The failure of the German Chancellor Angela Merkel to form a government after the elections a month ago came as a shock for many observers. What has happened to the “leader of the Western World”? Is German power on its “way out”? This perception is wrong. Merkel has never been as strong and successful as […]
Don’t Forget What Europe Is All About!
“If this is Europe, forget it“. With these words Matteo Renzi shamed his colleagues at the European Council meeting last week. I understand his frustration. After inhumanly treating refugees in the Mediterranean Sea, we now witness the breakdown of the Euro talks. But we must not forget what Europe stands for. I have never been […]
How To Create A Real European Social Market Economy
Europe’s citizens are torn between the European integration project, which requires market liberalization and competition rules promising greater welfare, and national welfare states, which are the framework for redistributive policies and provide social protection. Yet, the European Union is not averse to social welfare. The European model aims for “a highly competitive social market economy” […]
Europe After The Blues – Elect Jean-Claude Juncker
It’s ugly. It’s worrisome. It’s dangerous. The election results with extreme right wing parties arriving in first place in many European countries is proof of the bankruptcy of the European Union as we have known it. If Europe continues with its intergovernmentalism, which satisfies no one and prevents political change, the European Union will be […]
In Bed With Dracula – A Grand Coalition With Angela Merkel
The German Social Democratic Party (SPD) has campaigned to get rid of Chancellor Merkel. It now gets ready to give her a new term for four years. This makes 11 247 283 broken promises. The SPD as the oldest political party in Germany has demonstrated, again and again, that it knows when to assume responsibility […]
Austerity Versus Growth (III): Fiscal Policy And Debt Sustainability
In my previous two columns I have argued that lack of aggregate demand is reducing potential growth and long-term employment, and that policies of cutting public expenditure and reducing disposable income for households will re-enforce the negative dynamics. Aggregate demand can be stimulated by private investment, consumption and debt-financed public spending. However, there are trade-offs. […]
Austerity Versus Growth (II): The Sources Of Europe’s Demand Gap
In my previous column, I have argued that prolonged negative output gaps in the Euro Area will reduce potential GDP, long-term growth and employment, because the lack of demand will disincentivize investment. What Europe needs, especially the south, is closing the output gap not by reducing supply but by increasing demand. The question is then, […]
Austerity Versus Growth (I): Why We Can’t Go On Like This
Austerity is the curse of our time. Governments cut spending, raise taxes, reduce employment and lower wages in the hope of better times. The consequences are dire. 26 million people are unemployed in the European Union. Youth unemployment is 6 million, in Spain and Greece more than 50 percent. [1] A whole generation is desperately […]
Italy And The Disintegration Of The European Union
At the beginning of Europe, there was Italy. Ancient Rome copied Greek culture, but politically the Roman Empire dominated the Mediterranean universe and set the agenda for future empires.[1] Later, the Renaissance in Florence invented modernity and from there “Western” values took over the world. Italy was also a founding member of the Treaty of […]
The Future Of The Franco-German Couple
The celebrations of 50 years Franco-German reconciliation are behind us and maybe the most impressive fact they revealed was how “normal” these relations have become. De Gaulle re-accredited the “great German nation” after the war, Helmut Schmidt and Valery Giscard d’Estaing laid the foundations for Europe’s Monetary Union, Mitterrand and Kohl implemented it, but all […]
Social Justice and the Outright Purchase of Government Bonds by Central Banks
In my last column, I argued that the No-bailout principle in Europe is bankrupt, because it destabilises financial markets and sharpens the economic crisis. One reason why governments resist bailouts is that they believe it would violate the interests of their citizens. For the same reason the German Bundesbank is opposed to the ECB buying […]
The Bankruptcy of the No-bailout Principle
The European Central Bank has put its ultimate weapon in place: Under the new Outright Monetary Transactions (OMT) program, the ECB will buy bonds of distressed member states without predetermined limits, provided they have applied for assistance from the ESM. ECB-President Mario Draghi has repeatedly declared that the ECB will do “whatever it takes to […]
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