L'austerity uccide le banche (dei paesi in crisi)

JP Morgan, via Pawel Morski

C'è poco da commentare, basta guardare il grafico. Nei famigerati PIIGS l'austerity ha messo in ginocchio l'economia reale, che, per parte sua, sta distruggendo il sistema finanziario - le imprese quasi in bancarotta non pagano i loro debiti - che a sua volta non può reggere senza aiuto pubblico, che metterà in ginocchio le finanze pubbliche, che richiederanno più austerity.
Ben scavato, vecchia talpa.

Austerity: nuovo governo, vecchia musica

Nel primo articolo che proponiamo di seguito, di Wolfgang Munchau, si spiega come mai, nonostante tutti i dati puntino in direzione opposta, l'austerity rimarrà la linea guida del governo. Certo, Letta e Berlusconi hanno parlato di tagli alle tasse, ma nessuna vera nuova politica fiscale all'orizzonte. Qualche aggiustamento cosmetico sarà effettuato ma la stretta fiscale rimarrà inalterata, con tutti i suoi dirompenti effetti negativi sulla crescita. Almeno, forse, si riprenderà a pagare i fornitori - come nota giustamente Munchau la sospensione dei pagamenti (il trucchetto usato da Monti e soci per "mettere a posto i conti") equivale fondamentalmente ad una dichiarazione di fallimento. Ma nessun cambiamento strutturale è all'ordine del giorno. Inutile illudersi.
Di parere simile è Christopher Mahoney su Project Syndicate. Mahoney si interroga su quello che può fare la BCE - sostanzialmente abbandonare la linea monetarista, adottare obiettivo di politica legato al PIL e non all'inflazione e stampare moneta, difendendo al contempo i debiti dei paesi in difficoltà. Una idea parziale, se non accompagnata da interventi di politica fiscale, ma che potrebbe permettere di svalutare in termini reali l'ammontare del debito, riducendo quindi lo scopo del fiscal compact e aumentando i margini di manovra dei governi. Ma anche qui Mahoney pensa che la Germania si opporrà strenuamente e quindi le chance siano legate ad una possibile rivolta contro di Spagna e Italia (e magari Francia) contro il dominio tedesco.

Italy’s change from austerity is all talk

di Wolfgang Munchau

da Financial Times

There is a big buzz in Europe that austerity may soon be ending. The Italian elections have scared politicians in other parts of southern Europe. The European Commission seems sympathetic, too. As a consequence, I would expect to see minor small-print policy shifts. However, the main change will not be about policy itself, but the way it is sold.
A good example of the new PR-based anti-austerity strategy came in speeches last week by Enrico Letta, Italy’s new prime minister. He railed against austerity, but at the same time emphasised his commitments to Italy’s fiscal targets, as if the two were somehow unrelated.
He is planning to suspend an unpopular property tax, which would punch an €8bn hole in his budget if it were abolished. Now we are hearing that his government is working on a replacement tax to fill that gap.
My guess is that Italy will probably stick to the structural deficit reduction plan. However, because economic growth will be lower than previously expected, there is a good chance that nominal deficits will overshoot their targets. The most likely change in policy will be to allow that overshoot to happen, at least in part.
To see in more detail why the change is going to be so limited, one has to understand the sheer scale of austerity in the 2012 and 2013 budgets.
The structural government balance for Italy was -3.6 per cent of gross domestic product in 2010 and -3.5 per cent in 2011. However, in 2012 it jumped to -1.3 per cent, according to the data from the April World Economic Outlook by the International Monetary Fund. The forecast for 2013 is for another jump to -0.2 per cent of GDP. So the accumulated adjustment in 2012 and 2013 is projected at about 3.4 per cent of GDP.
This extreme fiscal correction has caused the current recession, the extent of which was underestimated by the European Commission and the previous Italian government.
What will happen now? European policy makers have some flexibility in their ability to trigger a clause in the economic governance framework of the eurozone, allowing them to adjust the targets during recessions.
The eurozone has come a long way from when the rule consisted of an inflexible nominal 3 per cent target. The 3 per cent rule still stands, but the main focus is now on structural deficits. This is an improvement, but in the way the framework is applied it remains pro-cyclical, though perhaps not to quite the same extent as before.
In addition, Italy may also be released from the excessive deficits procedure, which would provide some additional flexibility by releasing funds for investment that are currently blocked.
The slight moderation in the pace of austerity offers a further advantage. There will be less collateral damage from Italy’s hastily decided spending cuts. The Italian government applied austerity not so much by consuming less, but by simply not paying for services. Italy now needs to introduce a new law to allow the resumption of those payments. I would classify this behaviour as default.
The effect of a shift in strategy is therefore larger than zero, but still not much. The eurozone continues to move towards structural balance, in contrast to the US, the UK and Japan. Fiscal policy will continue to have a negative effect on growth.
If the eurozone were serious about a U-turn on austerity, the only effective way to accomplish this would be for the creditor countries to expand their fiscal positions during the recession. The opposite is happening.
Germany, a country with a lot more fiscal space than Italy, undertook a fiscal adjustment of almost similar scale. Between 2010 and 2012 the accumulated net improvement of the structural balance was 2.5 per cent of GDP. Italy and Germany are both projected to record structural balance, more or less, this year and in 2014.
There is no way that Germany in particular will accept a fiscal stimulus for the sake of the southern European countries. This is because Germany restrained itself by passing a balanced budget law that requires the government to run near-zero structural deficits indefinitely.
The European fiscal compact, an inter-governmental treaty that came into effect in January, provides far less flexibility to countries as they try to meet their deficit-cutting targets than they had under previous agreements. Under the fiscal compact, Italy will be required to pay back debt worth more than 2 per cent of GDP each year. To achieve that goal, Italy will need to run very large structural surpluses for almost a generation.
So if you want austerity to end, you need to start by repealing the fiscal pact and amending some of the secondary legislation governing fiscal policy co-ordination. I do not think this is going to happen. My conclusion is that austerity is here to stay, but will simply be presented with warmer words.
And it will last for as long as the euro exists.

Southern Europe: Revolt Now Or Default Later

di Christopher Mahoney

da projectsyndicate

“The policy is being set by the AAA core. The Commission bends to power, and will not move unless the rest of EMU mobilises superior counter-power. All else has become irrelevant in the euro snake pit.”
---Ambrose Evans-Pritchard, Daily Telegraph, April 24th, 2013

There are two schools of thought emerging among the non-delusional community with respect to the future of the eurozone. One view is that the ECB can still, by heroic action, save the eurozone. The other view is that it is now too late for the ECB to save the eurozone, and that the Club Med bloc will need to resume monetary sovereignty.

I cling to the former view because the alternative is pretty awful. I find it hard to grapple with the idea of some of the world’s largest debt issuers defaulting on their debts. It’s a horrific prospect. Euro exit by Italy or Spain would eviscerate the European banking system and cause a Lehman-squared.

But is the ECB rescue scenario possible? First, we will need to dispense with current ECB politics. This scenario only works if the ECB comes to Jesus and executes a total policy reversal as a consequence of the imminent default of Spain or Italy. So it is a given in this scenario that either the ECB sees the light on its own, or the Club Med bloc somehow forces the ECB to reverse course.

So now we have Mario Draghi and his entire board including the Bundesbank on the side of the angels, willing to whatever it takes to save the euro. What should the ECB do? For starters, it should implement the plan outlined by Lars Christiansen:
Target the level of NGDP that would have resulted had the eurozone been growing at a reasonable pace since 2007. That is a level maybe 10-15% above the eurozone's current NGDP.
Commit to engage in asset purchases such that M3 growth will average 10% p.a. until the output gap has been closed.
Suspend the 2% inflation cap until the target is met.
The policy instrument would be a GDP-weighted basket of eurozone government bonds.

In addition to the Christiansen plan, I would add the following:
Active use of the OMT to backstop Club Med bond issuance, so as to limit yield spreads and restore market-access.
A eurozone-wide bank support scheme guaranteed by the ESM and funded by the ECB.
A statement that no bank in the eurozone will be allowed to default on its deposits for the next five years.
Such a program would: (1) restore market access; (2) restore depositor confidence; and (3) ensure that all eurozone banks have full access to ECB liquidity. Both the sovereign and banking crises would be solved.

