Schilda in London

Das Zentrum des Vereinigten Königreiches, England und Wales, befindet sich derzeit in einer eigenartigen, selbst verschuldeten Doppelmühle. Einerseits macht Regierungschef Cameron Töne, die einer weiteren Integration in die Europäische Union mehr als skeptisch gegenüberstehen und die vielleicht nach der nächsten Wahl 2014 zu einem Referendum führen, das den Austritt aus der EU beschliesst.

And yet they (the Central Banks) move!

On Dec. 12, Ben Bernanke, President of the Federal Reserve Board (FED) of the USA extended the Fed’s catalogue of objectives by a significant step: as long as the unemployment rate does not fall below 6.5%, the Fed will do anything to stimulate growth, keep the interest at zero and pump around 85 bill $ a month into the economy. During that period, the (former) inflation target of 2.5% my be breached – wow!

On Dec. 13, Mark Carney, the Canadian Central Bank governor and designated Bank of England Governor, lectured that in the future central banks might go away from inflation targeting and orient their policy on nominal GDP (which is the product of GDP at fixed prices and the price deflator). Again, a significant step forward towards growth stimulation and relativization of the inflation target.

Nothing similar has been heard from Mario Draghi, governor of the European Central Bank, who will (at least nominally) stick to its sole inflation target. But, of course, the ECB under Draghi has done a lot to stimulate the EU/EZ economy, especially since he stated that ECB would do anything to prevent a recession. But Draghi on 13.12. also asked for an extension of ECB’s competency, in order to be able to wind down insolvent European banks.

All this is quite remarkable. It means that Central Banks increasingly and more openly see themselves as part of the total economic policy instrument kit. And, it is true, that during the recent crisis the ECB has been the only EU institution fully functioning and taking decisions when necessary. But it seems that now Central Banks also come out into the open with what they have been practicing more or less clandestinely during the past years. To extend their policy objectives to growth, or even more daring, to unemployment reduction, is a significant step – and very welcome. Of course, we know that in Europe there is a long way to go. The German Constitutional Court in Karlsruhe has been very restrictive in its interpretation of such and similar steps and will continue to do so. Mario Draghi is called upon to continue his surreptitious attempts to overcome the Eurozone economic and banking crisis.

 

Und sie (die Zentralbanken) bewegen sich doch!

 Am 12. Dezember hat Ben Bernanke, Chef der Federal Reserve Bank der USA, eine signifikante Erweiterung seines Zielkatalogs vorgenommen: solange die USA-Arbeitslosenrate nicht unter 6.5% liegt, wird die FED alles tun, um Wachstum zu stimulieren, und zwar zuerst einmal monatlich 85 Mrd $ an Cash in die Wirtschaft pumpen und die Zinsen bei Null halten. Das Inflationsziel von 2.5% wird in dieser Zeit nicht mehr bindend sein – wow!

Am 13. Dezember hat (Zufall?) Mark Carney, der kanadische Notenbankchef und designierte Chef der britischen Bank of England, geäußert, daß in Zukunft Notenbanken vom starren Inflationsziel abweichen könnten/sollten (=inflation targeting), und statt dessen sich am nominellen BIP orientieren könnten: dieses setzt sich bekanntlich aus dem realen BIP (also der preisbereinigten Summe der Güter und Dienstleistungen einer Volkswirtschaft) und dem Preisdeflator des BIP zusammen.

Nichts dergleichen war von EZB-Chef Draghi zu hören, der weiterhin zumindest auf dem Papier, am alleinigen Inflationsziel der EZB hängenbleibt, auch wenn seine Behörde massiv zugunsten von Wirtschaftswachstum in den letzten Monaten interveniert und zugesagt hat, alles zu tun, um die Krise zu überwinden. Er hat allerdings auch am 13.12. eine weitere Kompetenzausweitung der EBRD verlangt, um Durchgriffsrechte auf bankrotte Banken zu bekommen und sie abwickeln zu können.

All dies ist bemerkenswert. Einerseits sehen sich die Zentralbanken zunehmend als integraler Bestandteil der Wirtschaftspolitik; in Europa war die EZB sicherlich der einzig funktionierende Akteur, der bislang eine noch tiefere Rezession verhindert hat. Aber inhaltlich wird jetzt offenbar auch konzeptuell nachgeholt, was bereits praktiziert wurde, zumindest in den USA (wo die FED auch ein Wachstumsziel hat) und offenbar auch im künftigen England. Die quantitative Festlegung der FED auf ein Arbeitslosenziel  ist jedoch auch eine veritable und hoch willkommene Neuerung. In Europa wird dies noch dauern, da vor allem das deutsche Bundesgericht in Karlsruhe dies als verfassungswidrig ansieht und die Bundesbank bisher alle „offenen“ Schritte der EZB in diese Richtung blockiert hat.

