Bank of England governor attacks eurozone austerity
Source: The Guardian
The Bank of England governor, Mark Carney, has launched a strong attack on austerity in the eurozone as he warned that he single-currency area was caught in a debt trap that could cost it a second lost decade.
Speaking in Dublin, Carney said the eurozone needed to ease its hardline budgetary policies and make rapid progress towards a fiscal union that would transfer resources from rich to poor countries.
“It is difficult to avoid the conclusion that, if the eurozone were a country, fiscal policy would be substantially more supportive,” the governor said. “However, it is tighter than in the UK, even though Europe still lacks other effective risk-sharing mechanisms and is relatively inflexible.”
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While not mentioning any eurozone country by name, Carney made it clear that he thought the failure to complete the process of integration coupled with over-restrictive fiscal policies risked driving the 18-nation single currency area deeper into a debt trap.
Read more: http://www.theguardian.com/business/2015/jan/28/bank-england-governor-attacks-eurozone-austerity
BBC commentary:
Germany is not once mentioned by name in his speech - entitled "Fortune favours the bold" - which he gave this evening on the fringes of the eurozone, in Dublin.
But in saying that monetary union cannot work without fiscal union - or the ability and willingness of countries with stronger public finances to support those that are struggling to grow under the burden of big debts - he is in effect saying that Germany ought to do more to support the likes of Italy, Spain and France.
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And he cites the US, Canada and even Germany as federal countries where a central government has the ability to transfer significant financial resources to constituent states, as-and-when those states run into severe difficulties - which is not possible in today's eurozone.
http://www.bbc.co.uk/news/business-31031339
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During the Great Depression, FDR and Congress saw that the South was the poor area of the US and needed massive inflow of money. Congress thus set up a system for such massive inflow of money into the South (and into the West Coast and the American West).
One of the reason for the willingness to spend money in the poor areas of the US was the US saw itself as one nation and one people, thus people living in the Northeast and Midwest saw the South NOT as a separate nation or people, but as fellow citizens of the same nation.
The problem is that is NOT the situation in Europe, to a great degree each country sees themselves as separate from one another. Thus the problems in Greece has not produced pressure in Germany to give Greece the money to solve their problems. There is no pressure on a European wide basis to solve the problem in Greece.
Now, if you had a true national government, you would have heard people saying a "States" problem is not theys, for example you had people saying New York City's debt problem in the 1970s was NOT a national problem and the Natural Gas crisis of the Northeast and mid west ion the 1970s was NOT a National problem (A texas said at the time "Leave them freeze in the dark"
. Yes, those voices were heard, but both were solved at the NATIONAL LEVEL despite such talk (some people will object to helping anyone not matter how much the help is needed or how low are the costs, but they do NOT set policy).
The Euro and the EU was set up by the Banks for the Banks and it is clear they can NOT operate on a National Level for their have NOT set up a Nation-State. I suspect the people of Europe would welcome a Nation-State but one that includes their present Welfare states, but that demand is the one thing the Banks do not want or care about, thus no national nation-state and the reason Europe is in the problem it is right now. You can NOT have a government by the Banks, for the Banks and of the Banks for sooner or later the people MUST support said government and the PEOPLE will ask what is in it for them? When the banks say, safer and richer banks the people will walk away.
Thus you have to have POLITICAL UNITY and the concept that the GOVERNMENT of EUROPE is for, of and by the PEOPLE not the banks. You have to have a Federal Government willing to take money from the rich and give it to the poor (something the Banks will always refuse to do for they ARE the rich). You have to have a Government who is willing to tell the banks to take a long walk off a short pier and give money to the poor to spend so the economy will boom. The EU is NOT capable of telling the banks anything or giving money to the poor, thus not capable of solving the present crisis.
Hopefully the Greeks will walk out of the Euro. The best option is just to print Euros and tell the rest of the EU to accept the increase printing or rule Greek Euros are not Euros. The Greeks should then say, Greek Euros are Euros and all debts in Euros can be paid with Greek Euros on a Euro to Euro bases, no matter what is the exchange rate between Greek Euros and German Euros. The EU will have to make a decision to accept the printing of Euros by Greece OR try to force Greece to pay its debts in German Euros not Greek Euros.
Greece biggest import is oil from Iran and Iran (and Russia) have indicated they will accept payment in any currency including their own. Thus Greece has options, options that the EU dislikes.
