Interndevalvering (Ådals-metoden)

Related: Stabiliserinspolitik - Europakten 2011 - Finanskrisen - Eurokrisen

Ådalshändelserna - Sommaren 1930 pågick en konflikt om lönesänkningar vid Marma-Långrörs AB:s sulfatfabrik vid Marmaverken i Hälsingland.

FT In depth Austerity Europe

Italy - the eurozone’s third-largest economy - is weak and
shackled to a monetary union whose impact is substantially malign.

The rise of the populist politics represented by the anti-establishment Five Star Movement and the far-right League
is an all-too-comprehensible consequence of gross economic mismanagement both within Italy and in a very imperfect monetary union.
John Plender, FT 30 May 2018

Within the monetary union, Italy cannot address this competitiveness issue through devaluation.
The only remedy is internal devaluation via wage deflation.

Yet despite unemployment of 11 per cent and youth unemployment at a devastating 35 per cent,
unit labour costs have not come anywhere near to delivering that internal devaluation.

In reality, the level of unemployment that would be required to restore competitiveness might well be unthinkable.

Read more here

Italy illustrates the way to liberal democracy’s demise
Wolfgang Münchau FT 20 May 2018

If liberal democracy fails to deliver economic prosperity for a sufficiently large portion of the population over long periods, it ends — along with the financial and economic institutions it has created.

Read more here

The ECB has soaked up €300bn of Italian debt
buying time for the country to claw its way out of a debt-deflation trap.
Italy has pulled off an “internal devaluation” within the eurozone, albeit at the cost of a deeper depression than the 1930s.
Ambrose Evans-Pritchard Telegraph 13 May 2018

The next global economic downturn – probably in 2019 – will be traumatic for everybody,
given that we have already used up our monetary and fiscal powder, and exhausted popular consent for globalisation.
Ambrose Evans-Pritchard 31 January 2018

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The terrible price of austerity
Chancellor Brüning's austerity policies went far beyond keeping interest rates high to stay on the gold standard and stem capital flight.
A series of draconian fiscal budgets imposed severe spending cuts and tax rises
Frances Coppola 28 December 2017

A Greek tragedy: how much can one nation take?
Greece’s economic crisis has disappeared from the minds of many in Europe,
but inside the country, the pain is only getting worse  
FT 20 January 2017

The North still refuses to accept that the crisis was caused by destabilising capital flows,
and insists on a one-sided adjustment that forces the South to claw back lost competitiveness
through deflationary austerity.
Ambrose Evans-Pritchard, Telegraph 19 January 2017

Nobel economist Joe Stiglitz said this strategy had led to a contractionary bias for the eurozone as a whole and was ultimately unworkable

Martin Schulz, the European Parliament's president, said it was
absurd for politicians in the North to keep peddling the bogus morality tale that the South got into trouble because they are feckless and too lazy to work.
"These are all lies, and this is what is leading to huge lack of trust," he said.

Full text

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När det gäller den period med krympande BNP som inleddes 2012 är experterna i stort sett eniga:
Finland hade kunnat lyfta sig snabbare ur recessionen med en egen, fritt flytande valuta.
DI/TT 30 december 2016

IMF and EU policymakers take Greece bailout spat online
War of words breaks out between officials over austerity measures
FT 15 December 2016

Tensions between the International Monetary Fund and eurozone policymakers over a Greek bailout erupted into a full online showdown on Thursday,
raising questions over whether the IMF will join the latest €86bn rescue.

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Greece cannot be condemned to austerity for ever
Myths about the country’s rescue package must be confronted
Pierre Moscovici, European commissioner for economic and financial affairs, taxation and customs,
FT 15 December 2016

Put simply, the euro was flawed at birth.
It was almost inevitable that taking away two key adjustment mechanisms,
the interest and exchange rates, without putting anything else in their place,
would make macro adjustment difficult.
the social and economic costs of forcing Greek prices to fall enough are enormous
Stiglitz, FT 17 August 2016

Ambrose knows how to turn a phrase.
“Calamitous misjudgments” is a good way to describe the way the IMF, along with the EU and ECB, has handled the continent’s sovereign debt crisis,
which remains unresolved even now, six years later.
An Inheritance of Incompetence, John Mauldin, 13 August 2016

In 2013 economists at the IMF rendered their verdict on these austerity programmes:
they had done far more economic damage than had been initially predicted, including by the fund itself.
What had the IMF got wrong when it made its earlier, more sanguine forecasts?
It had dramatically underestimated the fiscal multiplier.
The Economist print 13 August 2016

Keynes supposed there was a “multiplier effect” from changes in investment spending.
A bit of additional money spent by the government, for instance, would add directly to a nation’s output (and income). In the first instance, this money would go to contractors, suppliers, civil servants or welfare recipients. They would in turn spend some of the extra income. The beneficiaries of that spending would also splash out a bit, adding still more to economic activity, and so on.
Should the government cut back, the ill effects would multiply in the same way.

Keynes’s reasoning was affirmed by the economic impact of increased government expenditure during the second world war.
Massive military spending in Britain and America contributed to soaring economic growth.

/Se also ”Det som satte stopp för trettiotalsdepressionen i USA var ett massivt underskottfinansierat program för offentliga arbeten som kallas andra världskriget”.

In an article published in 1979 and entitled “After Keynesian Economics”, Robert Lucas and Tom Sargent, both eventual Nobel-prize winners, wrote that the flaws in Keynesian economic models were “fatal”.
Keynesian macroeconomic models were “of no value in guiding policy”.

John Cochrane of the University of Chicago said of Keynesian ideas in 2009:
“It’s not part of what anybody has taught graduate students since the 1960s.
They are fairy tales that have been proved false. It is very comforting in times of stress to go back to the fairy tales we heard as children, but it doesn’t make them less false.”

The practical experience of the recession gave economists plenty to study, however.

Full text of excellent article, even by The Economist standard



The Myth of Austerity and Growth
Noah Smith, Bloomberg 22 June 2016

The principles of Keynesian fiscal policy -- which have slowly been coming back into vogue -- say that tightening spending is the worst thing you can do in the middle of a recession. More generally, it isn’t clear just how austerity is supposed to work its positive magic. The main claim seems to be the rather vague idea that lower budget deficits increase business confidence.

Blanchard has shifted his stance. In a 2013 paper with Daniel Leigh, he showed that the IMF had been consistently wrong in its forecasts of the effects of austerity. The more beneficial the IMF predicted that austerity would be, the more incorrect its predictions were!

In 2010, the IMF admitted that its demands exacerbated the pain of South Korea’s financial crisis in the 1990s.
And in 2016, the Fund released a report questioning whether its entire economic philosophy had major weaknesses.

Full text


Down and out in Helsinki
With relentless budget cuts and a gloomy economic forecast,
the Nordic country’s economy is on life support.
Politico 18 May 2016

A General Theory of Austerity
Simon Wren-Lewis, 17 May 2016

Christine Lagarde letter to Eurozone finance ministers demands:
drop all the talk about new austerity measures and quickly agree a plan for debt relief
so that a deal can be met before a possible Greek default in July.
Peter Spiegel, FT Alphaville 6 May 2016

The good news is that the recovery continues; we have growth; we are not in a crisis.
The not-so-good news is that the recovery remains too slow, too fragile, and risks to its durability are increasing.
Lecture by Christine Lagarde, Managing Director, IMF
Hosted by the Bundesbank and Goethe University
Frankfurt, Germany, April 5, 2016

Structural reform is like exercise: nearly everyone could use a bit more of it.
This newspaper has been known to recommend it to governments from time to time.

The extent to which economies stuck in a mire of low growth and low inflation should focus on structural reform,
rather than stimulating demand, is a tricky question.
Few economists would argue that Italy’s economy is a model of efficiency.
Yet some economists reckon that making it easier to sack workers and cut prices is risky
when a country is already facing high unemployment and deflation.

In its latest “World Economic Outlook”, the International Monetary Fund devotes a chapter to the debate


By adopting structural reforms at the same time as slashing spending,
European politicians may be creating an association in voters’ minds between reform and economic hardship
— a reflex that would not bode well for the health of Europe’s economy or for the survival of the euro.

