This morning’s Eurointelligence briefing put me on to this article in Les Echos, which in turn led me to this Ipsos opinion poll. It contains several sobering findings, notably with respect to foreigners. But the finding that struck me most — since this is something I have been writing about for years now — is that a majority of French working class voters now want to leave the Euro. Indeed, only 34% of French workers think that EU membership is a good thing.
Isn’t it amazing how short run blips in various economic indicators can lead powerful people to assume that all is well with the EMU project? It is slow moving variables — long term unemployment, gradual shifts in public opinion, and so on — that pose the greatest threat to the Euro’s survival. If the far right does as well as people now seem to think it will in the European elections, this will presumably be presented in the media as a “shock” to the system, but has it not been obvious since 2010 at the latest that something like this was likely, given Eurozone macroeconomic policies? And has it not been obvious for years that actually existing EMU is harming the broader European project?
Europe’s political leaders should remember what Ernest Hemingway said about bankruptcy.
49 replies on “Class divides and European integration, yet again”
Sadly the only kind of bankruptcy Europe’s political leaders seem to understand is the literal kind that hits the portfolios of rentiers.
Prof. O’Rourke, from your June 14th 2008 piece.
” … maintain the benefits of open international markets…”
Which are? And whom are the ‘losers’ then? – since there have to be ‘winners’. And if those losses involve the permanent loss (or significant reductions) of incomes derived from waged-labour employments – then what? If you promote support and invoke economic policies which eventuate in a reduction of ‘consumer demand’ – then whither your Consumer Society in terms of its mandatory, continual and exponentially increasing, consumption of goods and services?
They gave Louis and Antoinette a somewhat radical ‘haircut’ for suggesting that hungry folk whose low incomes could not buy bread – should substitute to cake – Economic Theory posits that this is what should have happened in a ‘Free Market’. So how did that work out, then? Not so a good I believe!
So what does modern Irish Economic Woman do when her income decreases or disappears? Substitute to their Credit Card(s)? Now that’s what I call really ‘clever’ career advice!
If voting Yes in that referendum meant that all state salaries and pensions and waged-labour incomes above 90,000 would be taxed at 100% – and all non-employed citizens would get an automatic 50% increase in their state income – and there would also a juicy 50% tax on all nature of un-earned incomes and all property transactions and inter vivos transfers. Guess who would have voted No? Hmmmm …
“My claim is simply that economic interests were one factor among many, and should not be ignored. If working-class and rural voters are systematically voting against further European integration, that is something which Europe’s political leadership will need to listen to.”
No contemporary political leader gives a rat’s ass about ‘public opinion’. All they hear is what their immediate supporters and spokesmodels tell them. “You are really, really wonderful minister! “You are working SO hard on our behalf.” And they actually believe this PR guff.
I live in DL. I voted No. I knew then, and I still know now, what is involved. The dilution of our Constitutional Republic in favour of un-elected and semi-elected officials and European parliamentarians. They cannot deploy force – though they would; so they deploy forceful economic means instead. Working, so far. So far!
It may take a triple-whammy of inconclusive Irish parliamentary elections to ‘shake’ the Irish political parties (and our bureaucrats) into implementing the required, modernizing, political and economic restructurings (reforms are simply window-dressing). We’ll see.
A current example of what Hemingway had in mind?
Applying his character’s experience to the EA, and a currency that is effectively the world’s second reserve currency, would not, however, be very credible.
Is anyone following the Bitcoin story ?
“It is a good thing that he resigned. It is a bad thing that he needed to resign,” said Roger Ver, an angel investor in a string of start-ups often known as “Bitcoin Jesus”
“The lesson is not that nobody can be trusted,” wrote Mr Voorhees. “The proper lesson, if I may suggest, is this: we are building a new financial order, and those of us building it, investing in it, and growing it, will pay the price of bringing it to the world. This is the harsh truth. We are building the channels, the bridges, and the towers of tomorrow’s finance, and we put ourselves at risk in doing so.”
“Indeed, only 34% of French workers think that EU membership is a good thing.”
That should not come as a surprise.
The EU, and certainly the EZ, is no longer a positive economic and social force, that contributes to improving the lives of many EU citizens.
