26 thoughts on “Buti and Mody on Europe”

  1. Not to mention that this statement is completely factually incorrect:

    “structural reforms would also increase domestic demand in the core”

    On the contrary, it is widely accepted that structural reforms in Germany from 2002 (i.e. Hartz I-IV) actively depressed domestic demand. This is precisely what was intended to kick start export-led growth.

    Having said that, it is interesting to hear the DG for Economic and Financial Affairs calling for more inflation in the Eurozone core (shorthand for Germany).

  2. @Aidan

    You could replace “structural reforms” in almost any economic pontification with the term “magic economy improving dust” – it’s that useful and that clever.

    Its also an anagram of:

    “Smarter Cult Furor”

    “Artful Scum Terror”

    and

    “Rarest Fulcrum Rot”

    An economist advocating “structural reforms” is like a management consultant advising a company should be “run a bit better”.

  3. The policy debate at the zero interest bound appears much more vibrant amongst US policy makers (and indeed in the UK) than in the euro area. If structural reform means measures to boost the supply side of the economy the role monetary policy can play in that is now a live issue in the US and appears to have played a significant part in the Fed’s recent decision to move away from QE and to embrace more explicit forward guidance. In other words supply is partly endogenous and therefore influenced by a prolonged period of depressed activity. The euro policy mindset does not seen to envisage that possibility and so national governments are responsible for the supply side.

  4. LOL,

    1. reading Buti, and then looking at
    http://sdw.ecb.europa.eu/quickview.do?SERIES_KEY=ICP.M.U2.N.000000.4.ANR&

    I can not help but laugh at all his false claims
    e.g. “as long as actual Eurozone inflation remains persistently low – well below the 2% inflation target of the ECB.”

    2. Looking at Mody
    Sorry, the resemblance from
    http://www.theguardian.com/commentisfree/2014/jan/05/romania-immigration-uk-stewart-lee

    is just to good to be not mentioned : – )

  5. Hats off to Michael Noonan named european finance minister of the year.
    Welcome to lowry Country,home of the greatest bank and property crash in the history of mankind.

  6. It would indeed be preferable if Marco Buti dealt in specifics and his own country provides ample material for what should be done, could be done and what would only be realistic.

    Whatever labels are used, with a jobless rate of 12.7% in Nov that is the highest in at least 36 years – an that is the official rate, which understates the crisis – compared with 4.8% in Austria and 5.2% in Germany, there is surely need for some change after a precrisis decade of stagnation?

    Italy has an employment rate of 57% for 15-64 year olds compared with France’s 64% and Sweden’s 73%.

  7. An attempt to define “structural reforms” in an EU context might read something as follows: “Multifarious administrative measures that can be taken by government to improve the productive capacity of an economy; and which often are not because of the influence of vested interests and assorted rent-seekers”.

    It is not feasible to set out a list that would apply to the EU in general. As Dan Mclaughlin points out “national governments are responsible for the supply side”. This has, however, little to do with any particular mindset. It happens to be what the Member States have signed up to in the treaties and, if the dusty reception given to the push for reform contracts by Merkel is any guide, no change is likely. Indeed, as the widely reported exchanges between her and other leaders indicate, given the heterogeneous nature of the countries that make up the EU, any change would be politically unrealistic and probably counterproductive.

    The above does not, of course, apply to countries that happen to go broke and become dependent on the “kindness of strangers”. We have our own list, not fully completed.

    @ MH

    Buti happens to be an Italian who works for the Commission not a representative of his country.

  8. @ DOCM

    Thanks but I know where Buti comes from. I’m not suggesting that he gets involved with politics.

    Just saying that without being country specific, he could be more specific about a reform process as he should likely be more aware of the impediments than his boss Olli Rehn.

  9. My response to the two authors is that regional framework agreements will be the way forward; these will establish a One Euro Government; it will establish regional security, stability and sustainability out of a soon coming credit collapse and global financial system breakdown

    Please consider that the bond vigilantes in calling higher in the Benchmark Interest Rate, ^TNX, higher from 2.48%, on October 23, 2013, as well as the failure of debt trade investing and currency carry trade investing on January 2, 2013, were twin extinction events that destroyed the foundation, capstone, and centerpiece of liberalism, that being the investor; and are birthing authoritarianism’s counterpart, the debt serf.

