Economic policy: voters versus men in white coats

Eurointelligence’s news briefing this morning (the professional edition) had a really excellent comment regarding the news that Jeroen Dijsselbloem is proposing that the stability pact be reformed, so as to link flexibility on deficit correction to “economic reform”. The question is, of course, what constitutes “economic reform.” Says Eurointelligence:

We recall that the expression „economic reforms“ had the exact opposite meaning in the 1970s – a reduction in market liberalism, more regulation, more workers rights. Economic reforms is always a political process. Is Dijsselbloem saying that decision on labour market organisations, for example, should be done at central level, and if not, who decides what reforms are desirable, and what constitutes reform? Say, the Commission enters into a “contract” with a country on certain types of reforms, what would stop a newly elected parliament in that country from breaking such a contract? In German constitutional law, for example, the parliament’s sovereignty would always rank above such contracts. One of the lessons of the eurozone’s short history is that one should not put currently fashionable ideological positions into a treaty or a law.

It is one thing to say that monetary policy should be the preserve of technocrats. You can also make a case that the same should be true of governments’ overall fiscal stances (although as soon as you get into questions of taxation and expenditure, you are beginning to trespass on matters that should properly be dealt with by democratically elected parliaments; and there are also the questions of whether the beurocrats in charge know what they are doing, and whom they are listening to). But the balance between expenditure cuts and tax increases in a deficit reduction programme? The composition of taxes or expenditures in normal times? Microeconomic regulations influencing the balance of power between employers and workers? These are political matters, on which the right and the left have legitimate disagreements (and, besides, economists know a lot less about a lot of this stuff than they sometimes pretend). Sorting out these disagreements is a core function of any modern democracy.

If, as a technical matter, the Eurozone requires at least some degree of fiscal union, and if, as a political matter, a big obstacle to this is citizens’ distrust of “Europe”, then measures which can be seen as attempted power-grabs by the centre at the expense of voters would seem to be directly counter-productive. Not everything in the economic life of a nation is a purely technical matter; we should be trying to convince voters that the Euro, and the EU itself, are compatible with the principle that our votes count for something, and that we can change policies that we don’t like, no matter how “technically desirable” they are thought to be in 2013 by the OECD or IMF or EC or whoever it is. Make the electorate feel disenfranchised, and you play into the hands of the populists.

47 replies on “Economic policy: voters versus men in white coats”

Do you think that the Irish government should accept the Troika credit line, with its conditionality?

The government talks about “regaining our sovereignty” but sometimes it sounds like “our sovereignty” refers to the sovereignty of the ruling coalition rather than that of the Irish people. The broader “sovereignty” of the Irish populace might be higher with the credit line in place!

IMHO the government should accept the credit line, despite the conditionality. Most of the conditions are probably for the best, although I admit that they detract from democratic control of the economy over the medium term.

If there’s one thing I started to get fed up with during the Greek crisis is how politicians talk to their voters as if economic reforms have a definite end goal, when it’s – as you point out – a process. They can’t even claim they’re merely saying the Greeks should do this, this and only this, because soon enough they shift the goal posts and demand that, that and definitely that too. The impression this leaves among voters is that the Greeks are incapable of reform. This in turn feeds into general opposition against helping other countries out. In some ways it’s an own goal for centrist parties, because it helps feed populists sentiment. How about regularly praising the troubled countries and provide concrete examples of what reforms have been implemented?

It depends on the conditionality. I am sure the conditions that would be set by you or the IMF would be fare, reasonable and probably in our best interest, But the track record of the Europeans especially the incompetent occupants of the ECB tower enter the fray, fairness & reason go out the window.

What is a ‘populist’ one wonders. At election times all politicians are populists and in between elections all opposition politicians are populists but the real populists are politicians with policies we don’t like. Of course this is disguised by some intellectual rationalisation as to why their policies are ‘populist’ , oops ment rubbish. After all we can’t have politicians giving the people what they want. It just strikes me that it was the populists(my populists) that got us into the mess we are now in. So I’m sure we can all agree, down with populists and and that sort of thing.

@rf and conversely, nobody really cares about the deficit when it’s right-wing governments doing it, of course.

“Microeconomic regulations influencing the balance of power between employers and workers? ”

Been here before

“Hitler’s regime promised to free German firms to manage their own internal affairs, releasing them from the oversight of independent trade unions. In future, it seemed, wages would be determined by the productivity objectives of employers, not the dictates of collective bargaining”

“The Domestic agenda was one of authoritarian conservatism, with a pronounced distaste for parliamentary politics, high taxes, welfare spending and trade unions”

The Wages of Destruction, the making and breaking of the Nazi Economy, Adam Tooze Pp 102,103

I think that Eurointelligence may be missing the point here. This may stem from the wording of the European Council conclusions.