Mario Draghi wird weiterhin klandestin daran arbeiten müssen, die europäische Wirtschaft zu retten.

Eurozone Future Fiscal Policy Options: a Political and Economic Dilemma

 This note deals exclusively with the fiscal policy set-up and the debt problem, both in the past and the future, but not with the wider economic policy question, whether the predominance of fiscal policy instruments is appropriate or adequate. I have argued frequently that other than budget balance objectives must also be contained in the umbrella of a future successive Eurozone governance.

The Eurozone is faced by a dual problem: how to deal with the crisis and how to prevent similar constellations causing future crises. The first is the “legacy problem”, caused by insufficient fiscal discipline in the run-up to the crisis when the fiscal rules (budget deficit of no more than 3% of GDP, debt levels below 60% of GDP) were continuously violated, and were deepened during the crisis. The “crisis countries”, Greece, Portugal and Ireland all increased their budget deficits and debt levels as a result of stimulus programs and bank bailout programs, but also because they encountered falling GDP levels which by definition drive the debt ratio up. The other Eurozone countries encountered similar patterns, if at a significantly lower level. Most recently, budget balances have been reversed in nearly all Eurozone countries, in the crisis countries as a result of the austerity conditionality conditions imposed by the “donor” countries and the IMF.

If it were not a tragedy, if would be a farce!

The reactions of the EU heads of state, after the negotiations to the budgetary framework 2014-2010 had collapsed on Friday at 16.30 were rather sanguine. Whether the reasons for this unpleasant result are due to the fact that they were happy with being able to start their weekends early, or that some of them see themselves as (temporary) victors in the battle of distribution, is unclear. EU citizens, however, should be greatly aggrieved and upset with their politicians, for several reasons:

Aus für nationale und internationale Steuervermeidung – jetzt!

Das bahnbrechende G-20-Treffen von 2009 urgierte das Austrocknen aller Steueroasen; das kürzlich zu Ende gegangene G-20-Treffen in Mexiko sah eine englisch-französische Initiative in diese Richtung (was haben sie in den letzten 3 Jahren gemacht??); das internationale Tax Justice Network hat zusammen mit der NGO Christian Aid geschätzt, daß Entwickungs- und Schwellenländern durch „Steueroptimierung“ durch Auslagerungen in Offshore Centers (vulgo „Steueroasen“) mindestens 160 Mrd $ pro Jahr an Steuereinnahmen entgehen.

End “Tax Efficiency” Schemes, National and International!

 The G-20 meeting in 2009 urged the closing of international tax havens, the most recent G-20 meeting in Mexico saw the UK and France take up the issue once more (what had they done to that effect in the intervening years?); the International Tax Justice network, an NGO, together with Christian Aid estimates that developing countries lose around 160 bn $ every year through “tax optimization” which results in income tax not being paid in the countries where economic activity is implemented. And recently, the UK papers have been full with examples of international companies (Starbucks, Google, Amazon, and others) which despite large turnover in the UK have paid hardly any corporate income taxes in the UK: they pay very high “licence fees” to their mother companies, they source their inputs from abroad at inflated prices (“transfer pricing”): Starbucks, it turns out, imports its coffee beans from the prime coffee plantation region of Switzerland, of all places.

Ine, Ane, U – drauss bist Du: Schlittert Großbritannien in einen EU-Austritt?

William Hague, der britische Außenminister, hat Berlin für seine erste EU-Rede als Außenminister gewählt. Er wird ankündigen, daß sein Ministerium einen tiefgehenden Überblick über sechs Bereiche bezüglich des Nutzens der EU-Mitgliedschaft bis Ende Juli 2013 durchführen wird: Binnenmarkt, Steuerpolitik, Gesundheitspolitik, Außenpolitik, Entwicklungszusammenarbeit und Tierschutz und Nahrungsmittelsicherheit. Dies sollen analytische Studien und keine Policy Papers werden, also “ergebnisoffen”.