It is true that this plan would not fully address the real effective exchange rate appreciation which has made the Club Med countries uncompetitive. But it would help in that inflation would permit real wages to decline over time (if nominal wages were constrained, a big if). Not ideal, but better than the current deflation and better than catastrophic default.

If this scenario proves impossible (see: Bundestag), the next question is whether a “managed exit” scenario is possible, by which one or more Club Med countries would be allowed to exit in the least disruptive way. Here, the answer is no. That is because euro exit at a minimum will be accompanied by redenomination of all debts, which is a form of default. There is no way that the troika (EU, ECB, IMF) is going to countenance a massive debt default. Indeed, it is likely that the troika will want to wreak its vengeance on the first escapee, to scare the others from trying to leave.

Thus, Spain and Italy face a stark choice: force the ECB to relent, or exit unilaterally. For Spain and Italy to be in a posture of revolt will require conditions to get much worse, and will require new governments. As Ambrose Evans-Pritchard wrote recently, a successful revolt by the south will require Churchillian leadership, which means different leaders.

L'austerity al servizio dei ricchi

Che l'austerity non funzionasse l'abbiamo ripetuto all'infinito. Che fosse, in realtà, un disegno politico, pure, come confermato da Paul Krugman nell'articolo che segue. Le fondamenta teoriche della stretta fiscale sono sempre state di cartapesta, se non proprio inesistenti, costruite adattando i dati a proprio piacimento. I risultati sono sotto gli occhi di tutti, sono lampanti. Cinque anni buttati al vento, miliardi bruciati, vite spezzate, una generazione perduta. Eppure per tutto questo tempo, contro qualsiasi evidenza, contro qualsiasi più che ovvia obiezione, abbiamo continuato, tafazzianamente, a darci martellate sui cogl.... E perché? Perché così voleva, e così ancora vuole l'1% più ricco della popolazione, che durante l'austerity si è ingrassato a dismisura mentre il resto della popolazione tirava la cinghia. Dimostrando, in effetti, due cose: che gli economisti (non tutti, per fortuna) e i media sono in realtà al soldo dei potenti. E che le nostre finte democrazie non sono nient'altro che oligarchie usate per difendere i privilegi di classe dei soliti noti. 

The 1 Percent’s Solution

di Paul Krugman

da New York Times

Economic debates rarely end with a T.K.O. But the great policy debate of recent years between Keynesians, who advocate sustaining and, indeed, increasing government spending in a depression, and austerians, who demand immediate spending cuts, comes close — at least in the world of ideas. At this point, the austerian position has imploded; not only have its predictions about the real world failed completely, but the academic research invoked to support that position has turned out to be riddled with errors, omissions and dubious statistics.

Yet two big questions remain. First, how did austerity doctrine become so influential in the first place? Second, will policy change at all now that crucial austerian claims have become fodder for late-night comics?

On the first question: the dominance of austerians in influential circles should disturb anyone who likes to believe that policy is based on, or even strongly influenced by, actual evidence. After all, the two main studies providing the alleged intellectual justification for austerity — Alberto Alesina and Silvia Ardagna on “expansionary austerity” and Carmen Reinhart and Kenneth Rogoff on the dangerous debt “threshold” at 90 percent of G.D.P. — faced withering criticism almost as soon as they came out.

And the studies did not hold up under scrutiny. By late 2010, the International Monetary Fund had reworked Alesina-Ardagna with better data and reversed their findings, while many economists raised fundamental questions about Reinhart-Rogoff long before we knew about the famous Excel error. Meanwhile, real-world events — stagnation in Ireland, the original poster child for austerity, falling interest rates in the United States, which was supposed to be facing an imminent fiscal crisis — quickly made nonsense of austerian predictions.

Yet austerity maintained and even strengthened its grip on elite opinion. Why?

Part of the answer surely lies in the widespread desire to see economics as a morality play, to make it a tale of excess and its consequences. We lived beyond our means, the story goes, and now we’re paying the inevitable price. Economists can explain ad nauseam that this is wrong, that the reason we have mass unemployment isn’t that we spent too much in the past but that we’re spending too little now, and that this problem can and should be solved. No matter; many people have a visceral sense that we sinned and must seek redemption through suffering — and neither economic argument nor the observation that the people now suffering aren’t at all the same people who sinned during the bubble years makes much of a dent.

But it’s not just a matter of emotion versus logic. You can’t understand the influence of austerity doctrine without talking about class and inequality.

What, after all, do people want from economic policy? The answer, it turns out, is that it depends on which people you ask — a point documented in a recent research paper by the political scientists Benjamin Page, Larry Bartels and Jason Seawright. The paper compares the policy preferences of ordinary Americans with those of the very wealthy, and the results are eye-opening.

Thus, the average American is somewhat worried about budget deficits, which is no surprise given the constant barrage of deficit scare stories in the news media, but the wealthy, by a large majority, regard deficits as the most important problem we face. And how should the budget deficit be brought down? The wealthy favor cutting federal spending on health care and Social Security — that is, “entitlements” — while the public at large actually wants to see spending on those programs rise.

You get the idea: The austerity agenda looks a lot like a simple expression of upper-class preferences, wrapped in a facade of academic rigor. What the top 1 percent wants becomes what economic science says we must do.

Does a continuing depression actually serve the interests of the wealthy? That’s doubtful, since a booming economy is generally good for almost everyone. What is true, however, is that the years since we turned to austerity have been dismal for workers but not at all bad for the wealthy, who have benefited from surging profits and stock prices even as long-term unemployment festers. The 1 percent may not actually want a weak economy, but they’re doing well enough to indulge their prejudices.

And this makes one wonder how much difference the intellectual collapse of the austerian position will actually make. To the extent that we have policy of the 1 percent, by the 1 percent, for the 1 percent, won’t we just see new justifications for the same old policies?

I hope not; I’d like to believe that ideas and evidence matter, at least a bit. Otherwise, what am I doing with my life? But I guess we’ll see just how much cynicism is justified.        

L'imbroglio dell'austerity

L'austerity non funziona, e lo sapevamo già. Ma ora, come scritto qualche giorno fa, sappiamo che anche le (debolissime) fondamenta teoriche dei tagli erano, in realtà, un gigantesco falso - non si sa quanto voluto. Tutti i lavori che cercavano di dare una spiegazione convincente sul perchè in tempi di crisi si sarebbe dovuto tagliare sono viziati da errori, omissioni, selezione ad hoc dei dati. Una pagina quasi oscena per gli economisti. In fondo sarebbe bastato studiare un po' di storia economica e vedere come si era evoluta la crisi del '29. O forse solo leggere Keynes. E nessuno si sarebbe bevuto la fanfaluca dei tagli che stimolano la crescita. Speriamo che ora se ne accorgano anche i governi!

Nei due articoli che proponiamo di sotto, Matthew Oà Brien di The Atlantic guarda alle possibile conseguenze della scoperta dell'imbroglio dell'austerity mentre Martin Wolf fornisce una prospettiva storica e spiega come non è sempre il debito a rallentare la crescita, quanto piuttosto la crescita lenta a provocare alti livelli di debito.

Who Is Defending Austerity Now?

di Matthew O'Brien

da The Atlantic

Austerians have had their worst week since the last time GDP numbers came out for a country that's tried austerity.

But this time is, well, different. It's not "just" that southern Europe is stuck in a depression and Britain is stuck in a no-growth trap. It's that the very intellectual foundations of austerity are unraveling. In other words, economists are finding out that austerity doesn't work in practice or in theory.

What a difference an Excel coding error makes.

Austerity has been a policy in search of a justification ever since it began in 2010. Back then, policymakers decided it was time for policy to go back to "normal" even though the economy hadn't, because deficits just felt too big. The only thing they needed was a theory telling them why what they were doing made sense. Of course, this wasn't easy when unemployment was still high, and interest rates couldn't go any lower. Alberto Alesina and Silvia Ardagna took the first stab at it, arguing that reducing deficits would increase confidence and growth in the short-run. But this had the defect of being demonstrably untrue (in addition to being based off a naïve reading of the data). Countries that tried to aggressively cut their deficits amidst their slumps didn't recover; they fell into even deeper slumps.