Full text at The Economist

IMF and the eurocrisis

Internal devaluation is already well under way
EU Observer 1 April 2016

Det finska eländet är gåtfullt.
Tillväxten har varit noll sedan finanskrisen bröt ut, och statsskulden stiger.
Även om det inte var euron som knäckte landets mobiltelefonjätte har valutan sannolikt blivit ett hinder för omställningen.
En lägre växelkurs skulle ha kunnat gynna tillväxten i nya branscher.
DN-ledare 17 september 2015

The euro was doomed from the start
The creation of the euro has been an error of historic dimensions and done great harm to the EU
which in its first 40 years had brought economic prosperity to the citizens of the Continent.
I had the privilege of negotiating Britain’s opt-out from the then new European single currency in 1991.
Norman Lamont, Telegraph 20 June 2015

Rather than call upon the combined authority of Euro governance to manage a deep Euro Area-wide sovereign debt workout,
the IMF, through its repeated public assertion of need for primary surplus numbers in that ballpark,
backs the application of Euro Area political authority to condemn a single member—Greece—to further depression,

thereby also prolonging and aggravating the vulnerabilities for the Euro Area as a whole.
Former IMF staffer Peter Doyle, FT Alphaville 17 April 2015

An amazing mea culpa from the IMF’s chief economist
the fund blew its forecasts for Greece and other European economies because it did not fully understand
how government austerity efforts would undermine economic growth.
Washington Post January 3, 2013

Fundamental misalignments that have made life so unbearable for many Europeans.
Imbalances tend to arise in economic life. There is nothing wrong with them in principle as long as they disappear eventually.
But there is no sign of a benign route out of the eurozone’s internal imbalances.
Wolfgang Münchau, FT 29 March 2015

Euron är ett fullskaleexperiment för att se om Hoover och Brüning och Bildt hade rätt,
om en interndevalvering är möjlig och om åtstramning leder till stimulans

Rolf Englund, 3 mars 2015

They never told us we could do that,” said Sidney Webb, a bruised former minister, when Prime Minister Ramsay MacDonald took Britain off the gold standard in 1931.
That momentous decision – forced on the government, in the end, by a mutiny of the Royal Navy –
took 25 per cent off the value of the pound and scarred the Labour party for decades.
But it also saved Britain from the Great Depression.
Stephanie Flanders, FT 18 April 2014

Full text

In September 1931, as part of its attempts to deal with the Great Depression, the new National Government launched cuts to public spending.

10% pay cut for officers and senior ratings. Those ratings below Petty Officer who had joined before 1925 would also have their pay reduced to the new rate; this amounted to a cut of 25%

For two days, ships of the Royal Navy at Invergordon were in open mutiny, in one of the few military strikes in British history.

The Invergordon Mutiny caused a panic on the London Stock Exchange and a run on the pound, bringing Britain's economic troubles to a head
that forced it off the Gold Standard on 20 September 1931.

Full text at Wikipedia

U.K.'s Chancellor Osborne:
"Varoufakis was recruited because Chairman Mao was dead and Mickey Mouse was busy."
CNBC March 2016

The nickname for the IMF in the markets is “It’s mostly fiscal”
Why do the IMF and the other lenders persevere with this destructive path?
The answer is IMP: “It’s mostly political.” That is to say, it is driven by the overriding will to keep the euro on the road.
Roger Bootle, 1 March 2015

SPIEGEL: Mr. Varoufakis, you have referred to the European Union's bailout policy for Greece as "fiscal waterboarding." What exactly do you mean by that?
Varoufakis: For the past five years, Greece has been subjected to austerity measures that it cannot, under any circumstances, meet.
Our country is literally being pushed under water. Just before we suffer an actual cardiac arrest, we are granted a momentary respite.
Then we're pushed back under water, and the whole thing starts again.
My aim is to end this permanent terror of asphyxiation.
Der Spiegel 16 February 2015

Weimar and Greece
Paul Krugman, 15 February 2015

Weimar, it’s never about the deflationary effects of the gold standard and austerity in 1930-32,
which is, you know, what brought you-know-who to power.

Full text

More here

Euron är vår tids guldmyntfot i Europa,
ett fast växelkurssystem som försvaras med ekonomisk åtstramning i länder med massarbetslöshet.
Doften av 30-tal blir allt starkare.
Nils Lundgren, Magasinet Neo, nr 1/2015

What is needed is not structural reform within Greece and Spain so much as structural reform of the eurozone’s design
and a fundamental rethinking of the policy frameworks that have resulted in the monetary union’s spectacularly bad performance.
Joseph E. Stiglitz, Project Syndicate 3 February 2015

Austerity had failed repeatedly, from its early use under US President Herbert Hoover, which turned the stock-market crash into the Great Depression,
to the IMF “programs” imposed on East Asia and Latin America in recent decades. And yet when Greece got into trouble, it was tried again.

Does anyone in their right mind think that any country would willingly put itself through what Greece has gone through, just to get a free ride from its creditors?
If there is a moral hazard, it is on the part of the lenders – especially in the private sector – who have been bailed out repeatedly.

Full text

Joseph Stiglitz

Austerity – the policy of saving your way out of a demand shortfall – simply does not work.
The question now is not whether the German government will accept it, but when.
Will it take a similar debacle for Spain’s conservatives in that country’s coming election

to force Merkel to come to terms with reality?
Joschka Fischer, Project Syndicate JAN 30, 2015

In a shrinking economy, a country’s debt-to-GDP ratio rises rather than falls, and Europe’s recession-ridden crisis countries have now saved themselves into a depression, resulting in mass unemployment, alarming levels of poverty, and scant hope.

It does not take a prophet to predict that the latest chapter of the euro crisis will leave Germany’s austerity policy in tatters – unless Merkel really wants to take the enormous risk of letting the euro fail.

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Det är Greklands konstnadsläge/växelkurs, Stupid
Det är inte Greklands skulder som är huvudproblemet.
Det är kostnadsläget.
Rolf Englund 2015-01-27

Levelling out competitiveness in the euro area will be costly
Greece must lower its real exchange rate, by cutting prices and wages.
This is proving a painful process.
Nice chart EMU Unit Labour Cost 1999-2013
The Economist online May 22nd 2012

Draghi only had to say "whatever it takes" to end Europe's financial crisis.
But Draghi will actually have to do whatever it takes to end Europe's economic one.
That's what he's trying to do now, but the eurocrats might not let him.
They have their rules, after all.
Matt O'Brien, Washington Post, August 27, 2014

Radical left is right about Europe’s debt
The tragedy of today’s eurozone is the sense of resignation with which the establishment parties of the centre-left and the centre-right are
allowing Europe to drift into the economic equivalent of a nuclear winter.

You may not consider yourself a supporter of the radical left.
But if you lived in the eurozone and supported those policies, that would be your only choice.
Wolfgang Münchau, FT November 23, 2014

Peter Wolodarski @pwolodarski
Wolfgang Münchau har nog rätt om detta

Draghi’s recent speech at the annual gathering of central bankers in Jackson Hole has excited great interest,
but the implication of his remarks is even more startling than many initially recognized.
If a eurozone breakup is to be avoided, escaping from continued recession will require increased fiscal deficits financed with ECB money.
The only question is how openly that reality will be admitted.
Adair Turner, former Chairman of the United Kingdom’s Financial Services Authority,
member of the UK’s Financial Policy Committee and the House of Lords, Project Syndicate 8 September 2014

Structural reform is certainly needed in some countries to increase long-term growth potential; but the impact of structural reform on short-term growth is often negative.

Simultaneous public and private deleveraging is bound to depress demand and growth. That is why eurozone fiscal austerity has become self-defeating. The more aggressively the Italian government, for example, cuts expenditure or increases taxation, the more its public-debt burden – already above 130% of GDP – will likely grow to unsustainable levels.
Until two weeks ago, eurozone policymakers denied this reality.
On August 22, at Jackson Hole, Draghi admitted it.

Without higher aggregate demand, he argued, structural reform could be ineffective; and higher demand requires fiscal stimulus alongside expansionary monetary policy.

Without a greater role for fiscal policy, the eurozone will face either continued slow growth or an eventual breakup.

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Ms Merkel does not say “no” to eurozone bonds.
She says: “Not without treaty change.”

EMU Collapse

Jag tycker det är skriande uppenbart att räntan världen över är för låg och att en större del av stimulanserna borde ske via finanspolitiken.
Rolf Englund blog 5 december 2009

The inevitability of instability
speech by Adair Turner
Buttonwood Jan 25th 2014, The Economist print edition

Helicopters can be dangerous
Lord Turner believes that all forms of monetary or fiscal stimulus,
conventional or unconventional,
work by increasing nominal demand in the economy
Gavyn Davies, Financial Times February 17, 2013


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Yesterday, president François Hollande had to ask his prime minister, Manuel Valls, to form a new government
after senior ministers publicly criticised his economic strategy - Mr Hollande’s “absurd” austerity policies
Telegraph 25 August 2014

Italy’s Downward Spiral
Italy’s new prime minister, Matteo Renzi, wants to stimulate growth. But what he really intends to do is accumulate even more debt.
True, debt spurs demand; but this type of demand is artificial and short-lived.
Sustainable growth can be achieved only if Italy’s economy regains its competitiveness,
and within the eurozone there is only one way to accomplish this: by reducing the prices of its goods relative to those of its eurozone competitors.
What Italy managed in the past by devaluing the lira must now be emulated through so-called real depreciation.
Hans-Werner Sinn, Project Syndicate 21 August 2014

IMF and its Keynesian fellow-travellers were convinced that his squeeze on public spending meant that the recovery would take years to materialise.
We now know that the Chancellor was right and the IMF spectacularly wrong.
Allister Heath, Telegraph 24 July 2014

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"Battle raging between the world’s leading macroeconomists"
The European Central Bank has found itself caught in the crossfire
The Bank for International Settlements’ call last month has reignited the debate over how to explain – and tackle –
the financial and economic turmoil that has persisted over the past six years.
The debate is so fierce, the viewpoints so distinct, that two of the world’s leading multilateral organisations,
the BIS and the International Monetary Fund, have completely different ideas on what the ECB’s next step should be

FT Money Supply blog 14 July 2014

Europe’s Debt Wish
ECB will soon have to confront the fact that structural reforms and fiscal austerity
fall far short of being a complete solution to Europe’s debt problems.
Kenneth Rogoff, Project Syndicate 7 July 2014

In October and November, the ECB will announce the results of its bank stress tests.
Because many banks hold a large volume of eurozone government debt, the results will depend very much on how the ECB assesses sovereign risk.

