• The elite still can’t face up to it: Europe’s model has failed

    by  •  • Posterous

    “…Voting is not how things are done in the EU. And whenever a state does actually consult its people – Denmark and Ireland had a go – they are made to vote again until they get it right.

    No wonder nationalist anger is growing. And all this to deliver a death spiral of spending cuts and tax increases that are sending Greece ever deeper into slump and debt. It makes no sense. Unless it’s understood that it’s not the Greek economy that’s being rescued, but European and US banks exposed to Greek debt. To protect the rentiers and prevent their own failures from seizing up the European credit system, Greece has undergone the deepest ever fiscal squeeze in a developed state without the possibility of any compensating monetary stimulus or devaluation – because of its euro membership.

    But as in Britain, the eurozone’s debt and stagnation crisis isn’t about state profligacy. It’s mainly the result of the recession-induced slump in tax revenues triggered by the 2008 crash feeding back into the banks that caused it. Private investment has collapsed, and until eurozone governments start bailing out the real economy, rather than the banks, with public investment for growth, the rescue packages will go on failing.

    To tie together 17 countries with widely different levels of development and productivity around a single currency without large-scale tax and spend transfers, and underpin it with a rigidly deflationary central bank without full monetary powers, or any kind of credible democratic control, was always a disaster waiting to happen.”

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