    God fully, totally, and utterly terminated liberalism, and commenced authoritarianism, giving it The full constitution of endtime rule, as presented by the Apostle Paul in Revelation 13:1-4.

    Now, under the paradigm and age of authoritarianism, the focus of attention is on regional governance policies seeking regional security, regional stability, and regional sustainability, which integrate not only banks, but all corporations into the government to assure debt servitude of the debt serf, which comes through the transmission of diktat money. We see this emerging as Mike Mish Shedlock reports on the rising ethic of authoritarian rule Hollande wants to “Get Things Done” by decree, not by passing laws

    Five years of liberalism’s money manager capitalism is going to produce authoritarianism’s Minsky moment. This is seen in Bible Prophecy of Revelation 13:3-4, which foretells of Financial Apocalypse, that is a world wide credit bust and financial system breakdown.

    Club Med, that is Portugal, Italy, Greece and Spain, sovereign, corporate, and banking insolvency, will be the genesis event of the establishment of economic policies of diktat in regional governance in each of the world’s ten regions, and schemes of totalitarian collectivism throughout all of mankind’s seven institutions. As a result, fiat money will become increasingly worthless, while diktat money rises in power to direct mankind’s economic activity.

    Under liberalism, the democratic nation state banker regime, created seigniorage, that is moneyness, and coined fiat money and fiat wealth through Asset Managers, such as, BLK, WDR, EV, STT, WETF, AMG, IVZ, CNS, AMP, PFG, LM, FNGN, BEN, VOYA, DNB, MORN, BR, and BX, where they endeavored to maximize return for investor; these proved to be quite effective in monetary transmission, as the investor, for the most part, became quite wealthy according to his skills and risk profile.

    Creditism, corporatism and globalism were the dynamos of liberalism’s economic activity, whose purpose and focus was for investment return. Economic growth metrics, such as job creation, ADP Employment, increasing GDP, are hokum, that is they are exogenous to liberalism’s purpose of providing investment return for the investor based upon one’s risk profile. Monetary transmission under liberalism was quite effective in a five investment areas: 1) Risk Investing, 2) Global Spending Investing, 3) Global Growth Investing, 4) Consumer Spending Investing and 5) Eurozone Countries.

    Under authoritarianism, in response to a deflatinary bust, leaders will meet in summits to renounce national sovereignty and announce regional framework agreements which provide regional pooled sovereignty to establish the authority for diktat policies of regional governance.

    The beast regime, replaces the banker regime, and creates seigniorage, that is moneyness, by minting money through the word, will and way of regional nannycrats; these coin diktat money through the mandates of statist public private partnerships, and in their mandates administering and overseeing the factors of production, banking, fiscal spending, commerce and trade, all for establishing regional security, stability, and security, in their role of overseeing the debt serf.

    Banks everywhere will be integrated into the government and be known as government banks, or govbanks for short; thus the Excess Reserves, will be captured by the beast regime, and not being released will not pose an inflationary threat. The Regional Banks, KRE, and the Too Big To Fail Banks, along with greatly downsized Asset Managers, BLK, WDR, EV, STT,WETF, AMG, IVZ, CNS, AMP, PFG, LM, FNGN, BEN, VOYA, DNB, MORN, BR, and BX, will all be made whole and sterilized by integration into the US Federal Reserve. The European Financials, EUFN, will be integrated into the ECB in Frankfurt, where all lending will be supervised and banks overseen. Such will be the mechanism of authoritarianism’s scheme of totalitarian collectivism.

    Regionalism is the singular dynamo of economic activity under authoritarianism. Monetary transmission will become quite effective for a number of people, as bible prophecy reveals “they worshiped and followed after the beast, saying who can make war against it”, Revelation 13:3-4.

  10. @ MH

    But Buti is involved in politics; European politics, not Italian. I also attempted to explain why the concept of “structural reforms” will stay rather vague as it is for implementation at a national level (although Van Rompuy and Barroso have been mandated to come up with a concept by November; just when both are most probably departing!).

