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Italy’s austerity-fueled crisis is a warning to the Eurozone

ineteconomics.org

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Re: Italy’s austerity-fueled crisis is a warning to the Eurozone

#31

Post by coryrc »

johnzim wrote: post #7

The Eurozone was never intended to do the damage it has done to PIGS economies but it has. What is worse, is that it has unquestionably been of benefit to Germany, which has one of the strongest hands in shaping the future of the EU. If a macroeconomist had sat down to devise a currency that suffocated Italy, Portugal, Greece and Spain - export driven economies (remember that tourism is an export as you have to buy t…

Floating currency is just a way to automatically renegotiate all of a country's contracts. It will not magically create more wealth or lower the costs of materials. In the end, if you're importing something for $1 and you earn $100/yr or it costs $3 because of your devalued currency but you earn $300/yr, nothing has changed.

What sucks is the most productive people left and the already massive state obligations fell on those left. It wasn't the currency that did that.

Re: Italy’s austerity-fueled crisis is a warning to the Eurozone

#32

Post by pjc50 »

alecco wrote: post #28
bjelkeman-again wrote: post #5

I thought it was going to be about Britain. They have been drivning towards the abyss in the last decades. I used to live in London. The difference in public infrastructure and company facilities between the UK and Northern Europe is quite staggering. Now, add the “Ever shrinking Britain” (Scotland leaving after Brexit…, Northern Ireland more part of EU/Ireland than Britain in the future?) to the events and it makes…

Sure but they are close to a balanced budget. And have the best employment rates in a long time. Unlike France, a closer example.

Yes, but at what cost? The food bank use rate is at an all time high.

A lot of people are skeptical of the raw employment rate - an uber driver who does 1 hour a week counts as "employed".

Re: Italy’s austerity-fueled crisis is a warning to the Eurozone

#33

Post by [deleted] »

johnzim wrote: post #7

The Eurozone was never intended to do the damage it has done to PIGS economies but it has. What is worse, is that it has unquestionably been of benefit to Germany, which has one of the strongest hands in shaping the future of the EU. If a macroeconomist had sat down to devise a currency that suffocated Italy, Portugal, Greece and Spain - export driven economies (remember that tourism is an export as you have to buy t…

[deleted]

Re: Italy’s austerity-fueled crisis is a warning to the Eurozone

#34

Post by pjc50 »

johnzim wrote: post #7

The Eurozone was never intended to do the damage it has done to PIGS economies but it has. What is worse, is that it has unquestionably been of benefit to Germany, which has one of the strongest hands in shaping the future of the EU. If a macroeconomist had sat down to devise a currency that suffocated Italy, Portugal, Greece and Spain - export driven economies (remember that tourism is an export as you have to buy t…

The logical conclusion of most of these arguments seems to be that the US should have floating currencies between the states, to stop unfairly benefiting the few net productive export states?

Re: Italy’s austerity-fueled crisis is a warning to the Eurozone

#35

Post by GordonS »

alecco wrote: post #28
bjelkeman-again wrote: post #5

I thought it was going to be about Britain. They have been drivning towards the abyss in the last decades. I used to live in London. The difference in public infrastructure and company facilities between the UK and Northern Europe is quite staggering. Now, add the “Ever shrinking Britain” (Scotland leaving after Brexit…, Northern Ireland more part of EU/Ireland than Britain in the future?) to the events and it makes…

Sure but they are close to a balanced budget. And have the best employment rates in a long time. Unlike France, a closer example.

This started long before the Conservatives came into power and actually made an attempt to right the budgetary wrongs of the previous Labour government.

Re: Italy’s austerity-fueled crisis is a warning to the Eurozone

#36

Post by evancox100 »

alanpetrel wrote: post #19
lenticular wrote: post #2

This is a great article. The EU has done tremendous damage through its obsession with austerity.

Were austerity instructions handed down by the EU or did the individual member states decide to implement it themselves?

Handed down but up to countries to follow them. As the article states, Italy appears to have followed them to the letter, more so than Germany or France, but hasn't ended up in a great place.

Re: Italy’s austerity-fueled crisis is a warning to the Eurozone

#37

Post by gridlockd »

mhh__ wrote: post #13
debatem1 wrote: post #9

I wish we had a political version of Mr. Rogers. We need better role models for how to talk about politics in ways that are measured, reasonable, and respectful.