The EU, and certainly the EZ, has moved to being a collection of institutions, whose primary role appears to be to protect wealth and the institutions that control wealth, primarily banking and financial institutions.
One could say that workers, particularly low paid workers, have been targeted in what appears to be an all war to protect wealth at all costs.
It is a pity, albeit convenient for bureaucrats, that the focus of discontent has gathered around ‘far right’ groups, rather than left of centre groups, that should be doing more to oppose the current EZ agenda that has been commandeered by financial elites and their supporters.
Ehhh, you do know that Kevin O’Rourke is speaking figuratively about bankruptcy here? As in morally bankrupt, no credibility left to spend, crisis of authority – that sort of thing?
Seafóid keeps banging on about this but you seem to be oblivious to it. Elite complacency about the undeniable failure of EU macroeconomic policy and EMU will gradually undermine the common interests of EU countries until suddenly there will be nothing left.
If the people of France grow tired of being in a currency union with Germany and democracy works its magic the Euro might well live on as some Deutsche bloc currency (or with Germany being the only large country left using it).
The Euro would still be a strong currency, it is just the EU that would be weak.
Italy – and France – remain the two major risk factors.
@ DOCM: Hi, there. Reading that Joe Salerno book on ‘Money’. Not very whelmed by what he has to say. These von Mises folk? They would not be another group or school of economic, ideological astrologers?
And on the subject of astrological ‘forecasts’ – have you read the utter sh*te from one of our ‘leading’* economists – Blanchard at voxeu.org/article/world-recovery-really-strengthening?
* Leading us to where exactly?
And as for our ‘judges’ rending their cloaks over the inability to appoint the ‘best’! A sample of ONE is now a positive ‘trend’ – which will end in what? – a disaster? Sweet divine!
Complacency is very dangerous. Especially if you keep on talking about sticking to what is politically possible.
Clare Balding- “if you want something to be important you have to make it important”
re EU forecasts. The Commission expects Ireland to miss the 3% deficit target by a wide margin in 2015 (4.3%) and also believes that the output gap will turn positive then so the structural deficit is even higher at 4.6% which implies the need for further significant adjustments. Only a forecast of course but different tack from Government and consensus….
Elite complacency has grown bloated on a diet of servility and willful ignorance. Why has no senior figure in the EU dared to call the current plan a failure?
Olli Rehn’s quarter of a million Euro annual salary might be one of the reasons and the general feeling that the institutions of the EU are there to serve the interests of the institutions of the EU.
Obligatory J M Keynes quote of the day:
“Words ought to be a little wild for they are the assault of thoughts on the unthinking.”
Quoting Ernest Hemingway who shot himself as his father also did, may be appropriate as the poll results point to a depressed French public. Official unemployment is more than double the German harmonised rate of 5.2%.
Globalisation, politicians, the euro and so on are handy to blame.
By 2015, German and French GDP will have grown by 25% since 1999, the year of the launch of the euro – not very impressive but there is no magic formula for sustainable jobs and Richard Freeman, the Harvard economist, has calculated that: “In 1980 the global workforce consisted of workers in the advanced countries, parts of Africa and most of Latin America. Approximately 960m persons worked in these economies. Population growth — largely in poorer countries — increased the number employed in these economies to about 1.46bn workers by 2000.
But in the 1980s and 1990s, workers from China, India and the former Soviet bloc entered the global labour pool. Of course, these workers had existed before then. The difference, though, was that their economies suddenly joined the global system of production and consumption. In 2000, those countries contributed 1.47bn workers to the global labour pool — effectively doubling the size of the world’s now-connected workforce.”
A temporary stimulus would not solve France’s economic problems as money printing alone will not solve Japan’s: a country can be prosperous and not.
Just over a quarter century after the USS Missouri sailed into Tokyo Harbour to accept surrender, Time magazine featured Akio Morita, Sony co-founder, on its cover with the slogan: “How to Cope with Japan’s Business Invasion.” Today Samsung announced that it has sold more than 200 million Galaxy S smartphones.
France’s overall debt has risen from 174% of GDP in 1999 to 262% in 2012 while German debt hardly changed. It has a big number of small firms (reducing export potential) and profitability is much lower than in German firms.
