Friday, June 19, 2015

Bad News for the Eurozone

In two recent news stories here:
Richard Orange, “Denmark election: Right-wing Eurosceptics look set to form a new government,” Independent, 18 June 2015.

Ben Chu, “Desperate Greeks turn to Vladimir Putin for help as country teeters on edge of bankruptcy,” Independent, 18 June 2015.
Could there be a greater tribute to the incompetence and stupidity of the Eurozone leaders?

First, there is the mind-numbing neoliberal economic incompetence that has caused depressions on the periphery of Europe (e.g., Ireland, Spain, Greece, the Baltic states) and economic conditions in the centre that are hardly much to boast about (e.g., unnecessarily high unemployment, asset bubbles, insanely high housing prices, unsustainably high private debt levels, etc.).

Secondly, there has been a steady rise of anti-EU right-wing parties in Europe and now we may well be seeing signs that some nations like Greece will be driven into geo-political alliances with Russia – just to avoid the anti-democratic Eurozone political and economic system.

In the UK in the recent election, the surprise result (actually probably not that surprising) was that the vehemently anti-EU UKIP party became the third largest party in terms of percentage of the vote (but owing to the first-past-the-post system in the UK only obtained one seat in the House of Commons).

One major reason why the Labour party lost was that UKIP attracted a significant number of Labour voters or swing voters who would have voted for Labour, just as I predicted here.

All in all, I see no reason to doubt that the EU is rapidly heading into a political crisis, and it will be exacerbated by any new economic crisis in the future.


  1. What you object to and describe as anti democratic is in fact democracy in action, isn't it? Hasn't more than one country rejected tighter integration in referenda, only to have that rejection ignored? That is anti-democratic.

    1. Ken B,

      The Eurozone is profoundly anti-democratic: it robs governments of fiscal and monetary independence. This is why Austrians like Jesus Huerta de Soto love the euro:

      In fact, the EU and Eurozone have been rejected just as often as it has been accepted by the voting public:

      (1) Treaty of Lisbon referendum:
      Ireland - 53.2% against (12 June 2008)

      (2) referenda on the Treaty establishing a Constitution for Europe (TCE):
      France - 54.9% against (29 May 2005)
      Netherlands - 61.5% against (1 June 2005)

    2. “The Eurozone is profoundly anti-democratic: it robs governments of fiscal and monetary independence.” That’s not a brilliant objection to the EZ.

      Obviously the EZ “robs” members of independence. That INVARIABLY happens when you join any sort union. Scotland or Yorkshire lose independence in a hundred ways as a result of being part of the UK. But for most of the last century both have reckoned that the advantages of union out weigh the disadvantages.

      In contrast, if the EU/EZ authorities are ignoring the wishes of the people, as is possibly the case to judge from your points “1” and “2”, then certainly that’s undemocratic.

  2. UKIP took more votes from the Conservatives than Labour. Without them, the Tories would have won by a greater margin.

    UKIP won votes by being anti-immigration, not anti-Eurozone, which The UK is not a part of.

    The "neo-liberal" Tory business secretary shares your objective of full-employment.

    1. "The "neo-liberal" Tory business secretary shares your objective of full-employment.

      You mean believes in full employment by means of expansionary austerity? You might as well believe in fairy tales or the Loch Ness monster.

      As for the EU and remaining in it, these are major issues in British politics:

  3. Does "expansionary austerity" mean falling unemployment and economic growth while the budget deficit and government spending are falling in relation to GDP? Because that's a pretty good description of what is happening in the UK right now.

    1. Anonymous,

      There are important facts about the UK economy:

      (1) The UK avoided depression because of the large Keynesian stimulus and QE to save the banking sector implemented by Labour in 2008-2010.

      (2) the extent of Tory austerity from 2010 is actually grossly exaggerated:

      Tory austerity has basically been a weak form of fiscal stimulus, with budget deficits still remaining. The UK has also been lucky and obtained export led growth.

      (3) But the UK could have brought unemployment right down years ago through strong expansionary fiscal policy, as other countries have done.

      (4) If you think austerity works, have a close look at Ireland, Greece or the Baltic states where governments pursued contractionary fiscal policy far worse than the UK -- and the result was disaster.

  4. I don't even know what "austerity" means in the sense used by economists critical of government policies. It s meaningful to call policies consistent with economic growth and falling unemployment austerity? Why is seeking to limit public expenditure "austerity" if people's living standards are rising, on the whole?
    Incidentally, Ireland has the fastest growing economy in the EU.

    1. Ireland may have a high growth rate in 2014, but that ignores its wretched growth rates from 2008-2013:

      2008 | -2.6
      2009 | -6.4
      2010 | -0.3
      2011 | 2.8
      2012 | -0.3
      2013 | 0.2

      The fiscal contraction in Ireland was a disaster.

      Analysis of Ireland here:

    2. What's more, Ireland's GDP today is still lower than it was in 2008. That is a disaster.

    3. So the "austerity" of 2014 is to blame for the contraction in 2008-2010? That's what you need to argue that the "austerity" is to blame for the "disaster".

    4. Agreed. The word austerity is thrown around in a very indiscriminate way by the cattering classes. The result is that the word is now near meaningless.

    5. "So the "austerity" of 2014 is to blame for the contraction in 2008-2010?


      No. The austerity 2008-2015 is to blame for the poor performance of the economy 2008-2015. Even with the higher growth in 2014, GDP is still below its 2008 level.

  5. I wouldn't call that a disaster given the property bubble and banking crisis that Ireland has had to recover from.
    What happened in Greece was a disaster, but not Ireland. Aren't recessions unavoidable and indeed necessary to rectify major structural problem in an economy. You really think this was all avoidable?