The Global Dilemma and the European Paradox Prof. Dr. Heiner

Total Page:16

File Type:pdf, Size:1020Kb

The Global Dilemma and the European Paradox Prof. Dr. Heiner Cernobbio, April 2019 The Global Dilemma and the European Paradox Prof. Dr. Heiner Flassbeck www.makroskop.eu We are living in extraordinary times: Never in history interest rates were so low Short term rate in the UK flassbeck-economics.de -2% -1% 0% 1% 2% 3% 4% 5% 6% 7% 8% Source: OECD, Deutsche Bundesbank Deutsche OECD, Source: 1) 1956 We Annual yield on 10 on yield Annual 1957 1958 Geneva and Zurich, February Geneva February Zurich, and 2015 1959 1960 are 1961 1962 1963 entering - 1964 year government bonds (monthly basis), minus annual rate of change CPI (monthly basis) (monthly CPI change of rate annual minus basis), (monthly bonds government year 1965 1966 1967 1968 1969 1970 1971 1972 a 1973 1974 recession 1975 1976 1977 1978 Long 1979 1980 1981 - 1982 inGermany rates interest real term 1983 1984 with 1985 1986 1987 1988 1989 zero 1990 1991 1992 1993 interest 1994 1995 1996 flassbeck 1997 1998 1999 2000 - economics.de 2001 rtates 2002 2003 2004 1) 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 We are entering a recession without a revival of investment Investment ratio of private companies in Germany 1) 25 24 23 nominal 22 21 20 19 18 17 16 15 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 1) Bruttoanlageinvestitionen (neue Anlagen) im Verhältnis zur Bruttowertschöpfung der privaten Unternehmen ohne Grundstücks- und Wohnungswesen. Wert für 2018 berechnet mit Hilfe der Bruttoanlageinvestitionen der nichtstaatlichenSektoren ohne Wohnbauten. Quelle: Statistisches Bundesamt, eigene Berechnungen. flassbeck-economics.de in % 10 15 -5 0 5 Quelle: Wachstumsrate des BIP im Vergleich zum Vorjahr, FRED. Zinssatz auf US auf Zinssatz FRED. im des BIP Vergleich Vorjahr,zum Wachstumsrate Quelle: 1951 1953 1955 Regime Regime 1957 the US in nominal interest and Nominal Growth 1959 1961 1963 change 1965 1967 1969 - 1971 back 1973 rate GDP Growth - Staatsanleihen von mit Laufzeit fester Staatsanleihen 1975 to 1977 1979 the 1981 past 1983 1985 10 Interest Interest ten year bonds - Jahren, Jahren, FED. 1987 after 30 after 1989 flassbeck 1991 1993 1995 years - economics.de 1997 1999 2001 of 2003 failure 2005 2007 2009 2011 2013 2015 2017 in % 10 15 20 -5 0 5 Quelle: Wachstumsrate des BIP im Vergleich zum Vorjahr, AMECO. Zinssatz auf französische Staatsanleihen v mit Staatsanleihen Laufzeit fester französische auf AMECO. Zinssatz im des BIP Vergleich Vorjahr,zum Wachstumsrate Quelle: 1961 1962 1963 1964 1965 1966 1967 1968 1969 Growth and interest in France in and interest Growth 1970 1971 1972 1973 The same 1974 1975 rate GDP Growth 1976 1977 1978 1979 1980 1981 is 1982 true 1983 1984 1985 1986 for 1987 ten Interest bonds yearrate for 1988 1989 France 1990 1991 1992 on 1993 10 Jahren, FRED. Jahren, 10 1994 flassbeck 1995 1996 1997 1998 1999 - economics.de 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 in % 10 15 -5 0 5 Quelle: Wachstumsrate des BIP im Vergleich zum Vorjahr, Statistisches Bundesamt, AMECO. Zinssatz auf Bundesanleihen Bundesanleihen auf AMECO. Zinssatz mit Bundesamt, feste Statistisches im des BIP Vergleich Vorjahr,zum Wachstumsrate Quelle: 1956 1958 1960 1962 Deutschland in für Staatsanleihen Zinssatz und Wachstum 1964 1966 1968 des BIP Wachstumsrate 1970 1972 ... 