Will the EU stability package work?

[RSS News]

EU ministers have agreed on measures worth billions to prevent a Greek debt contagion. Is this the right way?

(Feed provided by BBC News | Have your Say (http://news.bbc.co.uk/go/rss/-/2/hi/talking_point/default.stm))

[Proletarian Ultra]

No.

The Euro is clearly overvalued for the Eurozone as a whole. Which is why Germany has a huge current-account surplus and pretty much everyone else is running medium-to-enormous current-account deficits. They should be forcing a devaluation, not trying to prevent one.

And the Eurozone needs an expansionary monetary/fiscal policy to prop up demand and restore growth. Whereas the ECB measures are specifically desinged to prevent a growth in the money supply.

Bond traders would fucking hate both of these, so it would be more expensive for Euro economies generally to borrow. This wouldn't hurt Greece (it couldn't get much worse for them) and likewise Italy, Portugal, Spain, Ireland, etc. It would probably be slightly painful for France etc. But it would be a big pain for Germany, which is used to paying next to nothing on its government debt.

A big devaluation can't be held off for long, so they're just reducing the haircut taken by bankers on it - at enormous expense. They're also ensuring that instead of being paid once by moderately inflationary economic growth, the bankers will be paid twice over by workers - once with increased taxes and gutted social spending, then again through a deeper and deeper recession.

This is the same shit IMF pulled on Asia and South America in the '90's.

(Who will be the first Euro country to go Chavista? Only a matter of time.)

BTW: Merkel's party lost big in a state election last night, so not all bad news.

[Paul Cockshott]

No.

The Euro is clearly overvalued for the Eurozone as a whole. Which is why Germany has a huge current-account surplus and pretty much everyone else is running medium-to-enormous current-account deficits. They should be forcing a devaluation, not trying to prevent one.

And the Eurozone needs an expansionary monetary/fiscal policy to prop up demand and restore growth. Whereas the ECB measures are specifically desinged to prevent a growth in the money supply.

Bond traders would fucking hate both of these, so it would be more expensive for Euro economies generally to borrow. This wouldn't hurt Greece (it couldn't get much worse for them) and likewise Italy, Portugal, Spain, Ireland, etc. It would probably be slightly painful for France etc. But it would be a big pain for Germany, which is used to paying next to nothing on its government debt.

A big devaluation can't be held off for long, so they're just reducing the haircut taken by bankers on it - at enormous expense. They're also ensuring that instead of being paid once by moderately inflationary economic growth, the bankers will be paid twice over by workers - once with increased taxes and gutted social spending, then again through a deeper and deeper recession.

This is the same shit IMF pulled on Asia and South America in the '90's.

(Who will be the first Euro country to go Chavista? Only a matter of time.)

BTW: Merkel's party lost big in a state election last night, so not all bad news.
Those are good points, but in addition we have to take into account the fact that wage levels are particularly low relative to productivity in Germany. This means that German workers can not consume sufficient of what they produce which lies at the heart of the German surplus with other EU countries. With low wages in Germany, countries like Greece can not export to Germany to make up the difference.

Within normal capitalist states these regional imbalances would be addressed by the central state redistributing tax revenues, but the tax basis of the EU is too narrrow and regressive to do this. Unless it is able to levy a progressive income tax the savings of the rentier class, which are the obverse side of the coin to the state deficits, can not be effectively taxed out of existence.

A more fundamental measure that would get to the root of the deficits would be the abolition of wage labour. European law should recognise that labour is the sole source of value and that in consequence workers, and their Unions, will have a claim in law againsttheir employers if they are paid less than the full value of their labour. This would remove at a stroke the accumulation of credits by the rentiers which is causing the problem.

Instead of the now outdated slogans of nationalising industry, the aim of 21st century socialism in Europe should be the abolition of exploitation as a minimum objective.

[Proletarian Ultra]

This means that German workers can not consume sufficient of what they produce which lies at the heart of the German surplus with other EU countries. With low wages in Germany, countries like Greece can not export to Germany to make up the difference.

Normally the way to solve this would be to revalue the currency upward to give workers more purchasing power - the Euro is overvalued for Souther Europe but undervalued for Germany. Of course the common currency makes that impossible, so we will and be seeing a great deal of labor unrest and a sharp swing to the left.

[Paul Cockshott]

Normally the way to solve this would be to revalue the currency upward to give workers more purchasing power - the Euro is overvalued for Souther Europe but undervalued for Germany. Of course the common currency makes that impossible, so we will and be seeing a great deal of labor unrest and a sharp swing to the left.
I agree.
Here are a couple of posts I have put up on this recently:
http://thoughcowardsflinch.com/?s=cockshott
http://thoughcowardsflinch.com/2010/04/28/greece-and-the-gaffe/