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I never thought I would live to see a serving European Commissioner suggest that it was "reckless" to launch the euro without a lender-of-last resort or fiscal union to back it up.
Or that EMU policies have led to a vicious cycle and a catastrophic double-dip recession that is entirely due to the dysfunctional character of the project.
Or that the Greek debt crisis was botched because Germany’s leaders were playing politics with the North-Rhine Westphalia elections.
Or that that the internal devaluation policies forced on the victim states are cruel and inherently self defeating.
Or that EMU's stabilisation regime has not come close to putting monetary union on a viable footing, able to command political consent over time.
But we have one today from László Andor, and it is a corker, delivered in Berlin of all places. The European Commissioner for Employment and Social Affairs is very close to outright revolt, not surprisingly since his job is to deal with the terrible consequences of these policies.
Ambrose Evans-Pritchard, June 13th, 2014

The effect of austerity has been to erode the tax base, leaving the budget deficit stuck at over 4pc of GDP.
France has gained remarkably little from fiscal tightening equal to 5pc of GDP over the last three years.
Undeterred, it is now pushing through extra cuts of €50bn by 2017 under the new premier Manuel Valls,
dubbed the “economic Clemenceau” for his willingness to endure casualties stoically
Ambrose Evans-Pritchard, 3 July 2014

Deflation - A nightmare for the debt-stricken states of southern Europe, still trapped in a slump with mass unemployment
With Germany at zero inflation, they have to go into even deeper deflation to claw back lost competitiveness within EMU under "internal devaluations".
This, in turn, plays havoc with debt dynamics through the denominator effect.
Their debt loads are rising on a base of flat or contracting nominal GDP.
It is a key reason why Italy's public debt has risen from 119pc to 133pc of GDP since 2010 despite achieving a primary budget surplus
Ambrose Evans-Pritchard 12 March 2014

Euro Area — “Deflation” Versus “Lowflation”
March 4, 2014 by iMFdirect
Recent talk about deflation in the euro area has evoked two kinds of reactions.
On one side are those who worry about the associated prospect of prolonged recession.
On the other are those who see the risk as overblown.
This blog and the video below sift through both sides of the debate

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George Soros says EU may not survive crisis
"My hope is that Germany is going to change and realise that the policy of austerity is counter-productive.
"The only people who can change it are the Germans, because they are in charge.
They don't want to be in charge, in fact they are determined not to be in charge. And that's the tragedy."
Georg Soros, BBC 12 March 2014

In his book, The Tragedy of the European Union, published in the UK on Tuesday, Mr Soros also writes that he believes the banking sector is a "parasite" holding back the economic recovery and that little has been done to resolve the issues behind the 2008 crisis.

Full text

Tragedy of the European Union: Disintegration or Revival?: How Europe Must Now Choose Between Economic and Political Revival or Disintegration, at Amazon

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Optimists have a touching faith in the German locomotive that is supposed to pull the eurozone out of the swamp, but the latest data shows that ,,,

German wages fell 0.2pc in 2013. Germany too is in wage deflation.
Which raises the question: how on earth are France, Italy, Spain, Portugal, and Greece supposed to claw back lost labour competitiveness against Germany
by means of "internal devaluations" if German wages are falling?

Ambrose Evans-Pritchard, February 20th, 2014

Full text

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"It's hard to imagine that if growth remains as weak as it is, and the periphery is kept in permanent recession, that things won't eventually blow up in Europe," says Rogoff, echoing a view widely shared by many economists.
Rana Foroohar, Time Magazine, Jan. 15, 2014

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Professor Lars Calmfors skriver i en kolumn i DN idag 21/1-14 om hur eurokrisen borde kunna lösas. Rubriken är:
"Svångremmen politiskt ohållbar". Trots vissa ljuspunkter krävs "ytterligare kraftiga finanspolitiska åtstramningar" i krisländerna med den strategi som valts. De måste vidmakthållas kanske under ett decennium med dålig tillväxt och hög arbetslöshet som följd.
Han bedömer det rentav som osannolikt att krisländerna skulle fullfölja de åtstramningar som skulle behövas
Danne Nordling 21 januari 2014

If France goes to the trouble of aligning with Germany on German terms, expect no mercy for others.
The new consensus spans the entire mainstream political spectrum.
If you live on the European continent and if you have a problem with Say’s Law,
the only political parties that cater to you are the extreme left or the extreme right.

Wolfgang Münchau, Financial Times, January 19, 2014

The euro zone needs a history lesson
Choices that appear to have been made by Europe’s policy-making elite:
To preclude any form of debt mutualisation; to have individual debtor countries pay off their existing debts; and to have them adjust macroeconomically via austerity and deflation.
Kevin O'Rourke, University of Oxford, The Economist Free Exchange, Jan 17th 2014

In Münchau’s words, “If you look at this with a knowledge of economic history, this is an awe-inspiring set of choices, to put it mildly.” He’s right.

If such an adjustment mechanism was suitable to any period, it was the decades before World War I. Relatively flexible wages and prices meant that deflation was more feasible than it would become subsequently, and involved fewer unemployment costs.

The limited franchise /rösträtten/ meant that any unemployment that did result would incur lower political costs than would subsequently be the case.

An adjustment strategy based on the expectation that already over-indebted countries will pay back what they owe in an environment of falling prices seems doomed to failure; all the more so if “internal devaluation” at the level of individual member-states is replaced by euro-zone-wide deflation.

And interwar deflation ultimately had terrible political consequences, as well as economic ones.

Full text

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What euro crisis watchers should look for in 2014
The decision not to set up a common backstop for the eurozone’s banks has closed the last window for any form of debt mutualisation as a tool of crisis resolution.
All of the adjustment will take place through austerity and price deflation in the periphery.
Most of the adjustment still lies ahead.
Wolfgang Münchau, Financial Times, January 5, 2014
Highly recommended

In 2010, most of the world’s wealthy nations, although still deeply depressed in the wake of the financial crisis,
turned to fiscal austerity: slashing spending and, in some cases, raising taxes in an effort to reduce
budget deficits that had surged as their economies collapsed.
Basic economics said that austerity in an already depressed economy would deepen the depression. But the “austerians,” as many of us began calling them, insisted that spending cuts would lead to economic expansion, because they would improve business confidence.
The result came as close to a controlled experiment as one ever gets in macroeconomics
Paul Krugman, New York Times 19 December 2013

Peter Praet, the chief economist of the European Central Bank, a PRE, a Perfectly Reasonable Economist
Praet is aware of the problems of the two zeroes — the zero lower bound on interest rates and
the great difficulty in engineering downward movements in nominal wages.
Paul Krugman, New York Times 4 December 2013

His underlying framework for thinking about European problems seems essentially indistinguishable from mine.
It’s a framework that sees a useful role for moderate inflation, both to avoid the zero lower bound and to ease the path of internal devaluation.

And you do have to wonder what calculation leads to the notion that a target of “close to but less than 2%” is appropriate, as opposed to, say, 3 or 4 percent.

Whatever Praet may privately think, he and his boss have to deal with Europe’s Very Serious People — people who believe in austerity regardless of circumstances,

The sad and remarkable thing that we’ve learned over the past year or so is how little intellectual debate matters. On both fiscal austerity and monetary policy, the PREs have completely blow the VSPs out of the water..
Yet policy barely changes, and the VSPs continue to talk as if they are in possession of The Truth.