Enter Carmen Reinhart and Ken Rogoff. They gave austerity a new raison d'être by shifting the debate from the short-to-the-long-run. Reinhart and Rogoff acknowledged austerity would hurt today, but said it would help tomorrow -- if it keeps governments from racking up debt of 90 percent of GDP, at which point growth supposedly slows dramatically. Now, this result was never more than just a correlation -- slow growth more likely causes high debt than the reverse -- but that didn't stop policymakers from imputing totemic significance to it. That is, it became a "fact" that everybody who mattered knew was true.

Except it wasn't. Reinhart and Rogoff goofed. They accidentally excluded some data in one case, and used some wrong data in another; the former because of an Excel snafu. If you correct for these very basic errors, their correlation gets even weaker, and the growth tipping point at 90 percent of GDP disappears. In other words, there's no there there anymore. 

Austerity is back to being a policy without a justification. Not only that, but, as Paul Krugman points out, Reinhart and Rogoff's spreadsheet misadventure has been a kind of the-austerians-have-no-clothes moment. It's been enough that even some rather unusual suspects have turned against cutting deficits now. For one, Stanford professor John Taylor claims L'affaire Excel is why the G20, the birthplace of the global austerity movement in 2010, was more muted on fiscal targets recently.

The discovery of errors in the Reinhart-Rogoff paper on the growth-debt nexus is already impacting policy. A participant in last Friday's G20 meetings told me that the error was a factor in the decision to omit specific deficit or debt-to-GDP targets in the G20 communique.

For another, Bill Gross, the manager of the world's largest bond fund, and who, as Joseph Cotterill of FT Alphaville points out, used to be quite the fan of British austerity, made a big about-face in an interview with the Financial Times on Monday:

The UK and almost all of Europe have erred in terms of believing that austerity, fiscal austerity in the short term, is the way to produce real growth. It is not. You've got to spend money. Bond investors want growth much like equity investors, and to the extent that too much austerity leads to recession or stagnation then credit spreads widen out -- even if a country can print its own currency and write its own checks. In the long term it is important to be fiscal and austere. It is important to have a relatively average or low rate of debt to GDP. The question in terms of the long term and the short term is how quickly to do it.

Growth vigilantes are the new bond vigilantes. Gross thinks the boom, not the slump, is the time for austerity -- which sounds an awful lot like you-know-who.

The austerity fever has even broken in Europe. At least a bit. Now, eurocrats can't say that austerity has been anything other than the best of all economic policies, but they can loosen the fiscal noose. And that's what they might be doing, by giving countries more time and latitude to hit their deficit targets. Here's how European Commission president José Manuel Barroso framed the issue on Monday:

While [austerity] is fundamentally right, I think it has reached its limits in many aspects. A policy to be successful not only has to be properly designed. It has to have the minimum of political and social support.

That's not much, but it's still much better than the growth-through-austerity plan Eurogroup president Jeroen Dijsselbloem was peddling on ... Saturday.

Now, Reinhart and Rogoff's Excel imbroglio hasn't exactly set off a new Keynesian moment. Governments aren't going to suddenly take advantage of zero interest rates to start spending more to put people back to work. Stimulus is still a four-letter word. Indeed, the euro zone, Britain, and, to a lesser extent, the United States, are still focussed on reducing deficits above all else. But there's a greater recognition that trying to cut deficits isn't enough to cut debt burdens. You need growth too. In other words, people are remembering that there's a denominator in the debt-to-GDP ratio.

But austerity doesn't just have a math problem. It has an image problem too. Just a week ago, Reinhart and Rogoff's work was the one commandment of austerity: Thou shall not run up debt in excess of 90 percent of GDP. Wisdom didn't get more conventional. What did this matter? Well, as Keynes famously observed, it's better for reputation to fail conventionally than to succeed unconventionally. In other words, elites were happy to pursue obviously failed policies as long as they were the right failed policies.

But now austerity doesn't look so conventional. It looks like the punchline of a bad joke about Excel destroying the global economy. Maybe, just maybe, that will be enough to free us from some defunct economics.

fonte: http://www.theatlantic.com/business/archive/2013/04/who-is-defending-austerity-now/275200/

Austerity loses an article of faith

di Martin Wolf
da Financial Times

In 1816, the net public debt of the UK reached 240 per cent of gross domestic product. This was the fiscal legacy of 125 years of war against France. What economic disaster followed this crushing burden of debt? The industrial revolution.
Yet Carmen Reinhart and Kenneth Rogoff of Harvard university argued, in a famous paper, that growth slows sharply when the ratio of public debt to GDP exceeds 90 per cent. The UK’s experience in the 19th century is such a powerful exception, because it marked the beginning of the consistent rises in living standards that characterises the world we live in. The growth of that era is the parent of subsequent sustained growth everywhere.

As Mark Blyth of Brown University notes in a splendid new book, great economists of the 18th century, such as David Hume and Adam Smith warned against excessive public debt. Embroiled in frequent wars, the British state ignored them. Yet the warnings must have appeared all too credible. Between 1815 and 1855, for example, debt interest accounted for close to half of all UK public spending.

Nevertheless, the UK grew out of its debt. By the early 1860s, debt had already fallen below 90 per cent of GDP. According to the late Angus Maddison, the economic historian, the compound growth rate of the economy from 1820 to the early 1860s was 2 per cent a year. The rise in GDP per head was 1.2 per cent. By subsequent standards, this may not sound very much. Yet this occurred despite the colossal debt burden in a country with a very limited tax-raising capacity. Moreover, that debt was not accumulated for productive purposes. It was used to fund the most destructive of activities: war. Quite simply, there is no iron law that growth must collapse after debt exceeds 90 per cent of GDP.
The recent critique by Thomas Herndon, Michael Ash and Robert Pollin of the University of Massachusetts at Amherst makes three specific charges against the conclusions of profs Reinhart and Rogoff: a simple coding error; data omissions; and strange aggregation procedures. After correction, they argue, average annual growth since 1945 in advanced countries with debt above 90 per cent of GDP is 2.2 per cent. This contrasts with 4.2 per cent when debt is below 30 per cent, 3.1 per cent when debt stands between 30 per cent and 60 per cent, and 3.2 per cent if debt is between 60 per cent and 90 per cent. In their response, profs Reinhart and Rogoff accept the coding errors, but reject the critique of aggregation. I agree with the critics for reasons given by Gavyn Davies. The argument that data covering a long period of high debt should count for more than data covering a short one is persuasive.
Nevertheless, their work and that of others supports the proposition that slower growth is associated with higher debt. But an association is definitely not a cause. Slow growth could cause high debt, a hypothesis supported by Arindrajit Dube, also at Amherst. Consider Japan: is its high debt a cause of its slow growth or a consequence? My answer would be: the latter. Again, did high debt cause today’s low UK growth? No. Before the crisis, UK net public debt was close to its lowest ratio to GDP in the past 300 years. The UK’s rising debt is a result of slow growth or, more precisely, of the cause of that low growth – a huge financial crisis.
Indeed, in their masterpiece, This Time is Different, profs Reinhart and Rogoff explained how soaring private debt can lead to financial crises that generate deep recessions, weak recoveries and rising public debt. This work is seminal. Its conclusion is clearly that rising public debt is the consequence of the low growth, itself explained by the crisis. This is not to rule out two-way causality. But the impulse goes from private financial excesses to crisis, slow growth and high public debt, not the other way round. Just ask the Irish or Spanish about their experience.
It follows that, in assessing the consequences of debt for growth, one must ask why the debt rose in the first place. Were wars being financed? Was there fiscal profligacy in boom times, which is almost certain to lower growth? Was the spending on high-quality public assets, conducive to growth. Finally, did the rise in public debt follow a private sector financial bust?
Different causes of high debt will have distinct results. Again, the reasons why deficits are high and debt rising will affect the costs of austerity. Usually, one can ignore the macroeconomic consequences of fiscal austerity: either private spending will be robust or monetary policy will be effective. But, after a financial crisis, a huge excess of desired private savings is likely to emerge, even when interest rates are very close to zero.
In that situation, immediate fiscal austerity will be counterproductive. It will drive the economy into a deep recession, while achieving only a limited reduction in deficits and debt. Moreover, as the International Monetary Fund’s Global Financial Stability Report also notes, extreme monetary stimulus, in these circumstances, creates substantial dangers of its own. Yet nobody who believes in maintaining fiscal support for the economy in these specific (and rare) circumstances thinks that “fiscal stimulus is always right”, as Anders Aslund of the Peterson Institute for International Economics, suggests. Far from it. Stimulus is merely not always wrong, as “austerians” seem to believe.

