastille. Much less the Winter Palace.

The PS has previously supported the EU's (Merkel's) austerity policies in Portugal. It's heartening to see that they are now willing to attempt some kind of pushback. We'll see how it works out.

Portugal's new fight for democracy

As the left majority in the Portuguese Parliament continue to press its demand to form a government, I find myself thinking back to the acute phase of the Greek crisis earlier this year.

If the left majority takes power and seriously pushes back against the austerity measures, Angela Merkel's government is likely to retaliate. The ECB can bring enormous pressure on Portugal by withdrawing support from Portuguese banks in a similar way to what it did to coerce the Greek government into surrendering on austerity. Merkel also clearly wanted to punish the Greek voters for daring to vote against her Hebert Hoover/Heinrich Brüning austerity policy.

Since the attacks from Germany and the ECB forced a new election but returned Alexis Tsipras and his anti-austerity coalition back to power anyway, they may take a different approach with Portugal. But their pressure against Greece did force Tsipras to accept a continuation of the ruinous austerity program. So they have a tried-and-tested regime change model at hand.

The bottom line that we see from the Greek experience is that if Portugal is faced with a full-on coercive program in retaliation for election results that displeased Merkel, if they want to successfully push back, they have to be willing to risk being pushed out of the eurozone and go back to their own currency.

The Portuguese President Aníbal Cavaco Silva would obviously prefer to have the current conservative Prime Minister Pedro Passos Coelho continue in office. Despite the name of Passos' party, Social Democratic Party (PSD), the official social-democratic party and affiliate of the Socialist International is the Socialist Party (PS), which heads the majority left coalition that should be taking power now. Passos is trying to get the President to stall on allowing the left majority to create a government, claiming that it wouldn't be "stable." (Maria Lopes, Esquerda garante orçamento, direita quer que Presidente seja mais exigente com PS Público 20.11.2015)

Deputy Prime Minister Paulo Portas is the and head of the Christian Democratic CDS–People's Party (CDS-PP), the junior partner in the current and hopefully outgoing government. As Lopes reports:

[Portas] avisou, em tom de ameaça, que o Governo de esquerda “poderá ser matematicamente viável, poderá ser formalmente constitucional; será sempre politicamente ilegítimo e o CDS extrairá daí as consequências necessárias e suficientes”.

[{Portas} warned in a menacing tone that the government of the left "might be mathematically viable, might be formally constitutional; it will always be politically illegitimate and the CDS will then draw the necessary and sufficient consequences.]

Economist and former Greek Finance Minister Yanis Varoufakis is reserved about the approach of the Portuguese left coalition, as he explained to The World Weekly (Yanis Varoufakis’ ‘erratic’ Marxism 11/19/2015; also at Varoufakis' blog)

As the global financial crisis began in 2008, the eurozone was thrown into a sovereign debt crisis which engulfed not just Greece, but also Portugal, Ireland, Spain and Cyprus. The political impact of the crisis was swift. In many of these cases, the national governments moved to the right while once marginal forces became increasingly prominent. Much like in Greece, Portugal’s crisis to the emergence of a new progressive coalition led by the Socialist Party.

“The two countries, Greece and Portugal, are caught up in the same eurozone-wide crisis and both have been subjected to dead-end policies that have been portrayed as success stories (with the Portuguese one bathed in more adulatory light),” Dr. Varoufakis tells The World Weekly. “But there is a difference: last January, in Greece, our government was elected with a clear mandate to oppose these dead-end policies.”

“In Portugal this is not the case,” Dr. Varoufakis explains, “as the Socialist Party seems determined, even before forming government, to avoid challenging the basic logic of a failed policy agenda”. So the former Greek finance minister is not optimistic that the new coalition, which includes Greens and Communists, presents a sufficient challenge to austerity. It is important to note that the Socialist Party was the architect of the austerity measures as the crisis hit.

When asked if the Portuguese case represents any sign of social democracy resurging, Dr. Varoufakis does not mince his words. “Social democracy remains in tatters of its own making,” he says. “It has yet to articulate a valid criticism of its contribution to the eurozone’s terrible architecture as well as to the illogical manner in which Europe responded to the inevitable failures of that architecture.”

See also:

Stefan Schultz, Politische Krise in Portugal: Die Unsicherheit kehrt zurück Spiegel Online 11.11.2015. Schultz talks about the possible but constitutionally dubious option of the President calling for new elections immediately, or allowing the democratically elected left majority to form a government. He called it a "choice between the plague and cholera." But he also describes the "misery" that Merkel's austerity economics has brought to Portugal. And he notes that many Portuguese citizens find it "undemocratic" that the President would try to block the left majority from taking power. That's probably because it is undemocratic.

La actriz y el operario que están detrás del pacto de izquierda en Portugal Público 10.11.2015

Sérgio Aníbal, As chaves do debate difícil entre um governo PS e Bruxelas Público (Portugal) 11/11/2015

Syma Tariq, Portugal senses a chance for change after pro-austerity government is ousted The Guardian 11/11/2015

Catarina Martins in Women who conquered macho world of Portuguese politics prepare for power The Guardian 11/14/2015 notes:

Bloco de Esquerda, Portugal’s equivalent to Greece’s anti-austerity Syriza party, is a crucial element in a leftwing alliance which is set to deliver a socialist government. Its sudden rise is also the story of a remarkable turnaround in fortunes which, in a notoriously macho political culture, has been masterminded by four women: the Bloc’s leader, Catarina Martins, deputies Mortágua and her sister Mariana, and Euro-deputy Marisa Matias.

Lauren McCauley, Portugal Rejoices as Anti-Austerity Left Coalition Forms to Oust Right Wing Common Dreams 11/10/2015