“Work will be carried forward to strengthen economic policy coordination, with the objective of taking decisions in December on the main features of contractual arrangements and of associated solidarity mechanisms.”

Altering the SGP is one thing, entering “contractual arrangements” (with the Commission?) is another as these, presumably, would refer to specific policy actions in return for the “associated solidarity mechanisms”.

As to the latter, those that exist at present consist, essentially, of loans on a concessionary basis. There are enough of these already. What is needed is some assistance in the form of grant.

It remains to be seen whether anything comes of this. The idea is Merkel’s and has been around since Hollande took office.

Please consider two corollaries from the Dispensation Economics Manifest, presented here … … which is based upon Ephesians 1:10, the biblical revelation that Jesus Christ, is operating in dispensation, that is the household management plan of God to complete and fulfill all things in every age, epoch, era and time period.

Corollary #11, communicates that Jesus Christ, acting in dispensation, is introducing new talking heads and thought leaders who move society away from constitutionally limited government, free markets, individual liberty and personal responsibility. Specifically from talking heads, that is political pundits, intellectuals, interest-group representatives, and think tank spokesmen … such as Paul Krugman, Mark Zandi, and Lawrence Klein, and thought leaders such as Milton Friedman, Phil Gramm, Robert Rubin, Jimie Dimon, and Ben Bernanke, … to … talking heads such as Angela Merkel, and thought leaders such Jeroen Dijsselbloem, Olli Rehn, Michel Barnier, Klaus Regling, Werner Hoyer, Jorg Asmussen and Viviane Reding.

Corollary #15, communicates that Jesus Christ, acting in dispensation, is introducing a new money system; He is replacing the fiat money system, with the diktat money system.

Diktat money is defined as the compliance required, as well as the trust that is engendered, the debt servitude that is enforced, and the austerity schemes that are experienced, such as those reported by the such as The Irish Times report Troika Seeking Tough Post Bailout Terms In Ireland In Exchange For Precautionary Loan, heavy losses on large bank deposits via bailins, levying additional taxes, privatizations, capital controls, import curbs of branded items, budget cuts in social programs such as Head Start, sale of a country’s central bank’s gold reserves, fiscal policy councils, such as those reported on by the IMF, Case studies of fiscal councils and The functions and impact of fiscal councils, for Eurozone wide fiscal governance, and statist public private partnerships, which oversee regional economic commerce, trade, and the factors of production, as well as in the Eurozone, a fiscal union, where sovereign regional leaders, as well as sovereign regional sovereign bodies, such as the ECB, invoke all kinds of mandates for regional security, stability, and sustainability.

These leaders, that is nannycrats include, Jeroen Dijsselbloem, President of the Eurogroup meeting of euro-zone finance ministers, Olli Rehn, Vice President of the European Commission responsible for economic and monetary affairs, Michel Barnier, EU Commissioner responsible for internal market and services, Klaus Regling, Managing Director of the European Stability Mechanism, Werner Hoyer, President of the European Investment Bank, Jorg Asmussen, Member of Executive Board of the ECB, Viviane Reding, European Commissioner for Justice, Fundamental Rights and Citizenship.

And diktat money is seen in countries with high current account deficit, such as in India, where import duties have been declared on the import of gold, and the import of gold coins banned; and such as in Indonesia, where curbs are placed on the import of luxury cars and some branded goods.

The Commission paper from March.

It has more questions than answers.

The underlying political calculation would appear to be that there is no means of getting countries in difficulties to live up to the obligations they sign up to (in largely impenetrable legal texts) other than through the carrot of financial assistance in order to do so. (It may be noted that SPD leaders are on record as saying that Merkel has hitherto failed to recognise that there will have to be a cash cost to Germany if the crisis in the euro – now effectively the crisis in the periphery – is to be resolved.)

Incidentally, the idea that an incoming government could blithely repudiate legally binding contracts by its predecessor does not seem to add up.

… spose ‘legally binding’, ethically ‘foul’, and morally ‘unjust’ don’t enter too many equations in a troika!

@David O’Donnell

I don’t suppose that the need for a birth register in Greece ranked very high in the ‘structural reforms’ demanded by the Troika at about the time that Roma child was born.
Fruit pickers wages would have come under a bit of scrutiny alright. Migrant fruit pickers are unlikely to have many champions in any of the Troika memberships.

I hope that I don’t disturb the calm here too much with 2 links I found somewhat amusing:

Barack Obama: I hear what you say, Angela

“BO: What was the name of that cottage in the Black Forest you were talking about the other day? Michelle has always wanted to go there”

“Ob sie das richtig referiert habe, fragt Angela Merkel ihren Finanzminister”

priceless Spiegel style : – )

looking at theyenguy, has anybody have to say anything positive about any EU commisioner? Just one little thing ? Just curious.