This is why I was – and remain – concerned about the intellectual influence in favour of austerity exercised by profs Reinhart and Rogoff, whom I greatly respect. The issue here is not even the direction of causality, but rather the costs of trying to avoid high public debt in the aftermath of a financial crisis. In its latest World Economic Outlook, the IMF notes that direct fiscal support for recovery has been exceptionally weak. Not surprisingly, the recovery itself has also been feeble. One of the reasons for this weak support for crisis-hit economies has been concern about the high level of public debt. Profs Reinhart and Rogoff’s paper justified that concern. True, countries in the eurozone that cannot borrow must tighten. But their partners could either support continued spending or offset their actions with their own policies. Others with room for manoeuvre, such as the US and even the UK, could – and should – have taken a different course. Because they did not, recovery has been even weaker and so the long-run costs of the recession far greater than was necessary. This was a huge blunder. It is still not too late to reconsider.

fonte:http://www.ft.com/cms/s/0/60b7a4ec-ab58-11e2-8c63-00144feabdc0.html#axzz2RJyTiwFK

Austerity all'inglese

How about living with 53£ a week?

Tagliare, tagliare, tagliare. E se cominciassero a provare un po' loro?

Facile fare i fenomeni con i soldi degli altri. Ian Duncan Smith si è vantato pubblicamente di poter vivere con 53 sterline a settimana (circa 65 euro) dopo che un cittadino si era lamentato dei pochi soldi che i tagli al welfare gli lasciavano. Ora già 350 mila cittadini britannici stanno chiedendo a Duncan Smith di provarci - cosa che ovviamente il fighetto Tory neanche prende in considerazione. Ecco, sarebbe una bella idea. Ogni volta che le pensioni vengono tagliate, che gli stipendi vengono ridotti, che le tasse vengono alzate, che la sanità viene ridotta, la scuola privatizzata, sarebbe bello che chi decide in questo senso viva in prima persona la vita dei cittadini più colpiti. Così, tanto per capire come si vive nel mondo reale - d'altronde, ricordiamolo, i funzionari del PCI per anni hanno vissuto con gli stipendi di un operaio qualificato. Forse la politica sarebbe un po' diversa...

Will a member of David Cameron's cabinet agree to live on $11.42 per day?

di Ty McCormick

da Foreign Policy

After his appearance on a BBC radio program Monday, British Work and Pensions Secretary Iain Duncan Smith probably wishes he could eat his words -- because now he may not be eating much of anything for a year. Smith said in the interview that he could survive on £53 ($80) a week -- the amount one welfare recipient complained he was forced to survive on after his housing stipend was cut -- and now Britons are asking him to prove it. As of Wednesday morning, roughly 350,000 people had signed a petition on Change.org urging the secretary to make good on his pledge.
The petition calls on Smith to stick to the budget for "at least one year," thereby helping to "realise the conservative party's current mantra that 'We are all in this together.'" Doing so would require him to take a 97-percent salary cut while living in London, one of the world's most expensive cities.
Smith has been less than enthusiastic about the petition, which he called a "complete stunt" in an interview with the Wanstead & Woodford Guardian. The demand "distracts attention from the welfare reforms which are much more important and which I have been working hard to get done," he said.
If he warms to the idea, however, Smith won't be the first politician to take a trial run on the dole. In 2012, Jagrup Brar, a member of British Columbia's Legislative Assembly, spent a month living on $610, the province's welfare rate for a single, unemployed adult. After the last night of the month, which he spent "couch surfing," Brar was 26 pounds lighter and $7 in debt -- even after selling his backpack to buy a train ticket home.
Cory Booker, mayor of Newark, N.J. pulled a similar stunt several months later, living on the equivalent of food stamps for a week. The mayor was forced to cut caffeine out of his diet, eat "singed" yams for lunch, and consider "making a meal out of mayonnaise and salsa."
As appealing as it sounds, Smith may not be interested in the politics of empathy, having already gone through two real periods of unemployment in the 1980s. As he said in an interview Tuesday, "I know what it is like to live on the breadline."

I figli dell'austerity

Il refrain che sentiamo continuamente sulla riduzione del debito è che le politiche di austerity non solo hanno senso economicamente (non lo hanno, lo sappiamo...) ma che sono pure un obbligo morale. Non possiamo lasciare il debito accumulato da noi sulle spalle dei nostri figli. Insomma, dobbiamo farlo per le prossime generazioni. Peccato che sia vero soprattutto il contrario. I nostri figli - quelli che già ci sono - pagano sulla propria pelle non il debito ma l'austerity stessa. Tagli alla scuola, trasformazione in senso ancora più classista del sistema educativo, i poveri con meno servizi, i ricchi che non hanno problemi a godere dei servizi privati a pagamento. Altro che merito, il successo diventa sempre più condizionato dal censo, riducendo ulteriormente la mobilità sociale. Questi i punti salienti fatti da Simon Johnson nell'articolo che riportiamo qui sotto. Si riferisce all'America, ma potrebbe essere lo stesso in Europa, in Italia. E potremmo aggiungere un altro punto. Non solo i nostri figli, ma anche i nostri nipoti pagheranno per questa austerity moralizzatrice. Si ritroveranno non solo con una scuola per signori e una per poveri, ma avranno meno diritti, potranno essere licenziati più facilmente, non potranno andare in pensione. Ecco, forse il nostro obbligo morale è quello di offrire loro più opportunità. Il debito lo potranno pagare tranquillamente, in una società più giusta e che produce meglio, e di più, e soprattutto con meno poveri. 

Austerity’s Children

di Simon Johnson

da Project Syndicate

When economists discuss “fiscal adjustment,” they typically frame it as an abstract and complex goal. But the issue is actually simple: Who will bear the brunt of measures to reduce the budget deficit? Either taxes have to go up for some people, or spending must fall – or both. “Fiscal adjustment” is jargon; what austerity is always about is the distribution of income.

Much of Europe is already aware of this, of course. Now it’s America’s turn. And current indications there suggest that the people most directly in line for a fiscal squeeze are those who are least able to defend themselves – relatively poor children. For example, the current budget sequester (that is, across-the-board spending cuts) is already hurting programs like Head Start, which supports pre-school education.

The American comedian Jimmy Kimmel recently poked fun at his compatriots’ lack of fiscal knowledge by asking pedestrians on Hollywood Boulevard what they thought of  “Obama’s decision to pardon the sequester and send it to Portugal.” The segment is hilarious, but also sad, because the impact on some people’s lives is very real. Around 70,000 children are likely to lose access to Head Start on our current fiscal course.

And much larger cuts are in store for early-childhood nutrition programs and health care. Perhaps most shocking are the dramatic cuts to the Medicaid health-insurance program that the House of Representatives’ Republican majority have embraced in their latest budget proposal. Paul Ryan, the chairman of the House Budget Committee, proposes to balance the budget over the next 10 years largely by slashing the program. About half of all people covered by Medicaid are children.

Is it fair to force low-income children to bear the burden of fiscal adjustment? According to data available on the economist Emmanuel Saez’s invaluable Web site, from 1993 to 2011, average real income for the bottom 99% of the population (by income) rose by 5.8%, while the top 1% experienced real income growth of 57.5%. The top 1% captured 62% of all income growth over this period, partly owing to a sharp rise in returns to higher education in recent decades. (On average, those with only a high school education or less have few good income prospects.)

This implies that, if anything, the tax system should become more progressive, with the proceeds invested in public goods that are not sufficiently provided by the private sector – things like early childhood education and preventive health care to minimize educational disruption resulting from common ailments like childhood asthma.

Think of it this way: In recent decades, some families chose locations and occupations that seemed to offer a reasonable means of support – and good prospects for their children. Many of these decisions turned out badly, largely because information technology (computers and how they are used) eliminated many middle-class jobs. Increasing globalization of trade also did not help in this regard. In addition, as Till von Wachter of Columbia University has documented, prolonged periods of unemployment for parents have a severe and lasting negative impact on their children.

Children whose families cannot provide a decent start in life deserve help. But America has not provided it – a point recently made by Jeb Bush, a leading contender for the Republican presidential nomination in 2016. “In our country today,” Bush said in a speech to fellow conservatives, “if you’re born poor, if your parents didn’t go to college, if you don’t know your father, if English isn’t spoken at home, then the odds are stacked against you.”