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Peter Praet gave an important speech on disinflation risks and the ECB’s reaction function (see also his slides)

Peter Praet at ECB

Paul Krugman

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The question is, if it might not be better to dissolve the European Union in an orderly fashion instead of continuing the German led calamity.
How the European Union can achieve an internal rebalancing?
If Germany with its high productivity has low inflation, the other EU countries, who would have devalued their currency before the inception of the Euro, will have to dramatically deflate their economies – and that after years of virulent austerity.
This might seem a simple solution for economists and bureaucrats, but EU member states are democracies and patience in many of the peripheral nations – and not only those – is running very short.
Mathew D. Rose, via Naked Capitalism (Yves Smith), 3 December 2013
Highly Recommended

Yves Daccord, Director General of the International Committee of the Red Cross, gave an important warning earlier this year: “Europe has a long record of maintaining a plausible trust in the future of its young people, even during turmoil. Not anymore. With prices rising and rampant unemployment, young urban people no longer see any future for themselves, and governments start losing credibility and legitimacy.”

This cannot be the brave new world envisioned by the founders of the EU.

In May of next year there will be an election for the EU parliament. What many in the United States with its political history of two main parties do not understand is that in Europe many people do not vote for political parties, but against them.
To show their displeasure with the political class they select a “protest party”, not because they necessarily reflect their personal preference, but to express their disenchantment with the traditional parties. With regard to the current management of the financial crisis in the EU this will doubtlessly occur and rightly so.

The question is, if it might not be better to dissolve the European Union in an orderly fashion instead of continuing the German led calamity.

One saw what became of Germany’s last attempt to create a new European order seventy-five years ago.
The current situation shall only be complicated following the European parliamentary elections, when it is infused with ultra-right populist parties

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Can fiscal austerity be expansionary in present Europe?
The lessons from Sweden

Lennart Erixon, Department of Economics, Stockholm University, September 4, 2013

The main conclusion in this article is that the fiscal austerity measures in the mid-1990s delayed the Swedish economic recovery
and that neither these measures nor the fiscal rules were responsible for the impressive Swedish macroeconomic performance in the following period.
The positive economic development in Sweden was driven by export, profit and technology, reflecting an international upswing
and the country’s flexible exchange rates and industrial composition.
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Johannes Lindvall: Ett land som alla andra. Från full sysselsättning till massarbetslöshet
Lennart Erixon, Ekonomisk Debatt nr 4/2007

Erixon, Lennart Titel: Styrfel -- inte systemfel -- orsak till Sveriges eftersläpning?, Ekonomisk Debatt nr 1:1991
Erixon, Lennart Titel: Sackar Sverige efter? -- vad kan vi lära av utvecklingen i Förenta staterna?, Ekonomisk Debatt nr 8:1990

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Besk medicin behövs - och kanske kan en dos EMU tillhandahålla den kuren.

För det första kan vi inte på förhand veta hur utdragen och smärtsam den nödvändiga anpassningen blir.
Erfarenheter från Tysklands enande och den östeuropeiska integrationsprocessen tyder på att kostnaderna kan bli både betydande och långvariga.

Ett annat problem är att det demokratiska systemet kanske inte är berett svälja en så besk medicin.
Med tanke på den höga arbetslöshet som redan råder i stora delar av Europa, och givet den redan höga pressen på statsfinanserna, kan europeiska väljare visa sig ovilliga att acceptera en ännu större anpassningsbörda alldeles oberoende av om de då senare kan påräkna sig långsiktiga vinster.

Sammanfattningsvis är jag ganska pessimistisk när det gäller EMU:s chanser att bära sig om den gemensamma valutan införs som planerat den 1 januari 1999.
Men givet alternativen anser jag att projektet är väl värt ett försök.

Två tidigare försök att få till stånd ett intimare monetärt samarbete mellan Europas stater
- med Werner-planen 1971 och EMS (det europeiska monetära samarbetet) 1979 - har båda misslyckats.
Sannolikheten för ännu ett, större, misslyckande har inte minskat:
inga egentliga säkerhetsventiler har skapats.
Trots detta tror jag att EMU är bra för Europa.
Magnus Blomström i DN 1998-02-02

Varken Greklands finanser eller ens euron är värda
det vågspel som en finanspolitisk union skulle betyda.

Risken är påtaglig att politiken håller på att skena ifrån sitt folkliga stöd.
Gunnar Wetterberg, Expressen, 23 dec 2011

FORES presenterar en antologi där några av Sveriges kunnigaste ekonomer beskriver bakgrunden till krisen
och hur eurons framtid kan komma att se ut.
Lars Calmfors, Harald Edquist, Nils Lundgren, Stefan de Vylder, Pehr Wissén, och Hans Tson Söderström, bokens redaktör
14 november 2013

Lars Calmfors: "Överlever euron?" Bokpresentation 14/11, Youtube

Spanien får beröm för att ha lyckats sina kostnader och för att ha vänt ett underskott i bytesbalansen på 10 procent till ett litet överskott.
Men en arbetslöshet på över 25 procent imponerar inte.
Betyget blir ”godkänt”.

Dagens Industris Henrik Mitelman, 2013-08-27

Frankrike är det stora sorgebarnet och får betyget ”klart underkänt”.

”I den djupaste recessionen sedan andra världskriget är det rimligt att kostnaderna sjunker, inte minst när arbetslösheten har ökat till 11 procent. Men i ett sönderreglerat Frankrike sker det motsatta. Under de senaste fem åren har enhetsarbetskostnaderna, det vill säga den faktiska kostnaden för att producera i landet, stigit med 15 procent, vilket är häpnadsväckande eftersom konkurrenskraften urholkas ytterligare”, skriver Henrik Mitelman.

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Man häpnar.
Hur kan man undvika att inse att 25 procents arbetslöshet är en katastrof för land och folk?
Att det är fullständigt oacceptabelt.
Det är till och med ett orimligt pris även om man inbillar sig tillhöra dem som håller på att skapa ett nytt Romerskt rike.
Rolf Englund blog 2013-08-27



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However much money and power the Commission have, it is improbable that they will be able to have any significant impact on the competitiveness imbalance problem which a single currency will pose.
Anthony Jay, The Darlington Economics Lecture, November 17, 1995

This will leave the problem to nature's remedy - the migration of population. It seems hard to believe that the political, economic and social success of Europe, whether one approves or disapproves the objecfive, will be promoted by establishing at the heart of its economic fundioring a mecharism which depends for equilibrium on the enforced migration, on pain of destitution, of its population in the tens of millions:

If this is the character of monetary urion, conceived by politicians who saw it as little more than a trite gesture of nationhood, to go with a blue flag and a jolly anthem, then we can say that it is not in the long-term interests of Europe and very far from being a sensible economic sacrifice even for the sake of a large political goal.

Indeed, one may wonder that anyone who professes to hope for the success of political union in Europe could wish to implant in its foundations such an engine of mass destruction.

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Loans and guarantees do not make the unsustainable sustainable.

“austerity” in the peripheral countries could succeed.
By this, I mean the demand squeeze imposed on them results in a fall in costs and prices,
relative to their eurozone neighbours, leading to greater competitiveness,
an eventual recovery in living standards and a sharp drop in unemployment.

Samuel Brittan, Financial Times, August 8, 2013

"Growth-friendly process of consolidation"
Schäuble: “We need to stop this debate which says you have to choose between austerity and growth,”
The two-day effort by the United States Treasury secretary, Jacob J. Lew,
to persuade Europe to consider shifting its focus from budget balance to growth highlighted a deep trans-Atlantic policy gulf
New York Times, 9 April 2013

Psychological Roots of Austerity
Simon Wren-Lewis has a thoughtful post on the reasons for austerity mania
Thinking about President Obama’s first inaugural
Paul Krungman, March 23, 2013

– Europa är i djupa och fundamentala problem, som måste läsas med att samhällsmodellen i Sydeuropa görs om,
säger Anders Borg, som räknar med att länder som Italien kräver 10–15 års svåra och smärtsamma reformer.
SvD Näringsliv 20 mars 2013

naked capitalism: Is the Eurozone Nearing a Make or Break Point?
One of my colleagues studied in Germany, has extensive, high level political and economic contacts there, and reads the press daily.
He is not prone to overstatement or overreaction and also has a propensity to makes Delphic remarks.
He said the Eurozone is over. In pretty much those words, a simple sentence, no caveats or conditionals.
I nearly fell out of my chair.
naked capitalism, 5 March 2013

This apparently reflects the German recognition as a result of the Italian elections that they will not be able to surmount domestic opposition in Italy and potentially other periphery countries and would rather pull the plug than continue funding their trade partners.

He said there was a fair bit of discussion of Germany leaving the Eurozone after the election.

I quizzed him on how they thought they could do that, since the new DM would presumably trade at a big premium to the Euro.

My source finally said widespread recognition of the existential impasse at most a couple of months away.

He’s never this definitive.


Naked Capitalism is a blog published by Susan Webber, the principal of Aurora Advisors, Inc., a management consulting firm.
Webber authors the blog under a pen name, Yves Smith
The blog was ranked seventh in business authority by Technorati in 2011.