” Why has no senior figure in the EU dared to call the current plan a failure?”
Kevin I ‘m not sure the “right wing” label blunderbuss is really appropriate to Eurosceptic political movements. Most Ukip voters (not the nutty activists) would just laugh at anyone who suggested they were right wing. There are pressures on ordinary people that the elites of politics, journalism and academia just don’t experience. To them a guy actually in tune with their concerns is a left wing politician not a right winger.
“Most Ukip voters (not the nutty activists) would just laugh at anyone who suggested they were right wing”
I thought they were mostly taking votes from the Tories
Leaving Europe seems to be more of a right wing thing
Didn’t Downing St release a report on the benefits of being in the Single Market at the height of the floods when nobody was listening ?
Wilders is right wing. The Swiss SVP is right wing. So is Marine le Pen.
And Golden Dawn
I think EU incompetence has the potential to generate cross party opposition but that for the moment it’s not as much a thing on the left. Maybe because the left is incoherent.
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Seafood the ‘left’ is currently non-existent in any real sense.
Tony Benn used to talk about politicians as being either Weathercocks or Signposts. The careerists who currently wrap themselves in the ‘Left’ brand are Weathercocks to an even greater extent than the rest.
Charles Edouard of Swiss TV on the Phillips curve
But what are the people who are not Tories or CDU ? Centrists ?
Charles Edouard on Derivatives
They are the just the next group in the queue for a turn on the Merry-Go-Round. Doesn’t matter what colour or brand of umbrella they are standing under while they wait, all umbrellas serve the same purpose for these guys. When they were in their late teens and learning the stock party positions and arguments most of them believed the guff. Later on they matured and now they mainly just want to capitalise on, and monetise as much as possible, that investment of time and effort.
@political science heads
“… now they mainly just want to capitalise on, and monetise as much as possible, that investment of time and effort” [grumpy, 2014]
Critically discuss, in less than 100 words, wrt to The Irish Labour Party Elite in the context of possibly resolving the EZ crisis.
There is one major leader in the world today who I think is leftist: Shinzo Abe. Most leftists would think he’s right wing (and they’d be correct, on some social issues). But economically he is on the left.
Sarkozy was more to the left that Francois Hollande. Hollande is just a good little doggie.
Just Google Search “Hollande austerity”. Says everythig about why most French think the EU is turd-buckets.
What happened to the intellectual drift of 1968? Any serious intellectual still left in France at the mo?
Maybe the 1968 class just grew up. After all if you are not a socialist in your 20s you have no heart and if you are still a lefty in your 50s …. No brains.
Or maybe they just died of substance abuse.
After Tull amused me with the substance abuse:
crf’s: Shinzo Abe and his comfort women as a leftist, yeehaa : – )
the endless attempts to micromanage are just the main problem of the brussels bureaucracy monster
just the latest example coming in:
And while we have a 5% hurdle for the one important parliament, the Bundestag, the BVerfG ruled against the 3% for the talking shop EP:
“After all if you are not a socialist in your 20s you have no heart and if you are still a lefty in your 50s …. No brains.”
We are now in year 34 of morning in America. It has been very kind to the plutocrats.
The right wing agenda won and the stockmarket is banjaxed.
Like Hef on Vi##ra. Sure it still goes up every so often but honestly does anyone believe it? Most of the girls are just there for the money.
Morgan Stanley struggle to make 10%. Ballyhaunis Credit Union can do better than that. Just saying.
Larry Summers brought up the subject of secular stagnation last November.
A big load of externalities that were not priced in hit the UK last month.
I dunno if the right wing has any answers either, frankly.
“What brought it on?”
“Friends,” said Mike. “I had a lot of friends. False friends. Then I had creditors, too. Probably had more creditors than anybody in England.”
Rather small sample what 1,000 glad they could find some French “workers” rather elusive.Russell index just hit all time high!
“Confidence in developed economies like North America and western Europe has shot up since last year, according to a survey of investors across 23 countries.
Some 27 percent of the 15,749 investors surveyed by asset management company Schroders said western Europe offered the best prospect of returns in 2014, up from just 10 percent last year. Meanwhile, almost one-third (31 percent) of investors saw North America delivering the strongest returns, up from 18 percent in 2013.”