My favourite

BO: “Well, this is the NSA we are talking about. I’m not cleared for that kind of information.”

Has the ring of truth.

On the post: I think the Eurointelligence query is bang on: who defines “economic reform”?


I am wondering a little bit about the constant promotion of “Eurointelligence”, which is neither pro Euro nor intelligent :-), but might be “intelligence” as in CIA / NSA, …. LOL, the subscription based sounding board of Baron Münchausen 🙂 by Kevin O’ Rourke and others.

Why do these people believe to have ownership of what “reform” is? Do they have a registered trade mark on this word, like “Windows”?

What irks people like me, increasingly, that lots of red/green folks always respect majority votes, only if it fits their agenda. And get very inventive to try to topple it in the other cases.

Today we have here wiki/Reformation_Day remembering Martin Luther nailing his 95 theses to the church door in Wittenberg. I am pretty sure that the papacy of that time was not pleased with that.

One guy’s “freedom fighter” is the other guy’s “terrorist” : – )

The one key difference of Luther, compared to many others before him, like our good bohemian neighbor wiki/Jan_Hus, rector at the oldest German university, in Prague, interesting feature, was that he stayed alive and was not burned.

In his report Travelling with Austerity: Impacts of Cuts on Travellers, Traveller Projects and Services, social researcher Brian Harvey found that from 2008 to 2013, while overall government spending was cut by 4.3 per cent, funding for programmes benefiting Travellers were devastated.

Interagency activities programmes for Travellers were cut by 100 per cent; funding for Traveller education by 86.6 per cent; Traveller accommodation by 85 per cent; national Traveller organisations by 63.4 per cent; Fás special initiatives for Travellers by 50 per cent. Brian Harvey comments: “One can think of no other section of the community which has suffered such a high level of withdrawal of funding and human resources, compounded by the failure of the State to spend even the limited resources that it has made available.”

Racial prejudice and bigotry have deep roots in this society and extend, it seems, to the corridors of power.

[from above by Vincent Browne]

Bigotry and prejudice is in the genes in all badly governed countries. The question is like the what came first the chicken or the egg as in the poverty or the bigotry and prejudice.

In the USA they seem to be following the B and P first with poverty increasing since the 1970s’. In Ireland it was poverty first accompanied with B and P with some moderation as the economy improved after entry to the then EEC. Post 2008 we are back to the bad ould days. It is quite ugly in places like Tralee where the wayward youth harass Muslim women in crowded public areas. The Travellers are also discriminated against but that is a little more covert since Travellers can be dangerous. The truth of the matter is that Ireland has more than its fair share of tick and iggerent peeple. The make up of the Dail and Seanad reflects what is on the ground, unfortunately. Prosperity is a partial cure when it is accompanied with a low unemployment rate and a decent minimum wage.

@Sarah Carey

“On the post: I think the Eurointelligence query is bang on: who defines “economic reform”?”

Absolutely. The definitions will, of course, be provided by those who are currently winning and the definitions will be designed to ensure they continue winning. That holds true both between countries and within countries.
Structural reforms, as currently defined and applied, means lower wages and the ability to fire hourly workers at will. Great for those doing the firing.

@David O’Donnell / Mickey Hickey

Bigotry and prejudice is certainly in the genes in all countries, but it would be a pity to allow it’s institutionalisation to go uncontested, either locally or in Europe.

@ All


In circumstances where a state is incapable of financing itself, there is no way of getting away from the commonsense realities identified by Colm Keena. Irish politicians will do their best to do so for myopic party advantage. And there will be much uncritical acceptance of the arguments that they advance.

On the broader issue of who defines policy reform, the patience of other EA countries with the line persistently pursued by Merkel – i.e. reform is required by all countries other than Germany – is running out. The fact that the SPD recognises this, after a fashion, indicates that a change may be on the cards, not least because Germany is now in breach of some of the legislation adopted (macro-economic imbalances procedure). There are also reports that Merkel is no longer insistent on pushing through the “contractual arrangements” because of the resistance of various countries, not least from those that would have contribute the net contributions.