Nor is America likely to provide such help in the future, given the coming budget cuts’ disproportionate impact on children at the lower end of the income distribution.

America can easily afford to do better, of course. Its large budget deficits reflect the impact of tax breaks that favor the wealthy and upper middle class; an unfunded expansion of Medicare coverage to include prescription medicines; two foreign wars; and, most important, a banking system that was allowed to get out of control, inflicting massive disruption on the real economy (and thus on tax revenue).

Today’s children did not play a role in any of these policy mistakes. The preschoolers who are about to lose access to Head Start weren’t even born when they were made.

mposing austerity on poor children is not just unfair; it is also bad economics. When economists, again with their dry jargon, talk about a country’s “human capital,” what they really mean is the cognitive and physical abilities of its people.

As I pointed out in recent Congressional testimony, poor education leads to poor job prospects, poor families, and back to poor education – if not with a detour through incarceration, which makes it even harder to break the cycle. Unfortunately, no one in a position of power is likely to heed such arguments.

They should. When you travel to a foreign country for the first time, and you see neglected, ill-fed, and uneducated children, do you regard that country as likely to be one of the world’s great economic powers over the next half-century? Or do you worry for its future?

fonte: http://www.project-syndicate.org/commentary/the-unfair-burden-of-fiscal-adjustment-by-simon-johnson#RJugdiyKHerCdhdQ.99 

Anche Monti contro l'austerity? Troppo tardi!!

E così, secondo l'articolo del Guardian riportato qui sotto, anche Monti si sarebbe convinto che l'austerity fa più male che bene. Si potrebbe dire, meglio tardi che mai. E invece no. Troppo tardi. Per 18 mesi ha governato in Italia, con una maggioranza schiacciante - che come si è visto non corrispondeva certo ad una maggioranza nel Paese. Da quella posizione avrebbe potuto contribuire ad una svolta nelle politiche economiche. Invece Monti è stato più realista del re, seguendo alla lettera le indicazioni di Bruxelles, salvo accorgersi solo ora che non tutti lo fanno e che forse, in fondo, era meglio non farlo neanche noi. Capaci tutti di capirlo, quando non c'è da fare battaglie politiche. Monti è molto più adatto a fare il Grillo parlante, come quando criticava il podestà straniero, salvo poi farne il paggio. Che torni a scrivere sul Corriere e lasci la politica ad altri, più coraggiosi e intelligenti di lui

Mario Monti: EU faces backlash over austerity measures

dal Guardian


Italy's outgoing prime minister has warned European leaders that the rigid austerity policies of the past three years have generated mass disaffection with the EU and a populist political backlash.
In a bitter valedictory statement to a two-day EU summit that ended in Brussels on Friday, Mario Monti, who was crushed in the recent Italian election – a result that stunned the EU elite – pleaded for greater scope on economic and fiscal policy in the crisis.
He complained that other countries such as France and the Netherlands were being granted more breathing space on their spending targets than he had been given over the past 16 months, and said that he had followed EU orders in his policymaking, an admission he did not emphasise during the election campaign.
In the letter, Monti, a liberal reformer who was the darling of Brussels but roundly rejected by Italian voters, voiced disappointment bordering on a sense of betrayal at the way he was treated by fellow EU leaders, most notably in Berlin and Brussels.
"Since November 2011," when he replaced Silvio Berlusconi as caretaker prime minister, "Italy has been delivering on all the policy objectives set out by the EU. In the meantime, some member states have been given extra time to reach their budgetary objectives," he complained.
"Not only has Italy not requested any extra time to perform its adjustment, but it did not request any financial assistance from the EU or any other international organisation. On the contrary, Italy has contributed to the financial assistance of other EU countries in need."
Attending his final EU summit, Monti warned that the leaders were not acting strongly and fast enough to combat record mass youth unemployment, storing up trouble for themselves at the ballot box.
"Public support for the reforms, and worse, for the European Union, is dramatically declining, following a trend which is also visible in many other countries across the union," he said. "To revive growth and fight long-term and youth unemployment would be the best message to counter the mounting wave of populism and disaffection with the European Union, showing that Europe is listening to people's concerns."
While pursuing an agenda of fiscal and structural reform in office, Monti regularly pleaded with Berlin for more flexibility over the eurozone crisis. Ironically, the summit finally agreed to adopt more room for manoeuvre in the application of the eurozone rule book, although this will do little more than soften the harsh edges of the austerity medicine.
Monti also called for the swift application of a German-inspired stick-and-carrot regime, which would see countries commit to "contracts" with the European commission on structural reform in return for funding rewards pegged to progress.
The details of the scheme are to be devised by EU authorities by June. But already the scheme has run into trouble – no decisions are expected in June and several countries are balking at the surrender of sovereignty entailed.

BASTA AUSTERITY

E' giunta l'ora di cambiare. Lo hanno detto le elezioni, lo dice anche il buon senso con l'austerity che ha schiantato l'economia reale e tutta l'Europa in rivolta, dal Portogallo alla Grecia, alla Francia, all'Italia, appunto.
Ed allora, come suggerito nel post qui sotto ripreso da Economiaepolitica.it cambiamo registro. Non facciamoci più imporre da Bruxelles e Berlino il ricatto dello spread, del fallimento, dell'uscita dall'Euro se non licenziamo, tagliamo, chiniamo la testa. Il ricatto lo possiamo fare noi: o basta austerity, o usciamo dall'Euro. La fifa blu che prenderebbe i nostri partner li porterebbe sicuramente a più miti consigli. Per altro, sarebbero d'accordo anche i mercati. Basti pensare all'appoggio dato da Goldman Sachs a Grillo (è quello che può finalmente dire basta all'austerity e quindi alla crisi, stiamo perdendo soldi anche noi!!!!) e la bastonatura data da Soros alla Germania. Non la vogliono i mercati, non la vogliono ai cittadini, uccide l'economia. Rottamiamo l'austerity.

Un governo per ricattare l’Europa e far cessare l’austerità   

di Sergio Parrinello
da Economiaepolitica.it

Sono convinto che i risultati delle recenti elezioni politiche in Italia siano un segnale chiaro e potenzialmente positivo per i paesi forti dell’Unione Europea, come la Germania e la Francia. Essi sono anche un ammonimento per quei politici italiani abituati ad usare la metafora “Europa” per demonizzare chi invoca o un cambiamento degli accordi europei o, se ciò non fosse realizzabile, qualche sganciamento da quegli accordi. Sono anche convinto che i maggiori partiti tradizionali italiani, da un lato, e i governi europei, dall’altro, si assumeranno una grande responsabilità se non sfrutteranno appieno tale segnale continuando a dipingere effetti apocalittici per l’Italia, se, con un’altra metafora, il paese “uscisse dall’euro”.

Perché non prefigurare effetti altrettanto apocalittici se si continua a perseverare con le politiche liberiste di austerità? Ora sappiamo, oltre il fatto che l’Italia è un’economia importante per l’Europa, che gli italiani con il voto sanno protestare in modo democratico contro gli effetti ingiusti di trattati ingiusti e che i compiti a casa li deve fare (anche) l’Europa.
L’Italia non è una piccola economia, non è un piccolo debitore e non è un paese dove si può spaventare la maggioranza degli elettori contro cambiamenti dello status quo con vuote minacce verbali o soltanto con la (non vuota) salita dello spread. L’Italia ha una grande economia, è un grande debitore (con un peso maggiore di quanto lo avrebbe se fosse un piccolo debitore come ci insegna il mondo degli affari) e una parte del suo corpo elettorale non si spaventa a fronte di quelle minacce. Ciò costituisce una specifica forza contrattuale a livello internazionale e, se i suoi rappresentanti politici fanno gli interessi del proprio paese, questi politici possono usarla in sede di Parlamento Europeo senza bisogno di gridare o di lamentarsi e senza bisogno di assumersi il ruolo di mosche cocchiere quando vi si conseguono i vantaggi di piccole concessioni ottenute.
Finora siamo stati intimiditi nel sentirci ripetere “che cosa succederebbe se l’Italia uscisse dall’Euro”. Il segnale espresso dalle elezioni suggerisce invece il seguente controfattuale alternativo: che cosa succederebbe in Italia e in Europa, se non si allentassero i vincoli di bilancio finora imposti e non si istituisse una Banca Centrale Europea come vero prestatore di ultima istanza. In tale contesto fa parte del gioco discutere senza perdere la calma i costi e benefici di un piano B o C, che costituisca una via resa obbligata di sganciamento dagli attuali accordi di Maastricht, nel caso in cui quei governi europei rimanessero  sordi a tali istanze di cambiamento.
Io credo che il PD con Bersani e il Movimento a Cinque Stelle con Grillo si assumerebbero anch’essi una pesante responsabilità se non trovassero un accordo su pochi punti precisi,  ma che uno di questi punti debba essere un impegno forte per ottenere in sede europea e in tempi brevi una inversione di politica indirizzata all’occupazione ed alla crescita e che la forza di tale impegno deriva dal segnale trasmesso dagli elettori italiani: che la partecipazione dell’Italia all’Europa dell’Euro non durerà a qualsiasi costo economico-politico-sociale.
Una tale minaccia sarebbe credibile e potrebbe avere un effetto-domino per il consenso di altri paesi europei su quella linea strategica. Sarebbe troppo immaginare una Primavera Europea? Proviamoci.