1974 and 1976 for 1978 1980 Germany 1982 1984 1986 1988 1990 Zinssatz 10 Zinssatz r L 1992 aufzeit von 10 Jahren, OECD & AMECO. & OECD Jahren, von 10 aufzeit flassbeck 1994 1996 - Jahres - economics.de 1998 - 2000 Staatsanleihen 2002 2004 2006 2008 2010 2012 2014 2016 2018 But it is too late for a market solution! GDP-Growth1) , interest rate2) and public debt rate3) in the USA 15 120 GDP1) (left axis) 100 Interest rate2) (left axis) 10 80 60 in % in 5 40 3) in % of GDP Public Debt (right axis) 20 0 0 -20 -5 -40 1951 1993 1953 1955 1957 1959 1961 1963 1965 1967 1969 1971 1973 1975 1977 1979 1981 1983 1985 1987 1989 1991 1995 1997 1999 2001 2003 2005 2007 2009 2011 2013 2015 2017 1) Gross Domestic Product, Percent Change from Preceding Period, Annual, Not Seasonally Adjusted 2) Market yield on U.S. Treasury securities at 10-year constant maturity, quoted on investment basis 3) Total Public Debt as Percent of Gross Domestic Product, Percent of GDP, Annual, Seasonally Adjusted Source: FRED, FED flassbeck-economics.de Fiscal policy is the only option left, government debt, not labour market flexibility is the solution Unemployment rate and US budget balance 11 -12 10 -10 Budget balance 9 -8 8 -6 7 -4 6 -2 5 0 Unemployment rate 4 2 3 4 Unemployment Unemployment rate % in (annualaverage) US US budgetbalance in % GDP of (inverted scale) 2 6 1 8 0 10 1970 1972 1974 1976 1978 1980 1982 1984 1986 1988 1990 1992 1994 1996 1998 2000 2002 2004 2006 2008 2010 2012 2014 2016 Source: Federal Reserve Bank of St. Louis flassbeck-economics.de In Japan as well, the government is the missing debtor But this solution is forbidden in Germany and in Europe Germany relies on current account surpluses to solve the problem of the missing debtor, but not everybody can do that Financing balances1) of economic sectors in Germany 1991-2018 8 private households 6 4 Companies 2 0 -2 Government in percent of GDP of percent in -4 -6 -8 Foreign countries2) -10 -12 ) 2 2018 1991 1993 1995 1997 1999 2001 2003 2005 2007 2009 2011 2013 2015 2017 1) In % of nominal GDP; 2) Negative values mean foreign indebtedness 2) Estimate of the EU Commission Source: AMECO flassbeck-economics.de That is why Europe is totally unable to solve ist unemployment problem Unemployment rate1) 14 EMU2) 12 10 8 USA 6 Japan Quote in % Erwerbspersonen % in der Quote 4 2 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 flassbeck-economics.de Critical Analyses on Politics and Economics Visit us at www.makroskop.eu Publisher: Prof. Dr. Heiner Flassbeck & Dr. Paul Steinhardt Unit labour cost growth determines inflation rates Inflation (CPI) und ULC Growth in different countries, 1970-1990 and 1990-2016 18% 16% 14% R² = 0,9719 12% 10% 8% annual rate of change of ULC in % ULC of ofchange annualrate Ø 6% 4% 2% 0% -2% 0% 2% 4% 6% 8% 10% 12% 14% 16% 18% 20% Ø annual rate of change of CPI in % Source: Ameco; Apart from Switzerland all countries are marked with two dots for the given period of time. Japan ab 1980. CPI stands for consumer price inflation. flassbeck-economics.de Evidently, the break is not to be found in the 50s West Germany 1950 - 1960 15% 10% Government Private Households 5% in % ofGDP% in 0% Foreign2) -5% Companies -10% 1950 1951 1952 1953 1954 1955 1956 1957 1958 1959 1) In % of nominal GDP; 2) Negative values mean foreign indebtedness Source: Statistisches Bundesamt Geneva and Zurich, February 2015 flassbeck-economics.de Not in the 60s West Germany 1960 - 1975 10 Private households 8 6 4 in % ofGDP in 2 Government 0 Foreign countries 2) -2 -4 -6 Companies -8 -10 1960 1961 1962 1963 1964 1965 1966 1967 1968 1969 1970 1971 1972 1973 1974 1975 1) As a percentage of nominal gross domestic product 2) Negative values mean foreign debt Source: Deutsche Bundesbank,Geneva Ameco and. Zurich, February 2015 flassbeck-economics.de.