During 2011, Naked Capitalism was the third most visited business and economics blog on the web... Wikipedia


The turmoil produced by the Italian elections has directed attention back to where it should have been all along – to the politics of the eurozone crisis.
It is possible that southern Europe will give the Germans until the autumn to come around to a new approach.
But toleration for austerity is unlikely to last much beyond then.

Europe may be approaching a stark choice: giving up the euro; or keeping it and seeing the political crisis spin out of control.
Mark Mazower, professor of history at Columbia university, Financial Times 28 February 2013

"Euroministrar mot EMU"
Rebellion against the German-led prescription for fighting the debt crisis
Economic strains “may also justify in a certain number of cases reviewing deadlines for the correction of excessive deficits,” Olli Rehn told reporters
Bloomberg 5 March 2013

European finance ministers opened the way for looser budget policies after a backlash against austerity thrust Italy into political limbo and shattered months of relative stability in European markets.

Italy’s deadlocked election, France’s refusal to make deeper budget cuts and protests against the shrinking of the welfare state across southern Europe escalated the rebellion against the German-led prescription for fighting the debt crisis.

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I welcome the fact that the European institutions start to incorporate Keynes
and his ideas into their speeches and policies (see Mr Rehn’s recent comments),
but I have yet to read a single sentence in which someone from the troika makes sense of Keynes and his ideas.

Until now, it all comes down to: “see, we are Keynesians, too, so there is no alternative.”
Econoblog101, March 5, 2013

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In a recent speech (from February 28th), European Commissioner for Economic and Monetary Affairs and the Euro
and vice president of the European Commission Olli Rehn said the following things:
"While I am not sure if Keynes himself would be a Keynesian today, at least an unreconstructed one, I am in fact a Keynesian myself,
if that is measured by one’s belief in the dangers of a liquidity trap and the rationale of counter-cyclical economic policy.
Econoblog101, March 1, 2013

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Britain’s perilous austerity bunker
Cameron’s arguments against fiscal policy flexibility are wrong
Martin Wolf, Financial Times, March 12, 2013
Highly recomended

per·il·ous Adjective
Full of danger or risk. Exposed to imminent risk of disaster or ruin.
Synonyms dangerous - risky - hazardous - unsafe - parlous

David Cameron’s “there is no alternative” speech last week on the UK economy has aroused much criticism.

This is justified.The British prime minister’s arguments for sticking to the government’s programme of fiscal austerity were overwhelmingly wrong-headed.

Simon Wren-Lewis of the University of Oxford

and Jonathan Portes of the National Institute of Economic and Social Research,

among others, have demolished the prime minister’s views.

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Martin Wolf

Det svemska Bunkergänget

Top of page

The Fiscal Multiplier
Just as lawmakers force as much as $85 billion of budget cuts on the federal government
Bradford DeLong and Lawrence Summers: Now is the perfect time to spend more, not less
Bloomberg, 13 March 2013

Europe faces an impossible challenge - why can't Olli Rehn see it?
"There is no alternative". That was again the message this weekend from our old friend Olli Rehn
the eurozone's miscreant periphery has no option but to stick to the assigned path of budgetary consolidation
Jeremy Warner, Telegraph 4 March 2013

I say "old friend" because Mr Rehn's rigid adherence to the script has become an almost comically blinkered form of dogma, rendering him more a subject for mockery and ridicule than the feared enforcer he is supposed to be.

As I have said before, he can scarcely believe in what he is preaching, but a more loyal spokesman for the cause of fiscal austerity would be hard to find.

Even those people who come from larger EU countries should be conscious of the fact that
Every euro-zone member is systemically relevant.
If Cyprus were to face a disorderly default, there is a high probability that the consequence would be an exit from the euro zone.

All members of the euro zone have committed to doing everything in their power to preserve the unity of the euro.
This promise has calmed down the markets. We shouldn't do anything that would jeopardize this success.
Olli Rehn, Der Spiegel 4 March 2013

Om arbetsmarknaden liberaliseras måste de som förlorar jobbet erbjudas grundläggande trygghet i väntan på att reformerna vitaliserar ekonomin och fler arbetstillfällen skapas.
Det perspektivet har varit sorgligt frånvarande i den tyskdikterade politik som har delar av Europa i sitt grepp.
Den har förvisso modifierats något; Portugal, Grekland och Spanien har beviljats uppskov med budgetsaneringen.

Men det kan vara för lite för sent. Den nedåtgående spiralen fortsätter
Per T Ohlsson, Sydsvenskan 3 mars 2013

De italienska arbetskraftskostnaderna har stigit stadigt efter införandet av euron,
då Italien också förlorade de möjligheter som landet utnyttjade för att på konstlad väg
upprätthålla tillväxt och konkurrenskraft under de goda åren på 1960- och 1970-talet: inflation och devalveringar.

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Jag var en av nästan 2,5 miljoner väljare som röstade ja i folkomröstningen.
Jag har av och till brottats med två efterkloka tankar:
Den ena är att det kanske, från ett snävt svenskt perspektiv, var bra att det blev nej.
Den andra är att jag borde ha lyssnat mer på hjärnan än på magen och ställt mig på nejlinjen.
Per T Ohlsson, Sydsvenskan, 12 augusti 2012

Början på sidan

Irish Finance minister Michael Noonan played down concerns about the slide in sterling against the euro, saying the Irish economy is now strong enough to withstand the exchange rate shock even though Britain accounts for a fifth of the country's exports.
"We don't see a problem for sterling at present levels. We have cut costs right through the economy with an internal devaluation of 15pc or 16pc and we are now highly competitive."
Ambrose 28 Feb 2013

The post-election deadlock in Italy is an uncomfortable reminder that
the developed world’s sovereign debt problem ultimately boils down
not just to bad economics but to a failure of democracy.

John Plender, Finncial Times 26 February 2013

Over many years, the share of wages in national income stagnated or declined while a dramatic increase in the profit share contributed to the high levels of inequality that now blight the rich world.

The political response to this challenge in the Anglosphere and in Spain was a social contract based on encouraging the illusion of wealth through credit-fuelled housing bubbles and increased social transfers.

Unaffordable promises were the order of the day, too, across much of the eurozone. Debt problems were then compounded by the flawed construction of the monetary union.

In a recent book, David Roche and Bob McKee of Independent Strategy argue that democracy in the 20th century became, in effect, a victim of its own success.

After the end of the Cold War, it /democracy/ suffered a loss of vitality as the electoral process ceased to offer big ideas or clear choices and became increasingly beholden to special interest groups.

Se t ex Villaägarna och Fastighetsskatten

The fragility of a eurozone banking system that is overloaded with sovereign debt will once again be a cause of nervousness.

Instead of a new social contract, we have a non-contract whereby southern Europe endures austerity with high unemployment and growing social strife while northern Europe provides no fiscal stimulus to allow southern austerity to work

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‘Democrisis: Democracy caused the debt crisis. Will it survive it?’
Independent Strategy, 2012

In the fixed interest sector something irrational is undoubtedly going on
Despite the oft-heard central bankers’ refrain that bubbles are impossible to identify until after they have been pricked,
historical comparisons leave little doubt that this is a bubble

John Plender, FT January 29, 2013

John Plender

Austerity, Italian Style
What good, exactly, has what currently passes for mature realism done in Italy or for that matter Europe as a whole? For Mr. Monti was, in effect, the proconsul installed by Germany to enforce fiscal austerity on an already ailing economy; willingness to pursue austerity without limit is what defines respectability in European policy circles.
This would be fine if austerity policies actually worked — but they don’t.
Paul Krugman, New York Times 24 February 2013

Den massiva utslagningen på arbetsmarknaden är en social och ekonomisk katastrof
som kommer att prägla generationer i Europa framåt.
Att släppa fram så hög och segdragen arbetslöshet är att be om långsiktiga problem,
vilket Sverige upplevde i mindre skala på 1990-talet.
Peter Wolodarski, Signerat DN, 3 mars 2013

Skadorna på ekonomin blir permanenta, såren för de enskilda djupa. I förlängningen hotas sammanhållningen och tilltron till demokratin, särskilt i länder som saknar en tradition av folkstyre.

Så här var det inte tänkt att bli. För tre år sedan hävdade den politiska eliten – anförd av Tysklands Angela Merkel – att krisen var på väg att lösas, bara euromedlemmarna skapade ordning och reda i sina statsfinanser. Om regeringarna skötte sitt budgetarbete lika bra som Berlin skulle Europa snabbt vara tillbaka på banan.

Det grundläggande tankefelet var att budgetunderskotten skulle ha skapats av skenande statsutgifter snarare än skattebortfall till följd av svag privat efterfrågan.
Om något fanns behov av fortsatta ekonomiska stimulanser för euroområdet – men i stället fattades alltså beslut om åtstramningar.
Resultatet blev att krisen förstärktes. Den privata och den offentliga sektorn bantade sina utgifter samtidigt.