    I posted this link to a fascinating Der Spiegel article on the Iceland thread.

    http://www.spiegel.de/international/europe/relations-worsen-between-angela-merkel-and-european-commission-a-941243.html

    On the energy competition issue, this extract in particular.

    “Commission President José Manuel Barroso was one of the first targets of her anger. At the EU summit, Merkel took the Portuguese politician aside and flatly told him that the proceedings by the Commission against Germany’s renewable law — the German Energies Act (EEG) — on the grounds it breaches EU competition regulations was an “affront.” ”

    If the report is true, and it was clearly based on a briefing, Merkel needs to get out her treaty and read it a bit more carefully, especially Article 17.3 TEU which contains the following sentence; “In carrying out its responsibilities, the Commission shall be completely independent. … the members of the Commission shall neither seek nor take instructions from any government or any other institution,body, office or entity”.

    This is the keystone of the entire EU institutional edifice. If the Commission can be influenced in one of its core competences, that of being the competition authority for the EU as a whole, where would an approach such as this end? Luckily, other countries, and probably her foreign minister (for the second time) Steinmeier, have a better appreciation of the political realities.

  11. @ Flj

    “But while Greek mythology provided many of the cultural icons for European unity, the fate of the European project will not be shaped by Greece alone.”

    That is about the truest comment in the piece by John Palmer. He also seems to overlook that 2014 is the year of the European elections and the campaigns will dominate everything. That on immigration promises to be especially nasty.

  12. @ Flj

    AEP is all over the place as usual. 2014 is going to be a big disappointment to him.

    The IMF is not part of the EU (although it was on Merkel’s insistence that it became involved for the rather obvious reason that she, and Schaeuble, feared that Germany would be left holding the financial baby).

    The ECB’s level of independence is without parallel among central banks which is just as well as it is the one institution keeping the show on the road.

    Despite two terms, Barroso has left little mark. Tilting at him is to tilt at a windmill.

  13. DOCM,

    IMHO, the IMF was involved for 2 reasons:

    1. Only they had the expertise to draw up turn-around plans, at that time.
    Now we have this expertise in Europe, better than them, I believe.

    2. Without the IMF drawing up the plans, the racist hate mongering against Germany would have been a lot more severe

  14. @Francis

    I would accept reason 1 and that involved the Commission ( as part of the Troika) seeking and accepting instruction from an Institution in violation of the provisions quoted by DOCM above.
    But then … many rules and regulation have been ignored by the participants in a time of crisis.

    I wonder what your constitutional court will rule…it’s taking them a long time to make up the new rules.

  15. One thing I notice about “structural reforms” is that they always apply to ordinary workers. Taxing Europe’s Scrooge McDucks at punitive rates to fund demand expansion would also count as structural reform.

  16. Fiatlux,

    I actually think, if the Bundesverfassungsgericht could just say:

    hmrgh garble murmph

    and let everybody wonder what that is supposed to mean for the next 50 years or so

    it would be the best for everybody involved : – )

  17. Francis,
    Perhaps the most contributory factor behind the modest improvement in the EZ economy has been a outbreak of pragmatism in the core over the last 12 months. You rarely hear anything from Crazy Jens anymore. One wonders has Draghi locked him in the cellar of the ECB tower. Perhaps he has gone away, taken out a few of Helicopter Ben’s papers and figured out that he Jens was talking b…ix all along.

  18. Tull,

    The BVG can not write “hmrgh garble murmph”,

    but it can say, it needs a little more time, given new evidence and developments, like AQR : – )

    And since interest rates are coming down nicely, even 10-yr Portugal now at 5.3%, reducing Draghi’s valid concerns of country risk spilling too much into the corporate sectors, I dont see any urgent need for Weidmann / Diesselboom to make statements.

    I agree with Draghi, that the ECB has some more legal tools available.

    Apparently the nuclear option OMT is not needed to be exercised, a little bit like Steinbrücks 7th cavallry comments (The indians just need to know it is there.

    And now we wait how things are developing. It seems that other countries like France, NL, and UK want to take it out on an overreaching European Commision even more than us. The EU elections will be interesting to watch.

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