Recommended publications
  • The Exchange Rate: Economic Policy Tool Or Market Price?
    View metadata, citation and similar papers at core.ac.uk brought to you by CORE provided by Research Papers in Economics UNITED NATIONS CONFERENCE ON TRADE AND DEVELOPMENT THE EXCHANGE RATE: ECONOMIC POLICY TOOL OR MARKET PRICE? Heiner Flassbeck No. 157 November 2001 DISCUSSION PAPERS THE EXCHANGE RATE: ECONOMIC POLICY TOOL OR MARKET PRICE? Heiner Flassbeck No. 157 November 2001 I am grateful to Yilmaz Akyüz, Wolfgang Filc and Jörg Mayer for their helpful comments on the first draft. UNCTAD/OSG/DP/157 - ii - The opinions expressed in this paper are those of the author and do not necessarily reflect the views of UNCTAD. The designations and terminology employed are also those of the author. UNCTAD Discussion Papers are read anonymously by at least one referee, whose comments are taken into account before publication. Comments on this paper are invited and may be addressed to the author, c/o the Editorial Assistant*, Macroeconomic and Development Policies, GDS, United Nations Conference on Trade and Development (UNCTAD), Palais des Nations, CH-1211 Geneva 10, Switzerland. Copies of Discussion Papers may also be obtained from this address. New Discussion Papers are available on the website at: http://www.unctad.org/en/pub/pubframe.htm * Tel. 022–907.5733; Fax 907.0274; E-mail: [email protected] JEL classification: F310, F410 and F420. - iii - Contents Page Preface 1 Abstract 1 I. INTRODUCTION 2 II. CAPITAL ACCOUNT OR CURRENT ACCOUNT CRISES? 5 III. FLEXIBLE PRICES AND FLEXIBLE EXCHANGE RATES 8 IV. INFLEXIBLE PRICES AND FLEXIBLE EXCHANGE RATES 10 V. EXCHANGE RATES AS A BUFFER FOR REAL SHOCKS 15 VI.
    [Show full text]
  • Left-Wing Strategies to Solve the Euro Crisis
    LEFT-WING STRATEGIES TO SOLVE THE EURO CRISIS What answers can the left provide to the euro-zone crisis and the world economic crisis? The Left Party has begun analysing this important question in light of the continued growth of euro-scepticism. In order to further the debate, the Rosa Luxemburg Foundation has published a study by the economists Heiner Flassbeck and Costas Lapavitsas on the causes of the crisis and possible solutions. This study is summarised in the following, but can be found in full at: http://www.rosalux.de/publication/39478. HEINER FLASSBECK THE EURO AT A CROSSROADS THE CONCLUSIONS OF THE STUDY BY FLASSBECK AND LAPAVITSAS Let’s use our last chance! The study by Heiner Flassbeck and Costas Lapavitsas, The Systemic Crisis of the Euro – True Causes and Effective Therapies, which has been published by the Rosa Luxemburg Foundation, clearly demonstrates that the common European currency is seriously under threat. This situation has come about because the basic conditions needed for successful monetary union have been disregarded since the very beginning. Consequently, European Economic and Monetary Union (EMU) has been managed according to principles that fail to grasp its complexity, and EMU policy, which is blinded by the ideology of its main actors, has continually focused on fiscal issues. Since the beginning of the European crisis, which occurred at the same time as the world economic crisis, attempts to prevent the dissolution of European monetary union have been marred by serious mistakes. Once again, fiscal issues – in this case, the sovereign debt crisis – have become the focus of policy, and this has hindered the development of a comprehensive and targeted therapy package that could solve the problems currently faced by EMU.