Financial Times ekonomiske kommentator Martin Wolf påminde nyligen om hur det lät på G20-mötet i Toronto 2010, då den så kallade åtstramningspolitiken sattes i verket.

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Peter Wolodarski

At the Toronto summit of the Group of 20 leading economies in June 2010, high-income countries turned to fiscal austerity. The emerging sovereign debt crises in Greece, Ireland and Portugal were one of the reasons for this. Policy makers were terrified by the risk that their countries would turn into Greece. The G20 communiqué was specific: “Advanced economies have committed to fiscal plans that will at least halve deficits by 2013 and stabilise or reduce government debt-to-GDP ratios by 2016.” Was this both necessary and wise? No.

Because of its refusal to act as lender of last resort to governments,
they suffered liquidity risk – borrowing costs rose because buyers of bonds lacked confidence
they would be able to resell easily at all times. That, not insolvency, was the immediate peril.

(Jfr Soros om att dom inte förstod att det var ett stort steg att avskaffa den egna sedelpressen)

By adopting OMT earlier, the ECB could have prevented the panic that drove the spreads that justified the austerity.
It did not do so. Tens of millions of people are suffering unnecessary hardship. It is tragic.
Martin Wolf, Financial Times 26 February 2013

One can justify fiscal austerity, brutal though it is, as the only way to force adjustments of relative costs and the needed labour market reforms. My colleague, Wolfgang Münchau, argues that the opposite is true. But I wonder whether the eurozone will survive its cure.

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Mr Olli Rehn, The European Commissioner has been joking all along
"The data…supports, in my view, the fundamentals of our crisis response:
a policy mix where building a stability culture and pursuing structural reforms supportive of growth and jobs go hand in hand",
he said in response to news that the eurozone has finally emerged from recession.
Jeremy Warner, August 15th, 2013

He's joking, right? Indeed he must be, and by going just a little bit too far in his claims, he's given the game away.
It was good while it lasted, but now we know that even Mr Rehn cannot believe in what he says, for otherwise he surely would have tempered his remarks with a few caveats

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The European Trade Union Confederation wades into the debate on internal devaluation with an open letter to commissioner Rehn, responding to the latter’s “upbeat August blog on sunny Spain” where he suggested Spain might emulate the “success stories” of Latvia and Ireland.
ETUC argues Latvia’s success is actually the result of deviating from the advice of the IMF and halting the austerity policy which was leading the economy to depression.
Eurointelligence, September 2, 2013

Krugman anklagade EU-kommissionären för en ”Rehn of Terror” för att han trots rapportens slutsatser argumenterar för att åtstramningspolitiken återupprättat marknadens förtroende.
Efter att representanter för EU i förra veckan gått till verbal attack mot Krugman använde sig denne av
ett klassiskt Monty Python-citat för att visa att han inte gått till några personliga angrepp på Rehn
Nu slår Olli Rehn tillbaka mot Krugman i en intervju i Helsingin Sanomat
SvD Näringsliv 12 mars 2013

Krugman har i en rad blogginlägg på New York Times attackerat Rehn just för att han har en övertro på åtstramningspolitiken, och Krugman anser att EU istället bör uppmuntra de skuldtyngda länderna att stimulera tillväxten snarare än att fortsätta minska utgifterna ytterligare.

– Krugman sätter ord i min mun som i riksdagen skulle kallas för ”modifierad sanning”.
Helsingin Sanomat noterar att ”modifierad sanning” är det finska parlamentets artiga terminologi för att ljuga.

Full text med bra länkar

Paul De Grauwe and the Rehn of Terror
Nobody has taught me as much about the euro crisis as Paul De Grauwe,
who brought to the fore a crucial point almost everyone was overlooking:
the importance of self-fulfilling debt panics in countries that no longer have their own currencies.

Now he has a new paper with Yuemei Ji following up on that insight,
and offering yet more evidence of the incredible unwisdom of European economic policy
Paul Krugman, February 22, 2013

The Reign of Terror (5 September 1793 – 28 July 1794)

Rolf Englund: Om man har en sedelpress går man inte i konkurs.
Det var varit det till synes självklara budskapet på denna blog ett antal gånger,
första gången i november 2011.

"What we are seeing is that the effect of the OMT is truly powerful," said Marco Valli, chief euro zone economist at Unicredit. "A year ago if Italy were in this situation (bond yields) would have been going through the roof."
Markets are no longer betting against the euro and so they are not taking aim at the bloc's weakest members, like Italy.
"This was the only region in the world where countries could default at any time
because they didn't have a central bank behind them,"
said Mizuho chief economist Riccardo Barbieri.
"With OMT we now have something that approximates to having a central bank."
Reuters 12 Mar 2013

The Austerians, Olli Rehn, Olivier Blanchard and fiscal multipliers
No debate please, we're Europeans
Paul Krugman, New York Times blog, 16 February 2013
Jonathan Portes blog 15 February 2013

Olli Rehn of the European Commission, a firm advocate of austerity, responds to the disastrous economic news in Europe, which has confirmed the warnings of austerity critics and led to a widespread reassessment of fiscal multipliers; it seems that they are large in a liquidity trap, just as some of us predicted.

Rehn’s answer? We need to stop putting out these economic studies, because they’re undermining confidence in austerity!

As I said, these signs of desperation are gratifying. Unfortunately, these people have already done immense damage, and still retain the power to do a lot more.

Mr Rehn, in a letter to European Finance Ministers, copied to other international financial luminaries like Christine Lagarde, says:
"I would like to make a few points about a debate which has not been helpful and which has risked to erode the confidence we have painstakingly built up over the last years in late night meetings.
I refer to the debate about fiscal multipliers, ie the marginal impact that a change in fiscal policy has on economic growth. The debate in general has not brought us much new insight."

Rehn letter

The Teuto-Calvinists believe that the fiscal multiplier is around 0.5
The entire EU austerity plan is based on a false premise.
This disastrous error is now clear beyond any reasonable doubt.
Ambrose Evans-Pritchard, 3 October 2012

Olivier Blanchard, the chief economist at the IMF, om multiplikatorn
Paul Krugman, December 21, 2011

Peter Wolodarski, signerat DN 14 oktober 2012:

Internationella valutafonden, IMF, tar upp frågan i sin senaste stora rapport och konstaterar att man tidigare underskattat den så kallade multiplikatoreffekten, det vill säga hur omfattningen av en åtgärd förändras när den fortplantar sig genom ekonomin.
Tidigare trodde man att multiplikatorn låg på ungefär 0,5. Nu tycks den vara så hög som 1,7.


Början på sidan

Why is everybody so surprised by those GDP numbers?
Eurointelligence Daily Briefing, 15 February 2013

These data must have come as no surprise whatsoever for anyone who has recently been doing the maths on fiscal multipliers.
The fact that they shocked so many tells us that a large majority of analysts still fail to understand the underlying dynamic of this crisis.
As austerity continues into 2013, expect more such “surprises”.


Den nuvarande ekonomiska krishanteringen riskerar att undergräva demokratins grundvalar.
Sverige måste ta en aktiv roll i diskussionen om EU:s framtid och behovet av en fördragsändring för ett ökat handlingsutrymme för politiken.
Johan Danielsson och Claes-Mikael Jonsson, LO, Europaportalen, 15 februari 2013

Nedskärningarna har lett till lägre efterfrågan, lägre tillväxt och högre arbetslöshet vilket i sin tur lett till en ökad statsskuld. Som svar på detta ordineras ytterligare besparingar, med samma resultat.

Vi är övertygade om att denna spiral måste brytas. Annars ökar risken för att allt fler medborgare vänder politiken ryggen.

Det är med stor oro vi ser hur kollektivavtal, anställningsskydd och välfärdssystem bryts sönder. Demokratins grundvalar undermineras och extrema krafter växer fram.
På sikt är både nationella och europeiska politiska system i fara.

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The eurozone's North-South misalignment has not been resolved.
The Club Med bloc is still sliding into deeper depression.
The financial crisis — never more than a symptom — has graduated into a more intractable
economic, social, and therefore political crisis.
Ambrose Evans-Pritchard, January 23rd, 2013

The ECB's Mario Draghi has taken the risk of a sovereign default in Spain and Italy off the table, but he has not restored these countries to economic viability within a D-Mark currency bloc, and nor can he.

Take a moment to read Eurozone crisis: it ain't over yet by Professor Paulo Manasse from Bologna University, posted on VOX EU.

