Crisis is so serious why economist Andre Orlean has denounced the "total inertia of a Europe powerless" against the crisis
http://www.mediapart.fr/journal/economie/011210/leconomiste-andre-orlean-denonce-l-inertie-totale-dune-europe-impuissante-fa The plan helps Ireland has not convinced the market, now suspended announcements the European Central Bank (ECB), expected Thursday, December 2. Mediapart in an interview, the economist Andre Orlean, research director at CNRS, and one of the leaders of the movement "aghast" (read Extend tab), denounces the "strategic total inertia" of a Europe "divided and powerless." To cope, the specialist currency argues for a new deal, which would, inter alia, to review thoroughly our relationship of "extreme dependence" to markets.
After Greece in the spring, around Ireland. How serious is the situation for the euro area?
This new crisis was predictable. It is still within the same logic, which is managing the public debt by reassuring the financial markets. Unless it is very difficult to reassure the markets, since it only proposes the adoption of austerity, who themselves anticipate low growths. And low growth is the worst thing for a country in debt.
Is there something new, from the Greek crisis?
The market reaction differs. They reacted very positively to the Greek plan May 10, 2010. Today, it is not the case. Other countries that were previously not in the sights, such as Italy, have even seen their interest rates rise. Moreover, the financial press is rather alarmist. The Irish plan has not reassured either.
Everyone is aware, little by little, with the Irish case now pending in the following that this is the wrong strategy. This response piecemeal, whenever contagion touches a new country, does not work. We will move from one country to another, increasing funding for Europe over plans to help create the recession, which will cause problems even larger deficit, and accumulating debt so completely disorganized, with no clear perspective.
"Germany is too self-centered"
What to do?
Without a united Europe, not much. The current situation shows that a tightly integrated currency area as the euro area can not survive without a strong political power. The experience of the international monetary system is, from this point of view, without ambiguity. Their stability was obtained when a nation has been able to assume leadership. This nation imposes its currency, gains benefits, but it also returns homework, compared to other countries.
Whenever this leadership is not assumed, the period is unstable. This was the case in the inter-war years, when the U.S. did not want to take over England. We had a country, the U.S. economy and dominant creditor of the whole world, who applied for political opportunists in terms of its single private interest. It is somewhat the same situation with Germany and the euro zone today.
Germany only think it?
Yes. She is too self-centered. She did not even see that its trade surplus with the deficits that exist in other European countries - since the euro area is roughly in equilibrium as a whole. It is not in the interests of Germany that these countries are leaving the euro. Germany we have a dominant point of view, but is unable to understand the collective interests of Europe that looks only to the North, and despises the South of the continent. Hence a lack of collective vision that has resulted in a total strategic inertia.
But there is little chance that this is changing in the short term.
This kind of thing does not in fact be solved overnight. I am very pessimistic. I do not see how we can continue with such heterogeneity in the euro area. Just look at the differences in labor costs ... With the center, a country that does not raise his claim that wage pressure is very strong, and that focuses on exports. And for the so-called peripheral cures austerity as the only horizon!
Europe facing financial markets reminds me of the battle of the Horatii and Curiatii. Because Europe is divided, it is powerless. Each time, it's the same thing: the markets are against them a single country that they can easily put down. First Greece, and Ireland. And each time, Europe is losing despite its vast resources. His political fragmentation leads her into an impasse. She can not take advantage of its overall weight.
Today, it appears strongly that monetary sovereignty and political sovereignty are closely linked. The existence of a single currency without political sovereignty of the same intensity is not tenable. It was believed that markets would be able to harmonize their own interests. This was a resounding failure.
Today we see that the alignment of interests mostly through politics. This action is the political foundation of all monetary units. Through budgetary transfers in particular. But also through monetary policy and public debt. The U.S. show us how a country can use its political sovereignty to relax its economic constraints. Without such a mechanism, Europe saw its currency more than a burden, which produces austerity!