    [Show full text]
  • The Policy Space Debate
    APRIL 2007 Asia Program SPECIAL REPORT No. 136 The Policy Space Debate: Does a JOMO KWAME SUNDARAM Globalized and Multilateral Economy Policy Space? Overcoming Constraints to Pursuing National Development Constrain Development Policies? Strategies EDITED BY BHUMIKA MUCHHALA PAGE 8 ABSTRACT This Special Report asks whether multilateral economic policies constrain the abil- HEINER FLASSBECK Macroeconomic Policy Space ity of developing countries to choose the best mix of economic polices for achieving sustain- and the Global Imbalances able and equitable development. Jomo Kwame Sundaram illustrates the significance of PAGE 17 policy space for national development strategies, and assesses the principal sources of con- straints imposed by international financial institutions (IFIs) on policy space in developing CARLOS CORREA Constraining Policy Space in countries. Heiner Flassbeck contends that intermediate exchange rate regimes and the Intellectual Property development of a multilateral framework for exchange rates would enable developing coun- PAGE 22 tries to better align their monetary policies with their development priorities. Carlos Correa links intellectual property rights (IPR) rules in the global trade regime to equitable development ELAINE ZUCKERMAN by presenting several counter-arguments to the dominant proposition that IPRs are necessary Policy Space and the Gendered Impacts of International to promote knowledge and innovation, and by providing a historical analysis of IPR policy. Financial Institutions Elaine Zuckerman demonstrates
    [Show full text]
  • Heiner Flassbeck: Exchange Rate Management in Developing
    Heiner Flassbeck Acting Director UNCTAD Heiner Flassbeck Exchange Rate Management in Developing Countries: The Need for a Multilateral Solution in a Globalized Economy The discussion about adequate ex- to reconcile with the expectation of change rate systems for developing neoclassical general equilibrium mod- countries takes a new turn. Whereas, els where poor economies with a low in the 1990s the official doctrine of endowment of capital receive the the Washington-based finance insti- scarce resource from rich countries tutions has been the corner solution with an abundant endowment of capi- idea, developing countries either ab- tal. The fact that the most successful solutely fix their exchange rate against countries in the South have violated an international anchor currency of that “law” puzzles many orthodox ob- float freely, after the Asian crises the servers and leads them to argue that international economics community holding United States treasuries is a favored the return to floating. But waste of resources as this money only a few countries accepted this ad- could have been used much more ef- vice. Most of the countries affected ficiently by investing it in fixed capi- by the storm of the financial crises in tal or by using it for more imports of Asia and in Latin America decided to investment goods. use the opportunity of a low valua- For policymakers in developing tion of their currencies and the swing countries, the fact that exchange rate from current account deficit to sur- movements directly influence the plus to unilaterally fix their exchange overall competitiveness of a country rate or – at least – to frequently inter- and have the potential to directly im- vene in the currency market to avoid prove the overall trade performance the rapid return of their currencies to of the majority of their firms and the pre-crisis levels.
    [Show full text]
  • Explaining the Euro Crisis: Current Account Imbalances, Credit Booms and Economic Policy in Different Economic Paradigms
    Explaining the Euro Crisis: Current Account Imbalances, Credit Booms and Economic Policy in Different Economic Paradigms Engelbert Stockhammer, Collin Constantine and Severin Reissl November 2016 Post Keynesian Economics Study Group Working Paper 1617 This paper may be downloaded free of charge from www.postkeynesian.net © Engelbert Stockhammer, Collin Constantine and Severin Reissl Users may download and/or print one copy to facilitate their private study or for non-commercial research and may forward the link to others for similar purposes. Users may not engage in further distribution of this material or use it for any profit-making activities or any other form of commercial gain. Explaining the Euro crisis: Current Account Imbalances, Credit Booms and Economic Policy in Different Economic Paradigms Abstract: The paper proposes a post-Keynesian analysis of the Eurozone crisis and contrasts interpretations inspired by New Keynesian, New Classical, and Marxist theories. The origin of the crisis is the emergence of a debt-driven and an export-driven growth model, which resulted in a rapid increase in private debt ratios and current account imbalances. The reason the crisis escalated in southern Europe, but not in other parts of the world, lies in the unique dysfunctional economic policy regime of the Euro area. European fiscal rules and the Troika impose fiscal austerity on countries in crisis and the separation of fiscal and monetary spaces has made countries vulnerable to sovereign debt crises and forced them to comply. We analyse the role different paradigms attribute to current account imbalances, fiscal policy and monetary policy. Remarkably, opposing views on the relative importance of cost and demand developments in explaining current account imbalances can be found in both heterodox and orthodox economics.