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The European Commission’s 400-page report last week on the jobless crisis
quietly demolishes the claim that labour rigidities are the elemental cause of the social tornado sweeping across Club Med and parts of Eastern Europe.
It dutifully lists the sorts of things that can be done to help:
But then goes on to finger a "demand shock" as the real culprit. All else is "less relevant".
Ambrose Evans-Pritchard, 13 Jan 2013

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Employment and Social Developments in Europe 2012 (08/01/2013)
EU Catalog N. : KE-BD-12-001-EN-C

Ambrose Evans-Pritchard (AEP) increasingly faces the risk of running out of hyperbolic war-analogies sooner than the euro collapses.
For months he has been numbing his readership with references to the Second World War or the First World War, or to ‘1930s-style policies’
so that not even the most casual reader on his way to the sports pages can be left in any doubt as to how bad this whole thing in Europe is,
and how bad it will get, and importantly, who is responsible.
Detlev Schlichter, 11 December 2012

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Paul Krugman's Blind Spot
Sorry, but the New York Times' star columnist just doesn’t understand Europe.
Anders Åslund, Foreign Policy 8 November 2013

Since Krugman represents the mainstream of Anglo-American economic commentary and enjoys both popularity and an impact on policy, a post mortem of his positions in the European financial crisis are of broader relevance.

Argentina is a large, closed economy that has mostly pursued populist economic policies, while Latvia is a very small, open economy, a member of the European Union with small public debt and excellent business environment. The only similarities were financial crisis because of large current account deficits leading to an absence of market financing.

Krugman's most spectacular failure has been his prediction of the dissolution of the eurozone. As Niall Ferguson has noted, Krugman "wrote about the imminent break-up of the euro at least eleven times between April 2010 and July 2012." Well, that didn't happen. Not only did the eurozone remain intact but in 2009, Slovakia joined, as did Estonia in 2011; Latvia is set to join in January 2014.

Not only did the eurozone remain intact but in 2009, Slovakia joined, as did Estonia in 2011; Latvia is set to join in January 2014.

While anyone can make a mistake, Krugman's error was more profound, indicating a lack of understanding.
He treated the eurozone as primarily a system of fixed exchange rates, ignoring that it is a currency union with centralized clearing of payments.
As the euro crisis evolved, uncleared payment balances piled up. The best way of dissolving these imbalances was by restoring confidence in the euro system, which the European Central Bank (ECB) has done, sensibly, since July 2012

In the last century, three multi-nation currency unions in Europe have endured disorderly breakups -- namely the Habsburg Empire, Yugoslavia, and the Soviet Union.

Luckily for European democracies, the ultimate verdict on crisis management belongs to the voters.

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Rome, Habsburg and the European Union


Aslund praises Reinhart and Rogoff for providing an important corrective to the view that fiscal stimulus is always right – a position that is common across the Anglo-American economic commentariat, led by Paul Krugman in the New York Times.
This is a curious thing for him to say, because it’s an outright lie
I can’t believe that Aslund doesn’t know this; why, then, would he discredit himself by repeating an easily refuted falsehood?
Paul Krugman, New York Times, 22 April 2013

As anyone who has been reading me, Martin Wolf, Brad DeLong, Simon Wren-Lewis, etc. knows, our case has always been that fiscal stimulus is justified only when you’re up against the zero lower bound on interest rates.

What I think is happening is that austerians have put themselves in a box. They threw themselves – and their personal reputations – completely behind the various elements of anti-Keynesian doctrine: expansionary austerity, critical debt thresholds, and so on.

And as Wolfgang Munchau says, the terrible thing was that their policy ideas were actually implemented, with disastrous results; on top of which their intellectual heroes have turned out to have feet of clay, or maybe Silly Putty.

As I see it, the sheer enormity of their error makes it impossible for them to respond to criticism in any reasonable way.

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Reinhart and Rogoff


Latvia will join the euro on 1 January
but nearly 60% of Latvians oppose the single currency
EU Observer 27 December 2013

In 2010, most of the world’s wealthy nations, although still deeply depressed in the wake of the financial crisis, turned to fiscal austerity: slashing spending and, in some cases, raising taxes in an effort to reduce budget deficits that had surged as their economies collapsed.
Basic economics said that austerity in an already depressed economy would deepen the depression. But the “austerians,” as many of us began calling them, insisted that spending cuts would lead to economic expansion, because they would improve business confidence.
The result came as close to a controlled experiment as one ever gets in macroeconomics
Paul Krugman, New York Times 19 December 2013

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Why Austerity Works and Stimulus Doesn’t
The starkest contrasts are Latvia and Greece, two small countries hit the worst by the crisis.
They have pursued different policies, Latvia strict austerity, and Greece late and limited austerity.
Anders Aslund, Bloomberg 8 January 2013

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Om ingenting görs åt Grekland illa kvickt går landet i konkurs.
I så fall kommer Portugal och Spanien likaså att tvingas ställa in sina betalningar, vilket inte alls är nödvändigt.
Då kollapsar en stor del av det europeiska banksystemet.
Europa skulle till och med kunna hamna i ny stor depression.
Gråt inte för Grekland utan för Lettland, som varit ett dygdemönster.
Anders Åslund DN Debatt 30/4 2010

Why Latvia Should Not Devalue
Anders Aslund | December 9th, 2008

The EMU would not be the first multi-country currency zone to break up. ,
The Latin Monetary Union The three other examples of breakups were of
the Habsburg Empire, the Soviet Union, and Yugoslavia.
Anders Aslund, The Peterson Institute March 12th, 2012

Anders Åslund i dåligt sällskap
Percy Barnevik, ordförande ABB, Investor, Sandvik, Astra Zeneca; Gunilla Carlsson, vice partiordförande (m), Europaparlamentariker; Carl Cederschiöld, finansborgarråd (m), Stockholm; Klas Eklund, ekonom; Lars Leijonborg, partiordförande (fp); Tove Lifvendahl, ordförande Muf; Cecilia Malmström, Europaparlamentariker (fp); Anders Milton, ordförande Saco, vd Läkarförbundet; Birgitta Ohlsson, ordförande Luf; Mauricio Rojas, docent; Anders Scharp, ordförande SAF; Anders Wijkman, Europaparlamentariker (kd); Anders Åslund, öststatsforskare

Greece - Latvia

It all went wrong in 2010. The crisis in Greece was taken, wrongly, as a sign that all governments had better slash spending and deficits right away.

Austerity became the order of the day, and supposed experts who should have known better cheered the process on, while the warnings of some (but not enough) economists that austerity would derail recovery were ignored.
Paul Krugman, New York Times 6 January 2013

Europe must stay the austerity course
Structural reforms are helping rebalance the economy
The eurozone is living through lean times, but there is light at the end of the tunnel
Olli Rehn, Financial Times December 10, 2012

The strategy of triple-barrelled contraction across a string of inter-linked countries has been the greatest policy debacle since the early 1930s
Like the generals of the First World War, Europe’s leaders seem determined to send wave after wave of their youth into
the barbed wire of tight money, bank deleveraging, and fiscal austerity a l’outrance.

Ambrose Evans-Pritchard, 9 Dec 2012

The fond hope of EU leaders and commissars is that the North-South chasm in competitiveness will be closed by "internal devaluations" in Club Med states before their democracies blow up.
This morally indefesible policy relies on pushing unemployment to such traumatic levels that it breaks labour resistance to pay cuts
Ambrose 18 Nov 2012

And as we can see from the youth jobless rates in Greece (58pc) Spain (55pc), Portugal (36pc), Italy (35pc) it can take carpet-bombing to achieve effect.

indefesible = cannot be altered or voided

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Det budgetstup som alla; Tyskland, EU, Internationella Valutafonden IMF och andra ekonomiska pekpinneviftare är överens om att USA måste undvika till varje pris,
är precis det som flera av Europas länder redan knuffats ut över.
Den kur som sägs ta kål på USA påstås alltså kunna rädda Europa.
Andreas Cervenka, SvD Näringsliv 14 November 2012

Några exempel. Spaniens budgetunderskott skulle enligt order från övriga EU-länder minskas från 6,3 procent av BNP i år till 2,8 procent 2014.

I Portugal ska budgeten kapas med motsvarande över 3 procent av BNP bara under 2013 och i Grekland är besparingarna 7 procent av BNP under 2013 och 2014 varav det mesta ska tas nästa år.

Detta trots att budgetunderskotten alltså är större i USA.

Bland de som varit med och ställt upp dessa krav finns bland andra IMF.

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Början på sidan

Can struggling eurozone countries achieve the necessary ‘internal devaluation’
– and at what political cost?
OpenEurope Report 27 September 2012

With widespread anti-austerity protests sweeping Madrid, Athens and Lisbon, Open Europe has published a new briefing looking at the degree of ‘internal devaluation’ needed in struggling countries to keep the Eurozone intact – and whether citizens are likely to be able to stomach such adjustments.

Open Europe’s Head of Economic Research Raoul Ruparel said:
“The history of the Baltic states – and to some extent Ireland – shows that large scale internal devaluation is fully possible in certain circumstances. But, against a backdrop of plummeting real GDP, internal devaluation also produces a politically explosive combination of falling wages and rising unemployment – all leading to a reversal in living standards. This is the eurozone’s great curse: do what’s economically necessary but risk massive political and social fallout.”