@ All



“The Netherlands and Germany have continued to run substantial current account surpluses since 2011, while the current accounts deficits of Italy and Spain and the smaller economies in the periphery have contracted significantly, primarily as a result of a collapse of domestic demand and falling wages. Ireland, Italy and Spain have run surpluses in recent quarters, and Portugal moved into surplus in the second quarter of 2013. Germany’s current account surplus, meanwhile, rose above 7 percent of GDP in the first half of 2013, with net exports still accounting for a significant portion (one-third) of total growth in the second quarter, suggesting that rebalancing is not yet occurring domestically. To ease the adjustment process within the euro area, countries with large and persistent surplus need to take action to boost domestic demand growth and shrink their surpluses. Germany has maintained a large current account surplus throughout the euro area financial crisis, and in 2012, Germany’s nominal current account surplus was larger than that of China. Germany’s anemic pace of domestic demand growth and dependence on exports have hampered rebalancing at a time when many other euro-area countries have been under severe pressure to curb demand and compress imports in order to promote adjustment. The net result has been a deflationary bias for the euro area, as well as for the world economy. Stronger domestic demand growth in surplus European economies, particularly in Germany, would help to facilitate a durable rebalancing of imbalances in the euro area. The EU’s annual Macroeconomic Imbalances Procedure, developed as part of the EU’s increased focus on surveillance, should help signal building external and internal imbalances; however, the procedure remains somewhat asymmetric and does not give sufficient attention to countries with large and sustained external surpluses like Germany.

In 2012, the euro area, in aggregate, undertook one of the most aggressive fiscal consolidations of the advanced economies despite having the smallest cyclically-adjusted fiscal deficit and weak growth prospects.”

Bad timing!


I think Colm Kenna (Ir Times) needs to do a little more analysis.
Where does he think some of the €25 billion cash reserve is currently sitting, and how would those institutions get along without the same 25 billion?

I have to wonder whether the large cash pile, is more than just an expensive State reserve. Is there a possibility that it is a rather expensive liquidity program for our pillock banks?
If so it is expensive liquidity that should be available from the ECB. Should be.

@Joseph Ryan

Keep up the good fight but do remember not to be distracted by the troll in chief.


To avoid confusion can I suggest that it is a good idea to to stop using the word “reality” when you mean “neoliberal agenda” and not use the phrase “common sense” when you mean “dangerous unthinking conformity”.

Keena’s piece seems to fit both your usage of reality and common sense though.


The inclusion of the Netherlands is rubbish as the majority of the surplus relates to corporate tax haven activities where there are added charges on goods imported through Rotterdam for export to other countries.

US companies book super profits in the Netherlands similar to Ireland.

Part of the surplus arises because the country is a gas producer and has a lower energy import bill than other countries.

The Treasury report is a regular one for Congress on how nefarious foreigners maybe manipulating currency rates that distort trade.

In services, a US company just has to make some digital accounting transactions and this morning the Irish Exporters Association issued a press release with this fairytale:

“the jewel in the crown of Irish exports is our computer services exporting companies , whose exports powered ahead by 18.9% in the quarter and brought the year to September computer services exports up by 11.8% .This sector is the most important of our services exporting activities and now accounts for just under 42% of total services trade.’

@ MH

All that you say is true. And irrelevant to the central point.

The sad fact of the matter is that Germany’s enormous current account surplus is a major destabilising factor in the context of the functioning of a single/common currency area. Indeed, it is doubtful whether such an area can hold together in such circumstances.

In short, “macro-economic imbalances” threaten to overturn the euro apple tart.

In terms of who represent the voters, it is clearly Merkel, the most popular politician of all of Europe, by big margins, see Pew and BBC, and not some extremely tiny minority of folks like Münchau, who behave with their subscription web page like a sect.

In terms of the political dynamics, it is a few “reactionary elements” like “Eurointelligence”, LSE, and the Bastonians, who want to turn the clock back 40 years, to the time of their youth in the 1970ties, and ignore the experiences since then.

Spouting their opinion on outlets like euobserver, or, claiming to be the voice of “the people”, just not with giving them an opportunity to voice it, with comments.

Ireland is pretty different from continental Europe. You experienced only the English as one neighbor and mostly as an oppressor. People here have a much longer and way more diverse history, and have seen multiple ruling powers, and substantially different from that “wiki/Lingua_franca”’s.

Latin, German, Czech, French, German, Russian, and now English. They come and go. Maybe Chinese is next?

And when looking at our good bohemian (Czech) neighbors, we understand very well, that they did not like to sign the ESM. Their permanent experience of outside rule, even in the wiki/Mesalliance (no English wiki, interesting) with Slovakia, is something to be respected.

I actually spend some time to look up, how words are described on (English) wiki, to ensure that words I am using do not trigger for readers here very different impressions, I have using these words.

When we look at what happens in Europe now, my references to Luther and Hus are actually pretty relevant for very similar events 500 years ago.


As of now, it is our thing to be indignated about you deficit sinners. And to ask you to fulfil your contractual agreements, and not yours to ask us to adjust to criminal demands from some tiny groups.

When we look at

and that Ireland is one of the 3 under IMF supervision, it is our patience with you.