Economic Europe is about to break? The current logic
funding negotiated piecemeal, market conditions, leads us straight into the wall. First, because it necessarily meets one day or another the German refusal to continue funding. At some point, the German public decides it can no longer pay.
other hand, because today it seems to revive a remake of the 1930s, namely a series of shots deflationary which drive the European economy into crisis. So we have believed in 2008-2009 that states had heard the lesson by introducing Keynesian stimulus plans, today, there is no question of rigor budgetary, wage cuts, abolition of posts of staff, reduced social spending plans like Laval or Brüning.
What would be the tracks of the crisis, if this were a European power?
must first understand that we will not emerge from the crisis by considering the rights of creditors as untouchables. This is unsustainable and led to increased indebtedness as a dizzying, as illustrated by the Irish case. Employees can continue to honor the high-income finance. We need a new deal.
That means renegotiating public debt?
It would be a very important step. But who is related to previous point: it takes a pilot in the plane. To renegotiate the debt, we must be able to talk to the creditors with one voice. This is the only prospect for liberation from the tyranny of markets and end the interest rate on debt too high.
Incidentally, the high rates on the debt to be paid by some European countries are an illustration of the failures in Europe. In theory, these rates are used when they are raised to compensate for the lender, the risk of insolvency. They give creditors an income supplement to compensate for the losses Insolvency him dry. But Europe is paying these rates to the debtor countries and simultaneously guarantees the debt! This is totally contradictory
: either it is guaranteed the debt and then interest rates should be aligned to the decline, we do not guarantee it and we leaves open the possibility of a defect or a restructuring. At least another option, that these high rates are intended as punishment, which brings us directly to the total lack of European solidarity.
One frequently mentioned tracks would be to impose the idea of a European debt. There would be no debt or debt Irish German but a European debt. This hypothesis is interesting. But it can only succeed through global negotiations aimed at breaking our extreme dependence on markets. That is the central issue.
"Outside the euro zone, Ireland would be hard to finance"
Ireland or Portugal would they not be better to default, rather than accept assistance plans and Brussels IMF?
Note that there are lots of ways to manage its debts. For Ireland, first, you can very specifically decide to remove the state guarantee on bank bonds. Then, decide that the creditors of these banks also have a responsibility, and that no one will pay them back at a certain level. The depreciation of private debts is common, and even intrinsic to the financial machine.
is what I stated above. It would be crazy to want to ensure all claims. This necessarily implies transfers from taxpayers to the financial sector that are fundamentally counterproductive ... and unfair. Need I remind you that the public debt we have today is the direct result of financial and banking failures?
As for public debt there are many tracks, weigh on interest rates weigh on refunds, play on the term of the debt, its price, its interest rate, etc.. In fact, the instruments at our disposal are numerous. However, this is an act that requires a political strategy developed. Blocking access to international financing is a weapon in the hands of the markets which it certainly should not underestimate the power.
And if these "small" states coming out of the euro area?
is technically possible. Whether it is a solution, I do not think so. Presumably, they were not in the euro area, these countries would know maybe not all these problems, especially because they could change the parity of their currency. But now they are, the fact that output increases their problems rather than anything else. Outside the euro area, these countries would be very difficult to finance. It would only strengthen the requirements of financial markets.
there, nonetheless, grounds for optimism?
We have seen in recent years, that reality could be a taskmaster. She was able to impose ideological readjustments rapid and unexpected. I think in particular of the European Central Bank. Now (since spring, ed), the ECB buys sovereign debt, which seemed unthinkable even a year ago. From the perspective of monetary doctrine is a radical change: The euro was based on the myth of a currency designed as a purely economic instrument, independent of politics.
I also think that the ECB should go further in this direction. A strong European power in the currency find a weapon of great power if it had the will to change its state of dependence on international finance. Finally, under the ideological transformations imposed by necessity, we also remember the Germans at the time of the Greek crisis, opposed the idea of a European funding of indebted countries. The reality is they have left little choice.
December 2, 2010 By Ludovic Lamant
event Saturday in Dublin. "The debt of a bank, not the death of a nation"
