Wednesday, May 09, 2012

EU Fiscal Compact Treaty: Victimhood and belated outrage

These are posts to two threads on the Irish economy blog:

A Guest Post By Gavin Barrett: The Zero Impact Treaty? Some Observations About the Debt and Deficit Rules in the Fiscal Treaty

Michael Hennigan:
It’s likely that most people who will vote no will be motivated by factors beyond the clauses of the treaty.
California illustrates why economic or financial policy should not be made by plebiscite and before anyone mentions Switzerland, check how recent women were given the vote at federal level. It was dependent on men giving their consent.
I was among the minority sailing against the headwinds of conventional wisdom and self-interest during the bubble. I did ask where was the outrage but most of the public returned from Rip van Winkle land after the crash. 
Now, everyone is outraged including the insiders. 
A semi-detached membership and Greece on the way out, would hardly be good for those without State guaranteed jobs and lavish pensions, in the struggling indigenous sector. 
The EMU will survive long- term with a more cohesive group of countries. 
Do people naively expect eurobonds as another no-strings charity item in a CAP size begging bowl? 
Some twitter about neoliberalism and globalisation, 
How richer than Albania would we be without the system of free trade and it came about because leaders were able to agree decisions that had a long-term benefit?  
Is Ireland’s Fiscal Adjustment Failing? by Prof. John McHale

Paul Krugman in The New York Times: "What’s wrong with the prescription of spending cuts as the remedy for Europe’s ills?

One answer is that the confidence fairy doesn’t exist – that is, claims that slashing government spending would somehow encourage consumers and businesses to spend more have been overwhelmingly refuted by the experience of the past two years. So spending cuts in a depressed economy just make the depression deeper. Moreover, there seems to be little if any gain in return for the pain."

Michael Hennigan:

Post 1
Most foreign commentary on Ireland take misleading headline data at face value and in 2000, Antoin Murphy in a paper took Krugman to task for buying the yarn of an Irish productivity miracle. 
I assume that Krugman these days doesn’t spend too much time on the Irish issue. 
The export data since the crash, aided by official spinning, is also regularly misinterpreted. 
As for bond yields, the reference to bund yields is odd because, no matter how the bailout program is progressing, yields of countries like Ireland are not going to replicate the trend around the time of the euro launch.
Post 2
Lagarde says austerity vs growth is a false choice; Daniel Gros says Europe swings from austerity to growth but never gets around to addressing the factors that hinder growth - - it maybe boring for some of you folks here but this is reality and like it or not, it’s only Germany’s trade with emerging markets that has made European data look somewhat respectable in recent years. 
In the mid 1990s, in Spain, the unemployment rate then was as high as it is now, and in Italy, it was higher in 1996 than it is today. France’s world export market share fell 20% and its Eurozone market share fell 9% between 2005-2010. 
In the UK, Nick Clegg said yesterday that both Coalition parties’ local election setbacks in Scotland, Wales and northern England owed much to the absence of government subsidies, which were no longer possible to deliver. “For the past 10, 15, 20 years they have been reliant on subsidies from governments in Whitehall pumping money up the M1 farmed by explosive growth in the City of London,” he said. 
As for the auld sod, European welfare has supported farm income for forty years and in recent years it has been 94% (not a typo) of average farm income. Besides, price supports also were European subsidies. 
American firms are responsible for 90% of headline tradeable exports but would it be a shock if half the value of exports was smoke? 
We shouldn’t be a poster child as we fooled outsiders during the bubble as to how good things were and we’re doing the same today with dodgy data. 
There appears to be a lot of alienation in the country, including no doubt among people who are an easy market for outrage now but were immutable to reason during the bubble. 
Most commentators in the mainstream media play to the belated outrage while radicalism is hard to detect in academe. 
If the politicians are not willing to junk spin, then some credible group should provide realistic scenarios of the decade ahead.
People legitimately make the point that debt isn’t sustainable while forecasts of growth a few years out are not credible. 
Where is the growth engine? Spend more on the failed ’smart economy’ project? If the MNC sector can raise industrial production over 70% since 2000 and produce no jobs, it is easy to be fooled. 
At best, the unemployment rate will remain at a high single digit level for many years.
The bubble standard of living cannot be maintained; what should tax and spending be in an economy without any windfalls? 
Pre-2008 is not coming back and despite the odd positive smoke signal from the Croke Park implementation conclave, anyone who believes that this is the way to introduce reform in a large organisation, is to put it kindly, a fool.
Post 3
Some of you should overwrite the conventional wisdom on your braindisk: 
German exports unexpectedly rose for a third month in March as demand from outside Europe offset weaker regional sales. Exports and imports hit new monthly records while trade with other Eurozone countries was almost in balance.