Taking a closer look, only Sweden and Estonia were never on the black list.



In short, “macro-economic imbalances” threaten to overturn the euro apple tart.

That of course is the received wisdom but it ignores a reality that reduction in the imbalances may not benefit the single currency area.

In 2005 after much pressure from the US because of its big trade deficit, China unpegged the yuan/renmimbi from the US dollar and replaced it with a managed float and over 8 years the Chinese currency rose 35% against the US currency – – because of China’s higher inflation, the real gain has been higher.

Every year since 2005 the US trade deficit with China grew and by 2012 at $315bn, it was 56% higher than in 2005, according to US calculations.

The US pressure on China has benefited other countries as the overall surplus fell in 2009, 2010 and 2011. Falling commodity prices in 2012 pushed up the surplus.

Subsidies are commonly used to boost trade and the relative impact is difficult to gauge.

As for Germany, it would be foolish to believe that the introduction of a national minimum wage would have a material impact on the trade surplus as it’s main impact will be in the former East Germany area. Rising domestic demand helps over time.

Data from the IWH institute shows that 11% of workers in the former federal republic earn less than the proposed €8.5 an hour, compared to 25% in the former GDR.

Trade patterns of course change and governments have a limited potential to influence them in the long-term.

Germany’s ex-Euro Area surplus may well diminish overtime, in particular demand from emerging markets. However, that would also impact other member countries as in key sectors such as cars, chemicals and power generation, the competitor rivals of big German companies are not generally European.

There are lots of export imbalances within Europe that can only be solved if at all over a long period – – look no further than Ireland’s poor indigenous export performance over 60 years despite low corporate and employer social security taxes and competitive wages.

@ All

As for the issue of greater democratic consultation, given that despite direct elections to the European Parliament it is not generally taken seriously, the most practical route for better communications is via national parliaments whether having folk from Brussels available for monthly grilling by committees or some other mechanisms.

Irish people presumably wouldn’t want influence weighed on a per capita basis.

Democratic deficits within countries are possibly a bigger problem and Japan and Italy show how the disproportionate influence of older people on politics negatively impacts the younger populations.

Merkel accuse Obama of eavesdropping.

Now Obama fires back accusing Germany of destabilising the world economy by not stimulating domestic consumption.

Merkel fires back and accuses the USA of endangering the world economy by not curbing its debt.

The kettle calling the pot black, at least the debate is heating up.


1. Merkel did not accuse anything. She had actually played this down during the summer, before the elections, when the red/greens believed they benefit from picking fights, and accusing Merkel of neglecting her duties by not doing any dramatic public steps about the NSA. (“SPD-Kanzlerkandidat Peer Steinbrück warf Angela Merkel im Zuge der Überwachungs- und Spionageaffäre im Juli 2013 vor ihren Amtseid verletzt zu haben.”)

Recently Snowden leaked via Spiegel, and some other newspaper, that there is proof, that the NSA dropped into her phone, probably since 2002
A 76% majority of Germans find the commotion about the NSA overblown by now.
We are somewhat disappointed, and we will take some counter measures, which will not be discussed in broad daylight, and that is it. We did not even interrupt the trade talks about it.

2. After I read via economistsview.typepad the notorious Krugman nonsense “the-harm-Germany-does” with the starting sentence “The Germans are outraged, outraged at the U.S. Treasury department”, citing 2 times the same Spiegel international article, which just reports on this, together with the terse, summarily rejection as “incomprehensible” by the German government,

I checked the important German news web pages:,,,,,, and found that not a single one even mentions this anymore.

Since at least 1971 it is the same old selfish American attitude, that we should run our politics according to their preferences, give our money away, spend it on useless stuff, and send our soldiers away in wars which do not serve our interests. Nothing new and it comes in waves. Arrogant bricks. And when we didn’t give in the last 40 years, why should we start with that now?

Then he does the classical Krugman straw man “Oh, and yes, the US inexcusably spied on Angela Merkel — but that has nothing to do with this, and anyone bringing it into this conversation thereby demonstrates his or her intellectual bankruptcy”

As if anybody here in Germany is in any discussion about anything with him.

We look at this guy as if you are in Bayreuth and one minute before the Tannhäuser Performance starts, a guy with a beard and a funny jacket stands up and wants to begin a public discussion about the benefits of child molesting, and then gets angry, when security takes care of him.

Finally he discovers the “Target 2” topic for himself, just 2 years after the Sinn /Buiter /Whelan discussions, calling it a German “intervention”. I think most people in Europe remember this a little different, Germany not being happy, that this happens.

This guy in his parallel fantasy universe is so eeky.

@ John Corcoran

Many thanks for the link. 80 minutes well spent!