    [Show full text]
  • Flassbeck Spiecker.Indd
    A Service of Leibniz-Informationszentrum econstor Wirtschaft Leibniz Information Centre Make Your Publications Visible. zbw for Economics Flassbeck, Heiner; Spiecker, Friederike Article — Published Version The euro: A story of misunderstanding Intereconomics Suggested Citation: Flassbeck, Heiner; Spiecker, Friederike (2011) : The euro: A story of misunderstanding, Intereconomics, ISSN 1613-964X, Springer, Heidelberg, Vol. 46, Iss. 4, pp. 180-187, http://dx.doi.org/10.1007/s10272-011-0381-8 This Version is available at: http://hdl.handle.net/10419/68312 Standard-Nutzungsbedingungen: Terms of use: Die Dokumente auf EconStor dürfen zu eigenen wissenschaftlichen Documents in EconStor may be saved and copied for your Zwecken und zum Privatgebrauch gespeichert und kopiert werden. personal and scholarly purposes. Sie dürfen die Dokumente nicht für öffentliche oder kommerzielle You are not to copy documents for public or commercial Zwecke vervielfältigen, öffentlich ausstellen, öffentlich zugänglich purposes, to exhibit the documents publicly, to make them machen, vertreiben oder anderweitig nutzen. publicly available on the internet, or to distribute or otherwise use the documents in public. Sofern die Verfasser die Dokumente unter Open-Content-Lizenzen (insbesondere CC-Lizenzen) zur Verfügung gestellt haben sollten, If the documents have been made available under an Open gelten abweichend von diesen Nutzungsbedingungen die in der dort Content Licence (especially Creative Commons Licences), you genannten Lizenz gewährten Nutzungsrechte. may exercise further usage rights as specified in the indicated licence. www.econstor.eu DOI: 10.1007/s10272-011-0381-8 Invited Paper Heiner Flassbeck* and Friederike Spiecker** The Euro – a Story of Misunderstanding From the very beginning of the European Monetary Union the crucial institutions, the European Commission and the European Central Bank, led by mainstream economic thinking, were not up to their task of controlling the core of the system effectively.
    [Show full text]
  • Strengthening the Architecture of the International Monetary System
    STRENGTHENING THE ARCHITECTURE OF THE INTERNATIONAL MONETARY SYSTEM: THE RESPONSE OF THE PRIVATE SECTOR New York City Union League Club 38 East 37th Street January 26-27, 1999 Tuesday, January 26, 1999 ___________________________________________________________________________ 8:15 am Breakfast & Registration 8:45 am Introduction 9:00 am Panel 1 - Preventing Financial Crises Chair : Ed Altman, Vice Director, Salomon Center, New York University • John Hicklin, Assistant Director, Policy Development & Review Department, IMF • Tom Bernes, Executive Director for Canada, IMF • Mustapha Nabli, Senior Economic Adviser, Development Prospects Group, the World Bank • Clifford Dammers, Secretary General, International Primary Markets Association 10:45 am Coffee Break 11:00 am Discussion - Roundtable: The Response of the Private Sector • Carlos Asilis, Managing Director, Vector Investment Advisors • Liliana Rojas-Suarez, Chief Economist, Latin America, Deutsche Bank Securities • Peter Geraghty, Managing Director, Darby Overseas Investments 1:00 pm Lunch and Keynote Address By Dr. Heiner Flassbeck, State Secretary of Finance, German Ministry of Finance 2:30 pm Panel 2 - The Resolution of Financial Crises Chair: Andres Solimano, Director, The World Bank • Karin Lissakers, US Executive Director, IMF • Daniel Jackson, General Director, Nomura International • Timothy DeSieno, Hebb & Gitlin • Paul Leake, Partner, Weil, Gotshal & Manges 3:30 pm Coffee Break 3:45 pm Discussion - The Response of the Private Sector Chair : Andres Solimano, Director, The World
    [Show full text]
  • Coping with Globalized Finance: Recent Challenges and Long-Term Perspectives
    UNITED N ATIONS CONFERENC E ON T RADE AND D EVELOPMENT COPING WITH GLOBALIZED FINANCE: Recent Challenges and Long-term Perspectives UNITED NATIONS CONFERENCE ON TRADE AND DEVELOPMENT COPING WITH GLOBALIZED FINANCE: Recent Challenges and Long-term Perspectives Edited by Heiner Flassbeck and Massimiliano La Marca UNITED NATIONS New York and Geneva, December 2007 Note Symbols of United Nations documents are composed of capital letters combined with figures. Mention of such a symbol indicates a reference to a United Nations document. The views expressed in this paper are those of the authors and do not necessarily reflect the views of the UNCTAD secretariat. The designations employed and the presentation of the material in this publication do not imply the expression of any opinion whatsoever on the part of the Secretariat of the United Nations concerning the legal status of any country, territory, city or area, or of its authorities, or concerning the delimitation of its frontiers or boundaries. Material in this publication may be freely quoted; acknowledgement, however, is requested (including reference to the document number). It would be appreciated if a copy of the publication containing the quotation were sent to the Publications Assistant, Division on Globalization and Development Strategies, UNCTAD, Palais des Nations, CH-1211 Geneva 10. UNITED NATIONS PUBLICATION UNCTAD/GDS/2007/2 Copyright © United Nations, 2007 All rights reserved Contents Page INTRODUCTION....................................................................................................................................................................