The difficulty is that the two "basic" schools of politics/economics, Capitalism and Socialism are so diametrically opposed in terms of assumptions and methods that objectivity itself becomes subjective. Socalists tend to look at the world differently to capitalists.

These are not "the basic schools" of economics. If I had to pick two camps, I would pick Keynesianism and Neoclassical economics. Politically, Keynesianism has won over both sides of the spectrum.

There is no "diametric opposition", virtually all socialists of today agree that markets are to be favored over central planning. That part is settled by history.

What socialists and non-socialists disagree over is generally the degree of state intervention in the markets and who should pay for what, that is who pays taxes and who gets the benefits.

Re: Italy’s austerity-fueled crisis is a warning to the Eurozone

#38

Post by IAmEveryone »

Consultant32452 wrote: post #20
johnzim wrote: post #7

The Eurozone was never intended to do the damage it has done to PIGS economies but it has. What is worse, is that it has unquestionably been of benefit to Germany, which has one of the strongest hands in shaping the future of the EU. If a macroeconomist had sat down to devise a currency that suffocated Italy, Portugal, Greece and Spain - export driven economies (remember that tourism is an export as you have to buy t…

In my opinion the long term goal is to transition the EU (over the course of multiple human generations) into a single nation, similar to the way the United States operates. In that case, the conditions you described are an expected part of the process. In the US the states and local municipalities have different economic situations, different taxes, etc. And if our states broke off into 50 currencies, some would ben…

The motto is „a ever closer union“, although that does not necessarily see a nation state at the end, and it has become somewhat outdated...

What the US has, and the EU would need, are some mechanisms to level economic differences between the constituent states. Any federal US program effectively works as such, even though that is rarely acknowledged in the public discourse. As but one example: military spending is financed primarily by the economically strong and populous states, and disproportionately favors poorer states with defense contacts or military bases.

The EU has a few such mechanisms, some explicit (regional development funds), some less so (agriculture). But the total E.U. budget is rather tiny compared to the economy. Something like a common unemployment insurance would be best, mechanistically. Because it would automatically adjust to changing fortunes at the very local level without requiring constant political intervention and the accompanying bargaining. At present, such a policy is unlikely to find approval because of pervasive remaining mistrust („lazy Greeks taking our money“).

Re: Italy’s austerity-fueled crisis is a warning to the Eurozone

#39

Post by evancox100 »

pjc50 wrote: post #34
johnzim wrote: post #7

The Eurozone was never intended to do the damage it has done to PIGS economies but it has. What is worse, is that it has unquestionably been of benefit to Germany, which has one of the strongest hands in shaping the future of the EU. If a macroeconomist had sat down to devise a currency that suffocated Italy, Portugal, Greece and Spain - export driven economies (remember that tourism is an export as you have to buy t…

The logical conclusion of most of these arguments seems to be that the US should have floating currencies between the states, to stop unfairly benefiting the few net productive export states?

No, IANA Economist, but I'd wager that states in the US are much more homogeneous than are countries in the EU, both in terms of laws + regulations and in labor productivity. Plus, there is a (more or less) democratically elected government that is (nominally) responsive to all of its citizens. Much more so than the various EU branches are, at least.

Re: Italy’s austerity-fueled crisis is a warning to the Eurozone

#40

Post by kartan »

While one hand was trying to balance the budget cutting in investment (education that makes people happier and more productive, healthcare that keeps people healthy, ...) the other hand has been increasing the expenses and decreasing revenue (giving bailouts to bankers, allowing tax havens).

How was austerity supposed to balance the economy when money was given away to the rich and taxes reduced? For each euro that was removed from schools, more than that was given to banks. Each time public health benefits were reduced there was a new company moving to Ireland, Malta, etc.

So, now we have the same or more unbalanced budgets but citizens are poorer, less educated and do not see a future for themselves.

> Continued stagnation will feed the resentment and anti-establishment, anti-euro forces in Italy.

The Eurozone countries need to increase revenues and start investing that money into education to prepare its citizens for the new economy. The alternative is disenfranchised citizens stuck in poverty that will fall in the hands of populism.

You have to spend money to make money. Austerity misses the point.

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