No country may survive with a continuous sliding of the economy.
More than seventy years ago Keynes wrote the following well known statement: “the ideas of economists and political philosophers, both when they are right and when they are wrong, are more powerful than is commonly understood. Indeed the world is ruled by little else. Practical men, who believe themselves to be quite exempt from any intellectual influence, are usually the slaves of some defunct economist. Madmen in authority, who hear voices in the air, are distilling their frenzy from some academic scribbler of a few years back. I am sure that the power of vested interests is vastly exaggerated compared with the gradual encroachment of ideas. Not, indeed, immediately, but after a certain interval; for in the field of economic and political philosophy there are not many who are influenced by new theories after they are twenty-five or thirty years of age, so that the ideas which civil servants and politicians and even agitators apply to current events are not likely to be the newest. But, soon or late, it is ideas, not vested interests, which are dangerous for good or evil." Now one could dispute al length these ideas, but certainly the recent statement by Frau Merkel, according which Europeans need still five years of penitence in order to recover from excess public deficits, fits extremely well with Keynes’s formulation. In the case of Angela Merkel the defunct economists are those of Fribourg school of “ordo-liberalism”.
It is very difficult to understand how is possible to interpret the economic crisis from 2008 onward as led by excess of public spending, while it is clear that the rise of public debts was a consequence of the financial crack because of excess of private debt and financial speculation. Of course Frau Merkel would reply: look Greece. Now the Greek case is exactly a demonstration that the sin – expiation paradigm doesn’t work. The debt-Gdp ratio is forecasted, in 2013 - at 189%, almost twenty points more that previous forecast. The cuts of public expenditures and increases in taxation, by more than thirteen billions (more than 7% of Gdp), put forwards by Samaras government under the troika sword, are worsening the depressive spiral; it has been estimate that the result could be a drop of more than 8% of nominal Gdp in 2013.
No country may survive with a continuous sliding of the economy. Damages to the social structure of Greece are already arrived at a threshold level; Syriza party is by now virtually the first party, and is asking an exit from euro. It is apparent that Angela Merkel doesn’t wont a traumatic crisis before fall 2013, so that two more years of time will eventually be allowed to Greece. But, the other side of the coin is that the German Parliament doesn’t wont to put more money for Greece or some other country, like Spain. El Confidencial reports that FDP leader and economy minister Philipp Roesler has held meetings with his Spanish counterparts Luis de Guindos and Soraya Sàenz de Santamaria, citing sources thet he attempted to dissuade Spain from applying for a rescue. He apparently said the FDP’s 93 members of the Bundestag would oppose it. Mariano Rajoy is understood to have decided to deny publicly that there will be a rescue before the end of the year.
The intricacy of a wrong economic policy decided by euro countries, under German rule, and the electoral timing will result in a delay of an entire year. In the meanwhile Draghi’s OMT remain in the air, even if there was a result of reducing Spanish and Italian spreads. No programs of public investments at European level, let alone Eurobonds and the like. Holland has just decided to apply a cut of production costs balanced (in part) by an increase of two major Tva rates (from 19,6 to 20, from 5,5 to 7, corrected by a decrease from 5,5 to 5 per cent of the lowest rate). It is more or less the same proposal by Sarkozy, that is a fiscal devaluation, that the German government of big coalition implemented six years ago. Holland opposed to Sarkozy’s proposal, but now has decided that “beggar my neighbour” is the only option he has.
Clouds are gathering; the only relief is Obama’s confirmation, but he cannot resolve European problems.