There is much with which one could agree but on a number of fundamental issues I do not think that Giddens has it right.

First, in starting from Churchill’s famous speech regarding the idea of a “United States of Europe”, he omits to mention that Churchill did not have in mind the UK being included as it “had the Commonwealth”. It didn’t!

Second, the Europe of Monnet is far from dead. The idea of an elected President of the Commission, which Giddens supports, would certainly see its demise. Either one would have a head of the executive of the left or the right when what the job entails is to be the impartial head of a supranational body one of the main tasks of which is to ensure that the member states implement the treaties that they have signed up to. (The present incumbent as Commission president has made a poor job of it).

Third, he fails to understand that the EU is a sui generis construction. The member states are its executive, not the Commission, except in relation to a very narrow range of actions which it would be impossible to leave to the member states e.g. the policing of competition law. And, in the case of the euro, the ECB.

Merkel has certainly done her best to dismantle the existing structure. Indeed, she made no secret of her intentions in a speech in Bruges (no doubt intended to reflect an earlier speech by another Iron Lady) in 2010.


“The economic and financial crisis once again revealed how closely interlinked our European economies and societies already are. It also showed that the division of labour between the Union and the member states largely worked. But a familiar old pattern of reasoning has crept back into the debate, one which evokes the so-called community method. If you look into the history of the European Union you will find that this is a term familiar to many; it’s a translation of the unwieldy German word “Gemeinschaftsmethode”, which is cited frequently and in many languages. I suspect you’re familiar with the term from your studies. It describes the Commission’s sole right of initiative as well as the role of the European Parliament and Council in European legislation.

As a representative of a member state I would like to say now that it sometimes seems to me that the representatives in the European Parliament and in the European Commission see themselves as the sole true champions of the community method. They sometimes define themselves in opposition to the supporters of the intergovernmental method, who by that mean the Council, the European Council and the member states. Those are the intergovernmentalists, as it were, while the preservers and protectors of the community method stand on the other side.”

Whoever wrote this has not the vaguest grasp of what is meant by the “Community method”. It refers to the mechanism enshrined in the treaties which gives the Commission the sole right of initiative (if not, every state would push its own particular hobby horse) which is the only basis on which legislation can be adopted, by qualified majority voting (as unanimity would give a veto to every state and block any progress) in the Council and majority voting in the European Parliament which acts with the Council as the legislature.

That is what the member states have signed up to since the creation of the European Economic Community, the only really significant changes being in relation to the right of co-decision given to the European Parliament and changes in the voting system to better reflect population size.

It has withstood the assaults of assorted politicians, from de Gaulle onwards, and, with any luck, it will continue to serve.

Not everything in the economic life of a nation is a purely technical matter.

If ever a thing were true its that but in Europe we are now leaving behind near 2 decades of making pretend there is no such thing as a nation.

Tell the nations of Europe they don’t exist and you play into hands of populists also

@ francis

The Economist reports that Angela’s bugged mobile phone seems to be an elderly Nokia that she used mainly for party business. For government business, she has a pricey encrypted phone. [Its maker, Secusmart, avers that even the NSA would take 149 billion years to crack the code (though NSA hackers might see that as a nice challenge). If she was using the Nokia for anything important, a security expert says, “she has a lot more than the NSA to be worried about”.]

On exports, the commentary seldom strays from the superficial.

Firm size is a crucial issue and among SMEs, the number of firms with in the range 51- 249 employees (medium-size) and beyond that the number of large firms.

Italy has a lot of firms: 95% are micro with less than 10 people. It has 22,500 medium/large firms compared with 26,000 in France and 64,000 in Germany.

@ francis

Our history is what it is, and we are what we are. Just like you. Politics, and political advantage is a game with along history. Ditto for religion and culture, and it is pretty hard to say at this stage who exactly is the civilised one.

The thing about economics is that is, or is intended to be a science, and therefore pretty much universal in its application. Accounting identities are, by definition, true, and macroeconomic problems cannot be reduced to matters of contractual obligation. In other words, pacta servanda sunt is an important principle, but it is insufficient for the situation which presents itself.

Krugman may have changed horses a few times in his career, and he has a very US centred perspective, but that does not make him a fool.


since Ireland didn’t have a draft (or?), most of you are probably not familiar with security clearance. So let me put this into perspective:

The secusmart is qualified up to VS-NFD nur für den Dienstgebrauch, restricted, Srianta according to wiki/Geheimhaltungsstufe, the lowest possible restriction. I do know people, who take this home for scrap paper, and react indignated, when I said, I would not let my kids sell fruits wrapped into it.

As a draftee (but in a special function), like about 2/3 of the males of my age, I was entitled to see stuff up to NATO secret, 4 steps above it. And before you get in any way impressed, there were tens of thousands like me.