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Krugman e il disastro di Monti

Forse, invece di suicidarsi sostenendo Monti e il disastroso programma di austerity, bastava leggere Krugman che qualcosa di economia e di crisi finanziarie ne capisce. Peccato che ci si sia fatti incastrare in una situazione assurda che ha portato alla sconfitta politica della sinistra, alla rinascita di Berlusconi, alla vittoria di Grillo. Impareremo, impareranno mai?

Austerity, Italian-style

di Paul Krugman
da New York Times

Two months ago, when Mario Monti stepped down as Italy's prime minister, The Economist opined that "The coming election campaign will be, above all, a test of the maturity and realism of Italian voters." The mature, realistic action, presumably, would have been to return Monti -- who was essentially imposed on Italy by its creditors -- to office, this time with an actual democratic mandate.
Well, it's not looking good. Monti's party appears likely to come in fourth; not only is he running well behind the essentially comical Silvio Berlusconi, he's running behind an actual comedian, Beppe Grillo, whose lack of a coherent platform hasn't stopped him from becoming a powerful political force.
It's an extraordinary prospect, and one that has sparked much commentary about Italian political culture. But without trying to defend the politics of bunga bunga, let me ask the obvious question: What good, exactly, has what currently passes for mature realism done in Italy or for that matter Europe as a whole?
For Monti was, in effect, the proconsul installed by Germany to enforce fiscal austerity on an already ailing economy; willingness to pursue austerity without limit is what defines respectability in European policy circles. This would be fine if austerity policies actually worked -- but they don't. And far from seeming either mature or realistic, the advocates of austerity are sounding increasingly petulant and delusional.
Consider how things were supposed to be working at this point. When Europe began its infatuation with austerity, top officials dismissed concerns that slashing spending and raising taxes in depressed economies might deepen their depressions. On the contrary, they insisted, such policies would actually boost economies by inspiring confidence.
But the confidence fairy was a no-show. Nations imposing harsh austerity suffered deep economic downturns; the harsher the austerity, the deeper the downturn. Indeed, this relationship has been so strong that the International Monetary Fund, in a striking mea culpa, admitted that it had underestimated the damage austerity would inflict.
Meanwhile, austerity hasn't even achieved the minimal goal of reducing debt burdens. Instead, countries pursuing harsh austerity have seen the ratio of debt to GDP rise, because the shrinkage in their economies has outpaced any reduction in the rate of borrowing. And because austerity policies haven't been offset by expansionary policies elsewhere, the European economy as a whole -- which never had much of a recovery from the slump of 2008-09 -- is back in recession, with unemployment marching ever higher.
The one piece of good news is that bond markets have calmed down, largely thanks to the stated willingness of the European Central Bank to step in and buy government debt when necessary. As a result, a financial meltdown that could have destroyed the euro has been avoided. But that's cold comfort to the millions of Europeans who have lost their jobs and see little prospect of ever getting them back.
Given all of this, one might have expected some reconsideration and soul-searching on the part of European officials, some hints of flexibility. Instead, however, top officials have become even more insistent that austerity is the one true path.
Thus in January 2011 Olli Rehn, a vice president of the European Commission, praised the austerity programs of Greece, Spain, and Portugal and predicted that the Greek program in particular would yield "lasting returns." Since then unemployment has soared in all three countries -- but sure enough, in December 2012, Rehn published an op-ed article with the headline "Europe must stay the austerity course."
Oh, and Rehn's response to studies showing that the adverse effects of austerity are much bigger than expected was to send a letter to finance minsters and the IMF declaring that such studies were harmful, because they were threatening to erode confidence.
Which brings me back to Italy, a nation that for all its dysfunction has in fact dutifully imposed substantial austerity -- and seen its economy shrink rapidly as a result.
Outside observers are terrified about Italy's election, and rightly so: Even if the nightmare of a Berlusconi return to power fails to materialize, a strong showing by Berlusconi, Grillo or both would destabilize not just Italy but Europe as a whole. But remember, Italy isn't unique: disreputable politicians are on the rise all across Southern Europe. And the reason this is happening is that respectable Europeans won't admit that the policies they have imposed on debtors are a disastrous failure. If that doesn't change, the Italian election will be just a foretaste of the dangerous radicalization to come.


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Le riforme, l'austerity e le elezioni italiane

Wolfgang Munchau  è da tempo uno strenuo oppositore dell'austerity. In questo articolo spiega cosa siano e non siano le riforme di cui tanto si parla - controriforme, come si capisce bene dall'incipit - e cosa sia l'austerity - un programma economico di tagli e tasse che colpisce sempre i più poveri. Da qui la facile previsione - fatta qualche giorno prima delle elezioni - di una sonora batosta per i partiti pro-austerity. Ed infatti.....

Austerity obstructs real economic reform

di Wolfgang Munchau

da Financial Times

In Europe, the word “reform” is as misleading as it is ubiquitous. You heard it during the Italian election campaign, when politicians – such as Mario Monti, the country’s outgoing prime minister – were classified as pro-reform. Others, the rest of Italy’s political class, have been deemed anti-reform. It is as though reform has become an issue of religious dogma. You are either in or you are out.
In or out of exactly what, one may ask? What, exactly, is reform? Growing up in Germany in the 1960s and 1970s, I recall Willy Brandt, West Germany’s chancellor during some of those years, talking endlessly about reforms. For him, the word meant more workers’ rights and an increase in welfare payments. This has always been the meaning I first think of when I hear it.
A decade later, in the UK under Margaret (now Lady) Thatcher, reform became synonymous with privatisation and deregulation, and a reduction in the rights of trade unions. This is closer to the meaning that it holds for most people today.
There is certainly a clear, positive – though often overstated – case for structural changes such as the liberalisation of services, changes to labour markets to help younger workers and pension reforms to ensure long-term fiscal solvency. These reforms would probably increase the gross domestic product of several countries by a non-trivial but unknown amount.
A former editor of The Economist used to advise young reporters to “simplify, then exaggerate”. This is exactly what happened to the debate on reform in Europe. You might want to add “distort” as a third element. The simplification consisted of the notion that there is a link between some vague idea of reform and economic success, as measured in GDP per capita. No such link exists.
The richest countries in the world include those with both liberal and regulated labour markets. Per capita GDP in the highly regulated French economy has been higher than in the deregulated UK. The relatively solid performance of a largely unreformed France does not obviate the need for reforms. But it shows that the relationship is much more subtle than the dogmatists acknowledge.
The exaggeration consists of overstating the actual impact of reforms when they take place. Has financial liberalisation really increased long-run economic growth, or may it merely have given us a housing bubble? Has German labour market reform really increased long-term productivity or were other factors at work?
This distortion has become even worse recently, as reform has been conflated with austerity. Whenever you hear a European official applauding Mr Monti’s “reforms”, what they are really praising is his fiscal consolidation. In other words, they applaud the many of his policies that reduced economic growth, and not the few that might have a chance to increase it one day.
Austerity and reform are the opposite of each other. If you are serious about structural reform, it will cost you upfront money. If you want to open your labour market to a hire-and-fire rule, you will need policies to deal with those who are laid off. These costs may outweigh the financial benefits of reforms in the short term but the reforms may still pay off in the long run. Structural reforms, properly done, are not suited to the task of delivering austerity.
By contrast, austerity – higher taxes and cuts in public sector investments – weaken the economy’s capacity in the short run, and possibly also in the long run. If you have youth unemployment of more than 50 per cent for a sustained period, as is now the case in Greece, Italy and Spain, many of those people will never find good jobs in their lives. Economists speak of a so-called “hysteresis” effect – permanent economic damage that will not be repaired even if there is a full recovery. Austerity could well leave an economic and social scar across the eurozone.
Italy and Spain would have been a lot better off to come up with a list of front-loaded targeted structural reforms and backloaded fiscal consolidation. When you do it the other way round, cutting investment and raising taxes in a recession, you never get out of the hole, and you waste your political capital on austerity, leaving none for reforms.
By putting fiscal consolidation first, the political establishment also took a big gamble against what we know from history. A senior Italian official told me a while back that they had the situation under control. There would be a slight bump but the economy would take off afterwards. He was wrong. As last week’s European Commission forecasts confirm, the southern European economies are behaving as was predicted by those who thought austerity would sap growth and using monetary policy to offset it would be ineffective.
I am not surprised that European electorates are rejecting these policies, and the politicians who delivered them. On Monday we will know how Italy has voted. My hunch is that it is not going to be a good evening for the “Austerians”.

