The importance and effectiveness of national fiscal frameworks in the EU

This post was written by Philip Lane

The ECB Monthly Bulletin has a useful review article here.

7 Responses to “The importance and effectiveness of national fiscal frameworks in the EU”

  1. David O'Donnell Says:

    fyi

    Eurozone crisis:
    Austerity plunges Europe into recession again
    15 February 2013 PresseuropL a Tribune, Diário económico, NRC Handelsblad & 4 others

    The latest statistics on the state of the eurozone economy indicate that, contrary to what political leaders have recently been saying, the crisis is far from over.

    The European press blames the economic shrinkage on austerity policies that prevail in most single currency states, with some newspapers advocating a change of course.

    “The eurozone has become a recession zone,” remarks La Tribune, which wonders on its front page, if “Europe has been sickened by austerity.” For the French business daily, the figures that were published on February 14 amount to a “Saint Valentine’s Day massacre” —

    The latest quarterly report of a 0.6 per cent decline in the wealth of the eurozone is the biggest slump since 1995 — in other words, since Eurostat began to keep statistics on the economic and monetary union.

    http://www.presseurop.eu/en/content/press-review/3417111-austerity-plunges-europe-recession-again

    Comment unnecessary.

  2. Joseph Ryan Says:

    @David O’Donnell

    Re: Press review of recession in different EZ countries. Devastating.

    It reminds me of the old Leonard Cohen lyrics;
    “That’s right, it’s come to this,
    Yes it’s come to this,
    And wasn’t it a long way down,
    Ah wasn’t it a strange way down?”

  3. Eureka Says:

    So unemployment is high - who cares!! People don’t riot because of no jobs - they riot because of lack of food.
    European elite look at Spain and don’t think - wow isn’t that terrible - they think who would have think it could go that high without unrest. This will go on….

    And it’s not austerity (look at bankers bonuses for f*** sake). It’s financialism. You won’t see certain people come on here and give out about bankers bonuses because they are financialists.

    Start calling this what it is - financialism

  4. Mickey Hickey Says:

    Nothing happens until the amply endowed lady sings. In the past unemployment benefits were sparse to non existent. Social supports came from Quaker soup kitchens, St Vincent de Paul like charities and convent kitchens. Unemployment benefits and social supports have held up quite well in this crisis given the circumstances. Even post Bismarck Germany did not have unemployment and social supports as good as we have today. They had the best public supports in that era. Yet, in 1928/29 when unemployment rose to 30% the Germans voted in the only party that proposed large scale public works that guaranteed significant reductions in unemployment. Contrary to what non Germans think, Germans did not vote for Deutschland Uber Alles jingoism, Jewish persecution or racial purity. They voted for jobs and enthusiastically supported the Nationalist Socialists because they delivered jobs, quickly and consistently from 1929 up to and during WW2. The lesson to be learned is that people will hold their noses in return for jobs.

    Greece and Spain are now approaching 30% unemployment and we will soon find out at what level the dung hits the ceiling in the present circumstances. Italy is highly vulnerable and France is on a downward spiral which will be further exacerbated by any deterioration on the periphery.

    It would appear that in Ireland we are becoming agitated by property, water and waste charges that pale into insignificance compared to the billions doled out by the gov’t from 2008 to 2012. It would appear that the connection between increased gov’t debt and the need for revenue to pay it down is only now starting to be made.

    Financialism is a tool that can be used for good or evil. Some countries use it to advantage but in most countries it ends in pain and suffering. The flogging will continue until morale improves.

  5. Eureka Says:

    @ Mickey Hickey
    Interesting post. I have been looking into this a bit more.

    Best definition I have found for financialism (though would appreciate others) is “an economic system where the primary activity consists of creating and manipulating financial instruments”

    Financialism has no need for mass consumerism, robust government, satisfied masses or even law and order. That is why all of these things are being reduced as financialism rises.

    Somebody should write a book on it (maybe they already have). The rise and fall of financialism (it will fall!)

  6. Paul W Says:

    Guys
    Believe it or not, the recent positivity emanating from Ireland is fueling enormous (many, many $ billions of) Private Equity interest in Ireland here in the US. In various areas (don’t ask), plans are being worked upon that can only be good for the country. As a result, my own outlook has turned much more positive for the country in the last few months. Chins up and chests out. It may not solve the sov debt and related specifically, but should be much better for private sector employment, etc.

  7. Mike Hall Says:

    Eureka

    I think the book you’re looking for is probably something written by Prof Michael Hudson. AFAIK he’s the most prominent user, if not originator of the term ‘financialised’ economy, referring to the relatively recent growth & dominance of the ‘FIRE’ sector & its purely rent-seeking & rigged casino operations, to little or no productive purpose in the real economy.

    He’s absolutely right imo. There are two factors in the recent rise of this giant ‘financialism’ leech. One is the barely 2 decade old revolution in computing & international data comms technology. Transactions can be made at least two orders of magnitude faster - hence many more can take place. The other is the final elements of deregulation or regulatory capture in finance & its complete integration with the real economy payments system. (You can include in ‘capture’ the intellectual bankruptcy of the mainstream economics profession, as seen regularly in the articles posted here.)

    We are witnessing the 3rd element of the program now - very much a design feature of the Euro. Which is to greatly reduce the states’ role in public welfare, education, health etc. that Europe has enjoyed since WWII. Privatisation opportunities are the rent-seekers’ dream.

    The means to achieve this is to deliberately impoverish the real economy by maintaining high levels of unemployment & blame the victims & claim there’s ‘no alternative’.

    Probably pure opportunism & ideology for most advocates, but it’s also inconceivable some of the Euro system designers did not know what the effects of a severe economic shock would be. (Importantly the straight jacket imposed on responses.)

    Society is run by and for the top few percent. That includes most of the economics profession.

    It’s long past time that academic economists asked themselves a simple question. What is the purpose of an economy? (And an accompanying question. Since I work in the public sector. what might be my personal responsibility in establishing that purpose?)

    As Bill Mitchell put it recently. Unemployment is not complicated. It’s caused by lack of aggregate demand. It completely dwarfs real economic losses, in its effect, anywhere else in the economy (all the ‘micro’ cr@p which economists love to obsess over ad nauseam).

    The Euro is fiat currency, just like all the major currencies in the world.

    By definition, there is no shortage of something created from thin air on computer keyboards. The idle resources (labour) are not scarce. They are there waiting to be hired. It is not inflationary - and certainly no more so than using ‘borrowed’ (still keyboard created) money - to hire them.

    There is no need whatever for high unemployment to occur - ever.

    It is beyond a joke that so-called academic economists persist with all the rubbish they spout & pretend some concern for all of society. Eighty years after Keynes & they still don’t understand properly what makes ‘macro’ different, or how a modern monetary system & banking actually functions.

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