“Some 27 percent of the 15,749 investors surveyed by asset management company Schroders said western Europe offered the best prospect of returns in 2014, up from just 10 percent last year”
What was it Joe Kennedy said about shoe shiners ?
The run started in March 09.
@seafoid 100% of American workers think mothers day is a good thing….
S&P is within 3% of what I predicted in 2005,
Dax would be 11% overvalued, if 5 year rate wouldnt be 2% x 5 year undervalued,
because the greatest currency manipulator on earth, the Fed wouldnt have tuned the yield curve, to tune the mortgage rates and therefore house prices, a.k.a. Case Shiller index,
who said in what movie: “Boring , bad, idiots, criminals” in response to a similar situation?
Well, and now they would need some global inflation to kind of get out the consequences of their actions ….. : – )
From my dead cold hands ………
The most interesting thing I read in the past few weeks is that no progress has been made in economics since David Ricardo and Karl Marx. This was in a paper commenting on James Galbraith’s latest book which is widely praised.
In accordance with my Kerry need to keep an eye on things. I spent three unexciting hours at a meeting to elect the founding executive committee of a federal constituency. It takes the place of being in the bar or fingering the Rosary beads in Ireland.
The EMU might not have been absolutely necessary for Germany, France or Italy with their 50-80 million populations. For the countries with populations below 25 million it is a life saver.
When I envisage Ireland on its own I see a lifeboat being swamped in the Atlantic off the Blaskets. In the EMU it is on davits on the upper deck of an ocean liner.
Without the ECB backing our government debt, what would our interest rate be on the open market, my guess would be 8%+. As Bridey Murphy sez, tanks be to God for Mario Draghi, he shud be canonised.
in principle, the counter example Denmark. With a spandex tight peg to the Euro.
But it requires a lot of discipline and social cohesion. Could you imagine that in Ireland?
FYI this interesting report in Handelsblatt.
Merkel’s “reform contracts” seem set for oblivion and deservedly so as they are based on a false analysis i.e. that all the fault with regard to what ails the EA lies with the countries in difficulties. This erroneous thesis had a good innings as long as there was a clear division between the virtuous core and the sinning periphery and at least a few countries other than Germany in the former. As the Commission’s appropriately named forecast confirms, this no longer holds true (with the possible exception of Austria).
I believe in moms, apple pie and the equity risk premium
“Many researchers do in fact note that decreasing labour share, and therefore increasing capital share, of national income has been a global trend since the 1970s. What few say however is that this is trend is a result of policy choices informed by neoliberal ideology. We certainly could have avoided this trend if we desired. It was simply a matter of different policy choices. And to reverse the trend is also very simple, should be desire to do so.
In a mere technical sense, reversing the trend couldn’t be easier. Off hand I can think of dozens of policies; from inheritance taxes, greater public transparency of personal income data (including trusts), land taxes, improving the power of shareholders in the determination of executive pay, grants of land or capital for public service, and more. The options are limitless.
The barrier to change is modern realpolitik. Those at the top have captured the political process, partly by capturing the media. Any change will entail a massive redistribution of wealth from those who bankroll the political parties, to those with the least resources, the least education and the least interest.
This is the heart of the matter, and one we repeatedly avoid discussing.”
The Irish tend to get caught up in idee fixe. For example before joining the EuroZone there were decades when the Irish Pound was tied to the British Pound in a fixed rate arrangement that involved backing from both the British and the US. The Irish Pound was still vulnerable to attack by the Soros’ of the world, as you know he brought down the British Pound on one occasion. Also a man’s word is his bond (as at a cattle Fair), it is a small country and reputation matters. There is no anonymity in Ireland as there is in the large cities abroad.
This had a lot to do with the State honouring debts of private banks at taxpayer expense. The shame of having all the private Irish banks going bankrupt was too much for the Government of the day and its successor to face. In many countries they would be put into receivership and the courts would sort it out. Being hardened by years abroad and understanding that business is business and the law is the law and having experienced bank collapses (deposit insured) I know that life goes on. That is not what the Irish Government understood as they were in their overwrought emotional state, shame, guilt, loss of reputation. The world needs hard bitten, rational, cold people on occasion.