fonte: http://www.ft.com/cms/s/0/888950de-7c54-11e2-99f0-00144feabdc0.html#axzz2M95IhJkS


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Il disastroso bilancio dell'Austerity

Ormai il Financial Times è diventato il bastione del socialismo. O solo della ragionevolezza. Sia Wolf che Munchau, i due maggiori opinionisti economici, sono estremamente scettici sull'austerità, sulla UE, sul ruolo della Germania. Semplicemente hanno guardato ai risultati ottenuti, hanno fatto due conti e spiegato perché le cose non funzionano.

The sad record of fiscal austerity

di Martin Wolf
da Financial Times


At the Toronto summit of the Group of 20 leading economies in June 2010, high-income countries turned to fiscal austerity. The emerging sovereign debt crises in Greece, Ireland and Portugal were one of the reasons for this. Policy makers were terrified by the risk that their countries would turn into Greece. The G20 communiqué was specific: “Advanced economies have committed to fiscal plans that will at least halve deficits by 2013 and stabilise or reduce government debt-to-GDP ratios by 2016.” Was this both necessary and wise? No.
The eurozone was at the centre of the sovereign debt crisis frightening the world. Rapid fiscal tightening was judged essential for troubled governments. That view, in turn, persuaded those not yet subject to market pressure to tighten pre-emptively. That was very much the position of the UK’s coalition government. The idea that being Greece was around the corner gained traction in the US, too, notably among Republicans. Today’s battle over sequestration is partly a product of that concern.

A leading and, in my view, persuasive proponent of a contrary view is the Belgian economist, Paul de Grauwe, now at the LSE. He has argued that eurozone countries’ debt crises resulted from European Central Bank policy failures. Because of its refusal to act as lender of last resort to governments, they suffered liquidity risk – borrowing costs rose because buyers of bonds lacked confidence they would be able to resell easily at all times. That, not insolvency, was the immediate peril.
Today, argues Professor de Grauwe in a co-authored paper, the decision in principle of the ECB to buy up the debt of governments in trouble, through the so-called “outright monetary transactions” (OMT), allows one to test his hypothesis. He notes that the chief determinant of the reduction in spreads over German Bunds since the second quarter of 2012, when OMT was announced, was the initial spread (see charts). In brief, “the decline in the spreads was strongest in the countries where the fear factor had been the strongest”.
What role did the fundamentals play? After all, nobody doubts that some countries, notably Greece, had and have a dreadful fiscal position. One such fundamental is the change in the ratio of debt to gross domestic product. The paper makes three important observations. First, the ratio of debt to GDP increased in all countries even after the ECB announcement. Second, the change in this ratio turned out to be a poor predictor of declines in spreads. Finally, the spreads determined the austerity borne by countries. Paul Krugman of The New York Times adds an extra point: austerity was costly for the afflicted economies: the greater the tightening between 2009 and 2012, according to the International Monetary Fund, the bigger the fall in output (see charts).
By adopting OMT earlier, the ECB could have prevented the panic that drove the spreads that justified the austerity. It did not do so. Tens of millions of people are suffering unnecessary hardship. It is tragic.
Nevertheless, I can see two arguments for the ECB’s behaviour. The first is that help could only follow a demonstrated willingness to embrace austerity. Second, as the latest European Economic Advisory Group report rightly notes, the real problems have been destabilising capital flows, external imbalances and worsening competitiveness, not fiscal deficits. But one can justify fiscal austerity, brutal though it is, as the only way to force adjustments of relative costs and the needed labour market reforms. My colleague, Wolfgang Münchau, argues that the opposite is true. But I wonder whether the eurozone will survive its cure. Countries in the core would be better off themselves if they gave the weaker more time to adjust.
Countries outside the eurozone have been in a very different position. They had no need to fear the rising spreads of eurozone members because they did not face similar liquidity problems. To a first approximation, the yield on UK or US sovereign bonds should reflect expected future short-term rates of interest, with a small risk premium, since outright default is inconceivable. The widely held view that yields could soar is a bet on a surge in inflation. While inflation has been stickier than many expected, such a surge seems unlikely. Monetarists can note that the growth of broad measures of the money supply is low. Keynesians can note the excess savings of the private sector. Neither points to rising inflationary pressure.
Thus the panic that justified the UK coalition government’s turn to a long-term programme of austerity was a mistake. Had its members never heard of the paradox of thrift? If the domestic private and external sectors are retrenching, the public sector cannot expect to succeed in doing so, however hard it tries, unless it is willing to drive the economy into a far bigger slump. While short-term factors have played a real part, it is not surprising that the UK’s recovery has stalled and the deficit is so persistent. It is consequently also not surprising that downgrades are on the way, not that these tell one anything very useful in the case of an issuer with access to its own money-printing machine.
As Oxford university’s Simon Wren Lewis notes, “after the panic of 2010 was over, when it became clear that the debt crisis was really a eurozone crisis and UK long-term interest rates declined with the fortunes of the economy, we should have had a major change of policy”.
What would that change of policy consist of? The answer is simple. First, serious attention needs to be paid to why the UK non-financial corporate sector is running what seem to be structural financial surpluses, as Andrew Smithers of London-based economic advisers Smithers & Co points out. Second, the austerity on current spending needs to be made explicitly contingent on the economy: more when the economy grows faster and less when the economy grows more slowly. Third, every effort must be made to accelerate any structural reforms that might encourage higher investment by the private sector. Fourth, the banking sector must come clean on losses and accept needed recapitalisation so that it starts lending again. Finally, the government must recognise that current rates of interest provide a once in a lifetime opportunity for higher public investment.
In the long run, the fiscal deficit must close. In the short run, the UK has the chance to push growth. It should take it. So should the US.

fonte: http://www.ft.com/cms/s/0/73219452-7f49-11e2-89ed-00144feabdc0.html#axzz2M95IhJkS

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Amartya Sen contro l'Europa dell'austerity e la sinistra italiana

Ripubblichiamo oggi una intervista pubblicata originalmente dal Giornale il 19 Gennaio e ripresa poi da Keynesblog. Sen è solo l'ennesimo economista democratico (ma basterebbe dire, non dogmatico) che si scaglia contro le assurde politiche di austerity che stanno semplicemente fallendo, criticando al contempo anche le radici liberiste e monetariste dell'Europa. L'intervista finisce con una dura critica alla sinistra italiana, incapace di proporre un programma veramente alternativo alla sudditanza verso i mercati. Una sinistra non sinistra. Non possiamo che sottoscrivere.