In the military and public office you have clear rules, who can see what, based on grade and function, and at least at my time nobody was really eager to climb there, because that was combined with travel restrictions, and attempts to keep you in the reserve force.

To distribute confidential hardware in a party with half a million members is just plain crazy.

And based on what rules to restrict it? Without 95% pissed off to be not important enough? There are better ways

In commercial matters there are ways to restrict access, limited, numbered editions, with some hidden markers, and recognized breaches were mostly dealt with then feeding systematic disinformation. I remember some job applicant from Taiwan, where we had difficulties to keep a straight face, and not bursting out in laughter.

Forget about all those supposedly save encryptions. This was so often broken, by better algorithms, or mostly human negligence.

Sooo, nobody cares what the US Treasury says, and some Paul who? from the NYT.

Some opposition politicians on the way out, like the EU Martin Schultz, greenie Claudia Roth and Ströbele desperately try to stay in the news with the NSA stuff.

We have long experience here, to be in the center of the espionage game,

And looking at e.g., the one I forgot yesterday, which town has the most whores per capita, some singer owns his ex-wife 150k, and that Steinbrücks wife stood by her man in the lost election night (gosh, I am sooo surprised : – ), is way more important than any spy stuff.

2nd part of my post:

Getting somewhat used to it, doing a scan of the 8 most important german web pages, for how important is some topic, can be actually done in 5 – 10 minutes. I will do this more often in the future, because I do observe this in Germany as well, that a lot of people, when they approach 50, tend to read only their favourite newspaper, and talk to a smaller and smaller circle of similar minded friends, and then wonder, why they loose elections. Must be some conspiracy.

To Krugman,

I see him as an idiot, who is often borderline to hate mongering against Germany. And I see 2 systematic patterns.

In physics, the reality is often dominated by one effect only, and one or two effects as minor perturbations, if you look close enough. The planets moving around the sun, described nicely by mass points, some vapor pressure controlled by the temperature, ….

The problem in economics is, that it is practically always a mixture of several effects of similar size, with conscious actors, and most numbers not really precisely definable. Therefore numbers are repeatedly redefined, GDP = GNP is not a good approximation for Ireland, statistical tables contain offsetting positions, to formally fulfill accounting identities. “Dark matter” with respect to US foreign balances also comes to mind.

I look at yanis’s graphs, and I just laugh, sorry.

1. And Krugman is famous for hyper simplification, ignoring all but one effect, and then derive a sweeping, analytical solution, carefully avoiding numbers, and often even the symbols, on the graph axis, and gosh, to compare his little theories to actual numbers?

This is NOT science.

2. In recent years Krugman has added his trade mark style straw men to his repertoire, redefining what others have allegedly said, or what some discussion he was not previously involved in has to be about, together with frequent insults to everybody, who does not agree with him. In the link from yesterday now even resorting to his virtual alter ego, in some imaginary discussion, he has in his head only.

“I can’t stand this rubbish anymore,” said Norbert Walter for many people here

@Kevin O’Rourke

The always present but now painfully obvious undemocratic nature of much of EU decision making at an institutional level is an important topic be but I think that you might be experiencing a touch of the Stockholm Syndrome that must affect everyone who has to couch their criticisms of the insanity of Eurozone economic and monetary policy in terms that are acceptable to and comprehensible by the current elites.

It is one thing to say that monetary policy should be the preserve of technocrats.

It is pretty clear now that this was a bad idea and in a way the annexation of fiscal policy by the same reactionary forces that produced an “independent” ECB with a single mandate was inevitable once you conceded that there were aspects of economic policy in the EU that should be outside of popular democratic control – why stop at monetary policy? Just look at Germany to see how a powerful central bank helps skew the economic debate permanently to the right. (As someone pointed out there is literature suggesting that independent central banks, because they are powerful institutions with a generally right wing agenda, try to bring right wing governments into power and keep them there.)

Make the electorate feel disenfranchised, and you play into the hands of the populists.

I read an interview with Letta in the Guardian where he expressed similar sentiments but I think one has to ask oneself whether the real problem is rightwing extremism (which is what we mean by “populism” but can not say because the right is currently politically dominant in the EU) or the kind of indifference to the concerns of the general population in the less powerful states that the European Union’s technocrats show.

In other words, a mores serious problem in the Eurozone than incipient right wing populism is entrenched elitism and it is not that the population of the debtor countries might start to feel disenfranchised but that they are.

@ francis

Right now we have a slump in Europe. Even in Germany, many people have no decent career prospects. Even in the US, the Middle Class has been progressively hollowed out and indebted. As for Ireland, and other parts of the so-called European periphery, the employment situation is dire.