Ireland should not be mistaken for a country that was industrialised 200 to 300 hundred years ago. Think of it as nation of farmers and small businesses whose people are morally and politically conservative to the point where it is a problem. I know there are large foreign owned businesses but they do not elect Irish governments. As for discipline, within the culture it is positively brutal as my wife pointed out to me.
Who introduced trackers to Ireland ?
I believe the banks are losing 700m a year on them at the moment. That’s taxpayer cash , at the end of the day.
And this is surely linked to the fall in mortgage lending to 1970s levels. Why are tracker contracts still valid ? Who decides this ?
Is there not a very strong whiff of WTF over the whole tracker business ?
Why are trackers valid?
To save the borrower, lest he or or she bring down the lender.
Imho, it is the lender that is being saved.
You are right when you say it saves the lender since the lenders cost of money is directly tied to LIBOR or what is known as the Prime lending rate in a lot of countries. When rates are historically low the tracking borrower is at most risk from rising rates. In an ideal world the lender would sell bonds with expiry dates to match fixed rate mortgage exposure. The lender would then have mortgage prepayment penalties to compensate for the prebought risk coverage.
@ MH: ” … commenting on James Galbraith’s latest book which is widely praised.”
Galbraith fils needs to be read, carefully and in parallel, with Blyth and Krippner – at the very least. Our current global financial and economic mess has been at least four decades in the making. Each ‘paints’ only a portion of the full canvas. The Irish dimension is another canvas entirely.
Blyth: ‘Austerity’ – 2013.
Krippner: ‘Capitalizing on Crisis’ -2011.
@ francis: “But it requires a lot of discipline and social cohesion. Could you imagine that in Ireland?”
No imagination needed francis. We did it in 1979 – if my memory serves me. First papal visit!
@ DO’D: I don’t know that reversing out of ‘Neoliberal Lane’ (its a damn cul-de-sac) will be all that easy. But your suggestions are valid. We need (urgently) policies to ensure a minimum income for persons who either cannot engage in waged-labour or who could, but there are no longer suitable opportunities available for them. We inhabit a consumer economy and one needs the appropriate income for all necessaries.
We need policies to ensure that property (especially arable land) is available for purchase at prices that a family could afford. And policies which minimize the impact of all taxes, duties, social and property charges on waged-labour incomes. Doable – but unlikely in the present. Maybe three parliamentary elections hence. When the dung is well and truly airborne.
@seafoid I believe in a higher power and Mario doing whatever it takes,pity he has short hands and long pockets,the French missed their targets again will have move the goal posts for them.
“In the Commission’s outlook, France too will miss a goal to reduce its deficit below 3 percent despite being given two extra years to meet this target. The Commission predicted a shortfall of 4.0 percent this year and 3.9 percent in 2015.
President Francois Hollande’s government is hoping that the recovery will help it cut the public deficit, although the national audit office has said this is optimistic.”
If trackers are losing the banks 700m and regular mortgages are jacked up to subsidise them why aren’t trackers loaded to make it fairer ? Is it because so many trackers are knackered ? Is there a BTL bias towards trackers ? What is it ?
It would require a high degree of incompetence for a bank to lose money on tracker mortgages. Normally banks borrow on the open market 30 day to 1 yr money to fund their variable rate mortgages. It should follow that their mortgage rates go up and down in proportion to their borrowing rates.
Did they gamble on higher short term rates and borrow long in anticipation. That is the only explanation that makes sense to me. This is what happens when incompetents are bailed out. They feel there is no risk so anything goes, because as everyone knows the taxpayers have no choice but to pony up.
You say the banks are losing Euro 700 mln, to me it appears they gambled away Euro 700 mln.
Banking is a simple business about as complex as running a donut shop.
Would Mr O’Rourke be so kind to define ‘far right’?
I agree. They really messed up. They must have had a model that said rates would never fall below 3% or something. They have such little margins with rates on the floor. I can’t get a mortgage tied to base rate now.
I don’t understand why tracker punters should be subsidised. Charge them the market rate FFS. Contract law can always be turned over in extremis.
700m a year is insane.