In or Out? How Much? The UK’s dangerous slide out of the EU

So, William Hague, the foreign secretary of the UK has chosen Berlin to make his first EU-related speech as a foreign minister. He will announce that his department will conduct a very broad review of UK-EU relations on six areas: the single market; tax policy; health policy; foreign policy; international development and animal welfare and food safety. Supposedly, these will be analytical reports, not policy papers, detailing how in these areas EU policy affects UK interests.

Why have we not (yet?) solved the Financial Crisis?

For several months we have been bombarded with new EU and ECB proposals and decisions on reforming one or the other fragment of the EU and Eurozone economy. But still, growth is anaemic, unemployment rising, the double-dip recession deepening, the Greek crisis spinning out of control, social cohesion in Spain, Portugal, Italy and other EU countries disintegrating.

Why, ask many EU policymakers, are our efforts not successful? Have we not done some very innovative and radical things, have we not thrown many of the self-imposed rules and regulations overboard, in order to overcome the crisis? EU citizens also want an answer to these questions, urgently.

I see three major flaws in the EU/Eurozone crisis strategy: one is process-related, two are substantial.

Mario’s Plural Rationality Moment

International gremia have a hard time making decisions. When they finally arrive at a decision, it is invariably a compromise, that is, it is not the “functionally best” decision. Of course, in economics, there are no “functionally best” decisions, because the individual arguments entering into it come from different people/nations, representing different viewpoints or views of the world or of what they deem to be “reality”. These differences may be reinforced by ideologies

Die Straße nach Absurdistan: ein europäisches Politikdilemma

 Die EU hat ja einiges an Krisenbewältigung versucht. Vor einigen Tagen gaben die Eurozone-Finanzminister grünes Licht für ein 100 Mrd €-Paket an Spanien, damit die Regierung ihre Banken retten kann. Als Vorleistung an die EU, die EZB und den IMF hatte Spaniens Regierungschef kurz zuvor ein weiteres 65 Mrd € betragendes „Sparpaket“ gegen die wütenden Proteste der betroffenen Bevölkerung durchgedrückt. Zur selben Zeit reduzierte die spanische Regierung ihre Wachstumsvorhersage für 2013 von ohnedies mageren 0.4% auf minus -0.5%, und bekam als Dank ihre Rechnung von den Finanzmärkten präsentiert: weiteres downgrading und eine Steigerung des geforderten Zinssatzes für Staatsschuld von 7.2%, weder leistbar, schon gar nicht „tragfähig“!

The Road to Absurdistan: A European Policy Dilemma

It is not that significantly new measures have not been tried: a few days ago, the Eurozone finance ministers backed a 100 bn € bank rescue fund for Spain (after Ireland, Portugal and Greece), so Spain could rescue its ailing banks. As “conditionality” required by the finance ministers, the ECB and the IMF, the Spanish prime minister had just pushed through another 65 bn € austerity package, in order to prove that Spain was serious about “savings”. At the same time, the Spanish government lowered its already measly GDP forecast for 2013 from 0.4% to a minus -0.5%. This, of course, will once again make it more difficult to repay the old and the newly incurred Spanish debt. And this even more so, as the financial markets “rewarded” the Spanish and European efforts (to repay them) by increasing the requested yield on Spanish government bonds to a staggering 7.2% – a rate far from affordable, let alone sustainable.

What Kind of Political Union for the EU?

Recently EU policymakers have increasingly talked about the necessity to form a “Political Union” as a precondition for solving the dual (sovereign and banking) financial crisis in the EU/EZ. But little has been said so far of what exactly constitutes such a political union. Merkel and Co. seem to merely mean a transfer of sovereign budget sovereignty of “crisis countries” from national parliaments to an EU institution. The fiscal pact under various stages of decision by 25 EU countries (exceptions UK and Czech Republic) foresees this already.

Politische E-Union: Welche?

Die Granden der EU-Politik sprechen neuerdings von der Notwendigkeit, als Voraussetzung für die Überwindung der Finanzkrise der Banken und der Staaten eine “politische” Union etablieren zu müssen. Bisher ist wenig darüber gesprochen worden, wie eine solche Politische Union aussehen könnte. Kanzlerin Merkel und Co. scheinen darunter primär Budgethoheitsrechte einer europäischen Institution über die Staatsbudgets der “Krisenländer”, also jener Länder, die Hilfe aus den EU Töpfen beanspruchen wollen, zu verstehen.  Der von einigen EZ-Ländern bereits beschlossene Fiskalpakt sieht bereits eine solche Übertragung bisher nationaler Rechte vor.