You say:
‘The problem in economics is, that it is practically always a mixture of several effects of similar size, with conscious actors, and most numbers not really precisely definable.’

Economics is a science, with a huge and fascinating literature, going back to Aristotle and beyond. Inevitably some of it is not easy to grasp for a non-specialist, but a basic familiarity with the texts seems the minimum requirement for intelligent citizenship.

All boards attract trolls. I am talking about substantive content. Yannis is making some real and important points about the current state of macroeconomics. His point is that it is not stock-flow consistent and that it disregards the basics of accounting (sectoral balances). There is a very substantial literature on this point, going back to Godley’s work.

While you have an extraordinary capacity to research and link up empirical facts, your background reading is, if I may say so, unnecessarily limited. As a result, and doubtless for historical/cultural reasons also, you have a strong neoliberal bias, even if it is of the more socially responsible ordo-liberal type. If the governments of the creditor countries had been genuinely economically responsible, they would never have allowed the finance sector to run riot with credit issuance. As politicians tend to do, they played politics instead.

Notwithstanding the ‘satisfactory’ state of affairs in Germany, the record shows that aggregate demand matters, and that macroeconomics is not just microeconomics writ large. A nation is not a business, and a community of nations is not the same as an MNC. As the Dork of Cork used to put it, we need statespersons now, and we haven’t got them.

Maybe you could try reducing your prejudices against words beginning with K. What about the one in a million possibility that they could have part of the truth ? Ars longa vita brevis.

Of course Germans mostly pulled themselves back up after the last War, but they were assisted in the Western part by a US government which was employing Keynesian 🙂 demand management to create the resources for assistance.

Our economics, and our history, is more complex and interdependent than you seem to recognise. Being weak and peripheral doesn’t always make people stupid. The Hare and the Tortoise comes to mind.

@ Paul Quigley,
many economists are not that good at equations, and the macro economists tend to glance over most of the nitty gritty of how are data obtained and how precise is that.
(To provide some perspective, for myself I always had perfect grades in theoretical physics, up to PhD, and the math needed for that)

To shake your belief in accounting identities in the real world a little bit, I refer you to
and within that to tableS.1.a Total Economy – Current Account, line 9 and 10, showing a solid income surplus of some yearly little 250 b$ for the US, despite some nominal 4 trillion accumulated current account deficit.
This is a well known thing, called “dark matter”, see e.g.

To further this a little bit, please also look at table F.105.c Consolidated Statement for Federal, State, and Local Governments, line 58 “discrepancy”, and line 60 “Adjustments between NIPA and FOF”, two different versions of what SHOULD be essentially the same, with numbers of up to 1018 billion $/year, to give you some real world impression of accounting identities.

hmm, looking so far in vain at my email for a comment,

let me try it this way:

Now to Yanis.

I believe I learned first about him in a german economics blog, kantoos economics, now taken private, apparently run by an anonymous non-German economics PhD student, and when somebody pointed out, that while yanis was throwing up all the fairy dust of red and blue bonds, he was at the same time, in his own greek blog pretty openly declaring, that Greece would never pay back one cent of these bonds.

Looking at his “wonkish paper”, where are the equations linking variables, where are any numbers?

This is just a typical for people, like a guy who paintshopped himself into pictures with nobel prize winners. Cargo cult. Complete crap, producing meaningless graphs to impress gullible people. Paul Krugman had at least some style with his hyper simplificactions.

Just citing the main contributor on yanis blog, in that specific thread:
“Dean Plassaras on November 4, 2013 at 02:59 said:
This is for the Greek audience but I think Chatzimarkakis is precisely the type of politician we need representing us in Brussels. He has my unconditional vote:”

Priceless ! Falling of my stool !

wiki/Jorgo_Chatzimarkakis, so far an fdp MEP guy, “guilty of deception. In his doctoral thesis he adopted long passages verbatim from foreign works” and got his fake PhD revoked.

@ francis

I’ll trey to keep this as simple as I can. Macroeconomics matters. Our ‘official’ version of macroeconomics is deeply flawed.

Your talk about ‘perfect’ is, with respect, a reflection of national cultural bias. The world is a messy place, and too much certainty can be dangerous. This is a shared problem.

@ paul quigley,

I just realized that was tripping about my own feet in certain ways.

What I wanted to say was, that you dont need difficult math for economics.

Krugman was just the one eyed under the blind, and impressed a lot of people with his gimmickry.

And that is pretty obvious for people with a solid math background and some years of engineering real life experience. I am certainly not the only one.

That there is no point in making “perfect”, analytical models in messy multi-variable situations.

But it didn’t come across to you that way, and that is my problem, I have to work on, because you are not the only one.

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