Euro Crisis Alive, Well and Still a Threat
The green shoots of recovery are to be seen all round Europe if EU leaders are to be believed with President François Hollande being the latest harbinger of good news. But in reality the crisis is far from fixed says Greek economist and blogger Yanis Varoufakis
(Eds note: As an aside it is hard to reconcile the French president’s optimism with the recent downgrade of the country’s sovereign rating. As Zero Hedge noted: “Prompted by their FrAAAnce downgrade to AA+, French-owned Fitch has downgraded Europe’s last best promise/hope – the EFSF – from AAA to AA+… but the crisis is still behind us – we are assured by such truth-sayers as Juncker, Barroso, and Merkel (pre-elections).
For a year now, Europe has been lying to itself, pretending that the Euro Crisis has been, more or less, resolved. It is now clear that the Euro Crisis is alive and well and threatening Europe with disintegration, permanent damage, widespread poverty, a loss of democratic legitimacy and a swing toward misanthropy, writes Yanis Varoufakis.
OurModest Proposal for Resolving the Euro Crisis has never been more pertinent. Version 4.0 is now out, co-signed not only by its original authors, Yanis Varoufakis and Stuart Holland, but also by James K. Galbraith who has contributed signficantly to its evolution:
“Version 4.0 of the Modest Proposal offers immediate answers to questions about the credibility of the ECB’s OMT policy, the impasse on a Banking Union, financing of SMEs, green energy and high tech start-ups in Europe’s periphery, and basic human needs that the crisis has left untended.
It is not known how many strokes Alexander the Great needed to cut the Gordian knot. But in four strokes, Europe could cut through the knot of debt and deficits in which it has bound itself.
• In one stroke, Policy 1, the Case-by-Case Bank Programme (CCBP), bypasses the impasse of Banking Union (BU), decoupling stressed sovereign debt and from banking recapitalisation, and allowing for a proper BU to be designed at leisure
• By another stroke, Policy 2, the Limited Debt Conversion Programme (LDCP), the Eurozone’s mountain of debt shrinks, through an ECB-ESM conversion of Maastricht Compliant member-state Debt
• By a third stroke, Policy 3, the Investment-led Recovery and Convergence Programme (IRCP) re-cycles global surpluses into European investments
• By a fourth stroke, Policy 4, the Emergency Social Solidarity Programme (ESSP), deploys funds created from the asymmetries that helped cause the crisis to meet basic human needs caused by the crisis itself.
At the political level, the four policies of the Modest Proposal constitute a process of decentralised europeanisation, to be juxtaposed against an authoritarian federation that has not been put to European electorates, is unlikely to be endorsed by them, and, critically, offers them no assurance of higher levels of employment and welfare. We propose that four areas of economic activity be europeanised: banks in need of ESM capital injections, sovereign debt management, the recycling of European and global savings into socially productive investment and prompt financing of a basic social emergency programme.
Our proposed europeanisation of borrowing for investment retains a large degree of subsidiarity. It is consistent with greater sovereignty for member-states than that implied by a federal structure, and it is compatible with the principle of reducing excess national debt, once banks, debt and investment flows are europeanised without the need for national guarantees or fiscal transfers.
While broad in scope, the Modest Proposal suggests no new institutions and does not aim at redesigning the Eurozone. It needs no new rules, fiscal compacts, or troikas. It requires no prior agreement to move in a federal direction while allowing for consent through enhanced cooperation rather than imposition of austerity. It is in this sense that this proposal is, indeed, modest.”
Download the full proposal here
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