    [Show full text]
  • Global Imbalances and Destabilizing Speculation1
    GLOBAL IMBALANCES AND DESTABILIZING SPECULATION 1 HEINER FLASSBECK 2 MASSIMILIANO LA MARCA 3 ABSTRACT Global imbalances have become a major source of systemic risk to the global economy. They can be amplified by short term speculation such as the currency “carry trade”, which may prevent the real exchange rate to perform its adjusting role. The paper examines past and recent patterns of destabilizing short term speculative flows that have led to financial fragility and real costs for a number of developed and emerging market economies. Domestic policies aimed at preventing speculation should be coupled with the reestablishment of a cooperative global monetary system. Keywords: foreign exchange speculation, interest rate parity, global imbalances, carry trade. JEL Classification F31, F32, G15 1 This paper was presented at the XXXIX Annual Monetary Studies Conference of Caribbean Centre for Monetary Studies (Belize City, 6-9 November 2007) and draws on the authors' contribution to the Trade and Development Report 2007. We would like to acknowledge Makameh Bahrami and Juan Pizarro Rios for their statistical assistance. The usual disclaimer applies. 2 Director of the Division on Globalization and Development Strategies, United Nations Conference on Trade and Development. UNCTAD, Palais des Nations 8-14, Av. de la Paix, 1211 Geneva 10, Switzerland. 3 Economist at the Macroeconomic and Development Policy Branch, Division on Globalization and Development Strategies, United Nations Conference on Trade and Development. UNCTAD, Palais des Nations 8-14, Av. de la Paix, 1211 Geneva 10, Switzerland. Corresponding author: [email protected]. 150 / BUSINESS, FINANCE & ECONOMICS IN EMERGING ECONOMIES VOL. 3 NO. 1 2009 1.0 Introduction This paper provides an intuitive account of patterns and characteristics of carry trades which are gaining increasing acknowledgment in the very recent academic and policy oriented literature and relates it to the widening of global imbalances of the last decade.
    [Show full text]
  • This Is Part of Our Round Table on Against the Troika: Crisis and Austerity in the Eurozone
    Missing Chances for Change This is part of our round table on Against the Troika: Crisis and Austerity in the Eurozone. Heiner Flassbeck and Costas Lapavitsas have written a book that is designed to serve at least three purposes. In the first instance, it is a thoughtful and grounded critique of orthodox economic thinking at the heart of Europe’s single currency architecture, the decisions and actions it takes as a result, and the impact it has on the resilience of the single currency as a whole. Second, it examines German behaviour within the single currency, seeking to substantiate the argument that instead of working as an anchor stabilising the rest of the eurozone, it has acted in mercantilistic and free-riding ways that destabilise it. Third, it outlines what Greece would have to do to break free of these outside restrictions and reclaim its own sovereignty from eurozone. There are other points made within the book, but these are the core ones. This book is organized into two sections. Section 1 deals with the first and second goals outlined above. It is a welcome alternative to the approach taken to currency areas found in most economic textbooks that start with orthodox / neoclassical economic assumptions and then work out models of desirable economic benchmarks and adjustment strategies based upon them. Instead of focusing on stable prices as the benchmark of a working monetary union, Flassbeck and Lapavitsas argue for coordination of unit labour costs instead, following observations of how economic growth in Europe closely follows wage growth. This implies that instead of focusing on the budget deficits of national governments, and on the debt levels that they have, EMU rules should focus on a golden rule in which national governments commit to ensuring that unit labor costs increase at a steady pace of approximately 2% per year.
