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Eurozone: beyond bank bailouts? « Previous | |Next »
June 13, 2012

The eurocrisis as Paul Krugman points out now has a familiar pattern. The economy slides, unemployment soars, banks get into trouble, governments rush to the rescue — but somehow it’s only the banks that get rescued, not the unemployed.

The European policy elite always ready to spring into action to defend the banks, but otherwise completely unwilling to admit that its policies are failing the people the economy is supposed to serve. So a crisis of the market has been transformed by free market ideologues into a crisis of public spending.

Across Europe, the biggest slump since the 1930s has been used to push through policies straight out of some neo-liberal playbook: the slashing of taxes on the rich and major corporations; the selling off of public services; and a bonfire of workers' rights.

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So a crisis of the market was cleverly transformed by free market ideologues into a crisis of public spending. Across Europe, the biggest slump since the 1930s has been used to push through policies straight out of some right-wing dream: the slashing of taxes on the rich and major corporations; the selling off of public services; and a bonfire of workers' rights.

Will there be any real policy action that goes beyond bank bailouts?

Charles Grant in Germans, the Euro and the Painful Truth in the New York Times says that:

German officials know that a healthy euro requires deeper euro-zone integration. They recognize the need for some sort of “banking union.” They accept that they will have to talk about “euro bonds” — pooled borrowing for the euro zone — but say that a fiscal union enforcing budgetary discipline must come first. They want an “economic union” that would push the euro zone’s weaker members to become more competitive. That would mean giving the European Commission the means to cajole governments to alter policies in areas such as pensions, labor markets, privatization and company taxation.

Meanwhile the backlash against austerity is emerging for good reason: the politics of austerity has sucked growth out of the economies in Greece , Ireland, Spain failed to tackle debt, dramatically increased unemployment, and devastated living standards.

| Posted by Gary Sauer-Thompson at 10:48 PM | | Comments (4)
Comments

Comments

"Portugal, which – after being bailed out by the EU and IMF – is pushing through a far-reaching free market agenda."

The first wave of the most radical privatisation programme in the country's history is under way, including the selling off of energy, water, public transport and the national airline. VAT on electricity and gas has been hiked from 6 per cent to 23 per cent, driving up energy bills; many public sector workers are facing a drop in income of a quarter; and unemployment benefits have been slashed by nearly a fifth.

Berlin has realized that it has no choice but to fund Spain's and other bailouts.

The price is all eurozone members would be required to balance their budgets. Borrowing would be permitted only if approved by a Europe-wide finance minister, a position that would have to be created and supported by a select group of eurozone finance ministers. If approved, money could be borrowed by issuing eurobonds.

So there is an issue of national sovereignty and democracy to confronted, if there is to be greater Eurozone integration

The ability to manage a national budget, including the right to borrow, is held to be a central element of national sovereignty.

If the right to borrow is transferred from national governments to unelected technocrats appointed by a multinational entity, a profound transformation of democracy in Europe will take place.

The core question confronting Europe is to what the extent to which European publics are prepared to cede significant elements of national sovereignty in exchange for secured lines of credit, subject to the authority of elected technocrats.