Professor Sen, cominciamo con un’ottima domanda. Che cos’è la felicità?
Una condizione complessa, sicuramente più ampia di quella descritta dagli utilitaristi à laJeremy Bentham, per i quali sarebbe una massimizzazione del piacere. Dimensione imprescindibile per una vita piena è invece la libertà, pertanto ogni dispiegamento di mezzi ha senso se produce un’espansione delle nostre libertà sostanziali. Per capire è utile la distinzione medievale tra “agente” e “paziente”: la felicità è piena quando l’uomo è “agente”. Questo si vede bene nell’amore: quello vero allarga le nostre potenzialità e di certo non le avvilisce.
Pensa che la situazione che stiamo vivendo in Europa sia felice?
Credo che il sentimento prevalente in Europa sia l’infelicità. Nel sostenerlo non misuro una sensazione soggettiva, ma registro uno status quo che nega le maggiori libertà umane. Se non trovo lavoro, o se sono malato e non posso curarmi, la mia libertà è impedita. L’infelicità è il corollario, a prescindere da come possano poi sentirsi effettivamente le persone.
Perché siamo arrivati a questo punto?
Il tracollo europeo nasce una politica  d’austerità fallimentare che ha prodotto l’attuale scenario di povertà e disoccupazione. Lo dico in qualità d’economista, perché la nostra è una scienza empirica. E una legge fondamentale dell’esperienza è imparare dagli errori. Il regime d’austerity, in vigore da anni, sta conducendo al baratro l’Europa.
E l’Italia? Il termometro dello spread s’è raffreddato, eppure il tasso di disoccupazione non accenna a calare, le attività chiudono…
Anche l’Italia ha dovuto adottare politiche sciocche. Ma nessun paese europeo è al riparo dai danni di questa politica deflazionistica. La Germania stessa ne sente gli effetti, poiché sono venuti meno i mercati per le sue esportazioni. Sostenendo ciò, mi ricollego a un assioma base dell’economia novecentesca: senza domanda l’economia piange. Dovremmo riattualizzare Keynes.
Nessun paese europeo è un’isola, potremmo dire. Cosa si può fare per invertire la rotta, dovremmo inaugurare un “New Deal” europeo?
Il problema è endemico. Nell’Unione europea manca una visione politica ragionata abbastanza forte da ergersi a contrasto di quanto è pattuito in sede intergovernativa. Per questo servirebbe una dichiarazione all’unisono di Italia, Grecia, Spagna, Portogallo e in generale di tutti i paesi vessati da vincoli di bilancio. L’Unione europea deve lasciarsi alle spalle la controproducente austerità. E va adottato un grande programma di politica economica europea pro sviluppo.
In passato ha espresso la sua contrarietà all’unione monetaria europea. Se non avessimo adottato l’euro adesso staremmo meglio?
Sono stato contrario all’euro per motivi di tempistica. L’unione monetaria avrebbe dovuto essere adottata dopo l’unione fiscale e politica e non prima di questa. Saltando lo scalino, invece, gli stati ancora “nazionali” hanno perso il controllo sulla propria politica monetaria. Creando situazioni ad alta tensione: i tedeschi che accusano i greci d’essere pigri, i greci che accusano i tedeschi d’essere dei Kapò. Non è di certo questa l’unità europea immaginata da Altiero Spinelli e Ernesto Rossi negli anni quaranta sull’isola di Ventotene.
Serve la politica quindi. Al riguardo, Anthony Giddens ha difeso la tradizionale dicotomia destra-sinistra (a differenza del premier Monti). Per lei l’opposizione è ancora utile?
A mio avviso la distinzione c’è e affonda nei valori fondamentali delle due parti. Idealmente, la sinistra è garante della felicità, diritto da assicurare universalmente con l’interventismo statale. La destra originariamente è stata il bastione dei diritti proprietari; ora, più genericamente, difende le libertà individuali e il libero mercato. Personalmente sono di sinistra. Penso, però, che la sinistra debba prestare attenzione ai capisaldi liberali della destra. Il bipolarismo destra-sinistra è rintracciabile, seppure con cospicue diversità, sia negli Stati Uniti sia in Europa. Non si può dire lo stesso dell’Italia. Ed è deprimente che nel paese di Antonio Gramsci non si scorga un’agenda politica che possa definirsi veramente “di sinistra”.

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Lezioni britanniche: il fallimento dell'austerity

Postiamo oggi un articolo dal New Yorker che fa le pulci al governo inglese ed al suo fallimentare piano di austerity. Cose che abbiamo ripetuto in continuazione per oltre 2 anni. Tagli dopo tagli, il deficit non si riduce, e nemmeno il debito. A Londra non paiono averlo capito e l'economia continua a calare. Recessione, dopo recessione, fermata momentaneamente solo dai trucchi contabili usati durante le Olimpiadi. Eppure non si vedono segnali di cambiamento. Errare humanum est, perseverare diabolicum!!

U.K. Lesson: Austerity Leads to More Debt

di John Cassidy  

Yesterday, I argued that U.S. fiscal policy is heading in the wrong direction, toward the economics of austerity. If you want to know where this path can lead, look across the Atlantic to poor old Blighty. For almost three years now, since the election of a Conservative-Liberal coalition, the British government has been slashing government programs and raising taxes, supposedly to reduce a big budget deficit. As I’ve written previously, the results have been pretty disastrous—both for ordinary Britons and for the public finances.


Just how disastrous was made clear yesterday by a new report from the Institute of Fiscal Studies, a London-based think tank that is widely regarded as independent and nonpartisan. In the “Green Budget,” its lengthy and detailed annual review of the U.K.’s finances, the I.F.S. pointed out that the budget deficit, far from being eliminated, was still so large that next year the Chancellor, George Osborne, will have to borrow about sixty-five billion pounds more than he had anticipated. (That’s about four per cent of the U.K.’s G.D.P.) Indeed, the hole in the public finances is so big, the I.F.S. said, that the government might well be forced to introduce a series of tax hikes following the next general election, which is expected to take place in 2015.

Even some commentators who have supported the austerity program appear dejected. “This is a truly desperate state of affairs that demands swift and decisive action,” the Daily Telegraph’s Jeremy Warner wrote in his column following the release of the report. And he went on: “We seem to have the worst of all possible worlds, with nil growth, some very obvious cuts in the quantity and quality of public services, but pretty much zero progress in getting on top of the country’s debts.”
That’s a pretty accurate synopsis. When Osborne and his boss, David Cameron, took over in May, 2010, and committed to an unprecedented program of austerity measures, the economy was slowly recovering from the Great Recession. By the final quarter of 2011, it had fallen back into a recession, from which it has yet to emerge. In the third quarter of last year, the London Olympics gave the economy a temporary boost, but in the fourth quarter G.D.P. fell again, at an annualized rate of more than one per cent. Whether this should be categorized as a “double dip” or a “triple dip” is a matter for debate, but the fact remains that Osborne promised growth and instead delivered a lengthy slump.
In one thing, the Chancellor has succeeded: he has delivered cuts to programs. By the fiscal year 2014, he will have slashed more than ten per cent from overall spending by U.K. government departments, according to the I.F.S. While some departments—including the National Health Service, overseas aid, and part of the education budget—are protected from the economic measure, others have seen savage budget reductions. But this hasn’t led to the improvement in the government finances that Osborne and his supporters predicted. As a result of the renewed slump, tax revenues are lower than expected and spending on benefits for the unemployed has risen. Overall government spending has continued to rise; the budget deficit has remained stubbornly high. And that’s why Osborne still will need to borrow so much money.
In short, the U.K. experience shows how austerity policies, when applied without regard to the state of the economy, often lead to more government borrowing and debt creation, not less. In the past few years, we’ve seen pretty much the same thing happen in other European countries: Greece, Ireland, Portugal, and now Italy and Spain. Still, though, many proponents of austerity refuse to acknowledge their errors.
Osborne is one of them, which is only to be expected: he’s an unpopular politician, with his career on the line. It might be hoped that international organizations tasked with purveying economic wisdom, such as the International Monetary Fund and the Organization for Economic Coöperation and Development, would be more open to reappraising their views. Not so, apparently. The I.M.F. remains staunchly behind Osborne’s policies, and, in a statement released yesterday, the O.E.C.D. said the U.K.’s “fiscal stance remains appropriate.”
However, there are some signs of glasnost—or weaselling, anyway—on the part of the austerity hawks. “If growth significantly underperforms expectations over the coming months,” the statement from the O.E.C.D. continued, “the flexibility of the fiscal framework should be utilised.” That appears to be code for refraining from further cuts in spending (especially on unemployment benefits and other so-called automatic stabilizers), borrowing more money in the bond market, and allowing the deficit to balloon further. A shorter way to put it: when you are in a hole, stop digging.

font: http://www.newyorker.com/online/blogs/johncassidy/2013/02/uk-shows-how-austerity-policies-lead-to-more-borrowing-and-debt.html#ixzz2KRpXFBAe

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