    [Show full text]
  • Jorge Braga De Macedo Stuart Holland Marco Ricceri Jan Toporowski
    The Trajectory of the Periphery By Matthew Drecun, November 10, 2013 Chair: Heiner Flassbeck Panel: Jorge Braga de Macedo Stuart Holland Marco Ricceri Jan Toporowski Jorge Braga de Macedo Jorge Braga de Macedo began the panel with a presentation titled, “Portugal’s assisted adjustment: death on the beach?” This title is drawn from a common Portuguese saying about the survivor of a shipwreck who manages to swim to shore, only to die from exhaustion on the beach. Macedo stressed that the crisis facing the Eurozone is fundamentally a balance of payments crisis. Previous crises of this type (e.g. Mexico in the 1980s with its subsequent Lost Decade, the East Asian crisis in the late-90’s that spread to Russia) are therefore the relevant precedents, though the stakes of the current crisis are more global. Macedo explained that Portugal had missed out on the growth enjoyed by the rest of Europe throughout the EU’s early years, because it could not achieve the necessary competitiveness. Now, it has to make tough choices under duress that could or should have been made in better times. Macedo hoped that all of Portugal – its people, its government, its courts – would be kept in mind during the adjustment process to come. His concern is with the Memorandum of Understanding signed by Portugal, which some view as subverting the country’s Constitution. Macedo did not make concrete recommendations to fix the balance of payments crisis, but rather speculated about the use of a outright monetary transfers. He also speculated about the feasibility of undoing the Eurozone in an orderly fashion.
    [Show full text]
  • Die Eurokrise Und Die Krise Des Ökonomischen Urteilsvermögens*
    [ Blickpunkt ] Die Eurokrise und die Krise des ökonomischen Urteilsvermögens* Eine Erklärung der Grundlagen der Währungsunion, der Bedeutung der Inflation und der Lohnstückkosten in Form eines Wirtschaftskrimis. Der Autor macht deutlich, dass Hauptursache für die Eurokrise nicht das Ausgabeverhalten der südlichen Länder, sondern die Sparpolitik Deutschlands ist. von Heiner Flassbeck Man muss den Dingen folgen, die nun mal Es gibt jetzt so ein paar Bewegungen auf vorliegen, das ist Ihr tägliches Geschäft. Ich der Ebene der europäischen Kommission, werde Sie bitten, ein Urteil zu fällen über die versuchen, durch Vorschläge für neue das, was im Euroraum passiert ist. Ich gebe Regulierungen dahin zu kommen, dass Ihnen ein paar Informationen, sozusagen die Dinge vernünftig laufen können. Aber als Sachverständiger vor Gericht, und Sie es ist noch nicht so weit, und es wird eine müssen dann urteilen. Ich will Ihnen aber extrem spannende Frage sein, ob die Zeit auch erst mal die Möglichkeit geben, Ihre ausreicht, die der Euro noch hat, um über Vorurteile abzuspeichern, damit Sie hinter- die nächsten Jahre zu kommen. Denn her überprüfen können, ob Ihre Vorurteile das Zeitfenster, das Window of Oppor- richtig oder falsch waren. Dazu habe ich tunity, schließt sich jetzt ganz schnell. In schon mal ein paar Verdächtige ausge- einem Monat wählt Spanien, da kommt Professor Dr. Heiner Flassbeck wählt, die schuld daran sein könnten, dass wahrscheinlich eine sehr instabile Situa- ist Wirtschaftswissenschaftler. Er es dem Euro schlecht geht. Dem Euro geht tion heraus – wie in Portugal gerade, wo war von 1998 bis 1999 beamteter es in der Tat sehr schlecht. Dabei ist die ein Staatspräsident verhindert, dass die Staatssekretär im Bundesministe- Krise in Athen vielleicht nicht das einzige Mehrheit die Regierung bildet.
    [Show full text]