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Räntechocken en besk medicin som verkar än
Johan Schück och Thorbjörn Spängs DN 8 september 2012

Trots att Sverige ännu inte var EU-medlem knöts kronan strax före valet 1991 /av finansminister Allan Larsson och statsminister Ingvar Carlsson/ till EU:s valutaenhet ecun - som var en föregångare till euron.

Riksbankens uppgift var att försvara kronans växelkurs och den borgerliga regeringen, som tillträdde hösten 1991, var på samma linje.

Samma dag som Sverige slog till med rekordräntan 500 procent gav Srorbritannien upp och lämnade EU:s valuasamarbete ERM.

Det hade varit bättre att ge upp kronförsvaret i september, framhåller Olle Wästberg som var Anne Wibbles statssekreterare.

Carl Bildt ser det alltjämt som ett misslyckande att man till sist tvingades släppa den fasta växelkursen.

Det är inte med glädje som Carl Bildt ser tillbaka på torsdagen den 19 november 1992 då kronan slutligen tilläts falla.
- Sverige skulle ändå ha tagit sig ur krisen
DN 8 september 2012

Ingvar Carlsson och Carl Bildt är överens om att Sverige numera är betydligt bättre rustat än för 20 år sedan. Med 1990-talskrisen inleddes en reformprocess som betyder att svenskarna har drabbats relativt litet av dagens kris i Europa.

När det gäller eurokrisen visar båda besvikelse över att valutaunionen inte blev vad de hoppades. Carl Bildt tror dock alltjämt på en gemensam europeisk valua, där vad han kallar relevanta länder är med.


Ur Carl Bildts veckobrev v1/2002

Jag var statsminister under dessa år och fast övertygad om fördelarna med en hårdvalutapolitik. Det hade delvis att göra med de tidigare decenniernas erfarenhet av devalveringspolitik, men var delvis en konsekvens av att jag strävade efter att Sverige skulle gå in i det europeiska samarbetets kärna, också den ekonomiska och monetära unionen, och därmed vara med i den gemensamma europeiska valutan från dess första dag.

Därför var Sverige väl rustat inför finanskrisen
Reformer som stärker ekonomin är vad som till slut avgör, i Grekland och Spanien likaväl som i Sverige.
Det finns ingen enklare utväg, inte heller för länder som låter sin valuta flyta
Johan Schück, DN 8 september 2012

- Sverige tvingades låta kronan flyta. Ur detta misslyckande föddes en framgång. Sverige fick visserligen betala ett högt pris för 1990-talskrisen, särskilt genom att arbetslösheten fastnade på hög nivå. Men samtidigt gavs chansen till stora förändringar som annars varit omöjliga.

Den massiva sammanhållningen, tvärs över de politiska blockgränserna, förlängde kampen onödigt länge. Men på plussidan fanns den växande insikten om att Sverige behövde grundligt reformeras.

Allt blev inte perfekt, men få längtar tillbaka till Televerkets monopol eller oändliga taxiköer.

Lärdomarna från 1990-talskrisen sitter djupt, även om några bankers expansion i Baltikum och påföljane stora kreditförluster tyder på annat.

Vi segrade vid Poltava 1992
Rolf Englund blog 19 oktober 2012

Tomas Fischer: Med Bildt mot Poltava
Aftonbladet 22 december 1991

Johan Schück, Poltava-föreningens hovreporter
Kronkrigarna från valutafronten firar. Poltavaföreningen höll möte, skrev Carl A Hamilton i en legendarisk artikel i Aftonbladet 2002. Nu tio år senare var det dags igen för Poltavaföreningen att fira sin seger hösten 1992. Poltavaföreningens hovreporter Johan Schück inkallades under fanorna och resultatet blev två artiklar i Dagens Nyheter den 8 september 2012.
Rolf Englund blog 28 oktober 2012

Grekland, Spanien och fredspriset till EU
Någon ekonomisk vändpunkt är ej i sikte.
Peter Wolodarski, signerat DN 14 oktober 2012

Under den stora depressionen på 1930-talet fick ekonomen John Maynard Keynes kritik för att ha bytt ståndpunkt om penningpolitiken. Keynes replik blev klassisk: ”När mitt faktaunderlag förändras anpassar jag mina slutsatser. Vad gör ni, min herre?”
Samma fråga skulle kunna ställas till dagens beslutsfattare runt om i Europa, som ansvarar för de senaste årens åtstramningspolitik.

I Grekland backar ekonomin för femte året i rad, samtidigt som arbetslösheten passerat 25 procent och fortsätter att öka. De som har kvar arbetet tvingas acceptera drastiska lönesänkningar för att rädda jobben.

I Spanien, som före krisen sågs som en europeisk framgångssaga, är situationen på arbetsmarknaden inte mycket bättre. De dystra tiderna driver dessutom landet mot upplösning, påhejat av katalanska nationalister. Samma separationstrend syns för övrigt i flera europeiska stater.

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Peter Wolodarski

Anders Borg tror att Grekland kan komma att tvingas lämna eurozonen
– Skulle man lämna eurosamarbetet är det troligt att man får tillbaka sin konkurrenskraft
och då kanske Grekland kan komma på fötter vart efter.
– Det är en smärtsam och komplicerad väg
men det är svårt att se en alternativ väg som skulle kunna fungera.
Ekot 12 oktober 2012

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Anders Borg - Grekland

Politicians are kept from taking full responsibility for battling recessions by the intellectual baggage of past decades.
Some cling to the notion that stimulus is unhelpful, risky and hard. Such views need updating.
The Economist, 7 September 2017

Multiplikatorn A deficit of common sense
The debate about budget cuts has become dangerously theological
The Economist print Oct 27th 2012

What matters is how austerity is imposed and what other policies accompany it. The experience of the past couple of years argues against sudden sharp cuts, and especially against tightening more when the economy turns out weaker than expected. Better to have a medium-term plan which gradually reduces underlying deficits.

The debate centred on the value of an economic variable called a “multiplier”.

A fiscal multiplier describes the change in GDP that is due to a change in tax-and-spending policy. A multiplier of 1.5, for instance, means that $1 in government-spending cuts reduces GDP by $1.50; a multiplier of 0.5 means a $1 cut in spending only reduces GDP by 50 cents. Multipliers work both ways: during the recession experts bickered over the extra economic bang to be expected from a given stimulus buck. But it is the impact of austerity that now preoccupies people.

A simple example illustrates the multiplier’s importance. Take an economy growing at 1.5% a year and with a government budget deficit of 1% of GDP. If the multiplier is 2, spending cuts big enough to close the deficit produce a drop in GDP in the year the cuts take effect. For its pains the economy ends the year with a higher debt-to-GDP ratio than it started with. A multiplier below 1.5 means slow growth and a lower debt burden at year’s end.

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In 2013 economists at the IMF rendered their verdict on these austerity programmes:
they had done far more economic damage than had been initially predicted, including by the fund itself.
What had the IMF got wrong when it made its earlier, more sanguine forecasts?
It had dramatically underestimated the fiscal multiplier.
The Economist print 13 August 2016
Highly Recommended

Hur stor är multiplikatorn, egentligen?
IMF skrev i en rapport att åtstramningarna slog hårdare mot tillväxten än modellerna antagit
Chris Giles på Financial Times fattade dock misstankar
Johan Norberg, Kolumn SvD 21 oktober 2012

Han tittade på den förföriskt diagonala linjen i IMF:s diagram, som skulle visa att en extra nedgång i ett land stod i proportion till dess åtstramning. Och så gjorde han ”tumtestet”: Med båda tummarna höll han för de två länder som stod ut mest från de andra. Då syntes inget samband, resten av länderna bildade ett kaotiskt mönster.

IMF:s misstag betyder inte att snabba åtstramningar är rätt, utan att sambanden är komplexa, varierar mellan länder och inte kan fångas i enkla formler.

En viss minskning av tillväxten efter en kris är en förutsättning för återhämtning, eftersom dåliga investeringar rensas ut.

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Robustness of IMF data scrutinised, By Chris Giles, Financial Times October 12

High fiscal multipliers undermine austerity programmes
Gavyn Davies, Financial Times, October 21, 2012

If we exclude Greece and Germany from the 28 countries in their study, then their result largely melts away. It is also sensitive to the time period chosen, and does not appear to work for other similar periods.

It is surely asking a lot to change the entire course of global economic policy on the basis of a result as flimsy as that.

Having said that about this particular study, there are other, stronger, reasons for believing that fiscal multipliers are higher than many governments have been assuming. In the 1950s and 1960s, when Keynesianism was at its height, the multiplier was generally assumed to be around 2. Then in the 1990s and 2000s, these estimates gradually dropped, leaving the consensus range around 0.5-0.7 by 2009.

No-one really knows for sure. However, what does not seem plausible is that the multiplier, in the current recession, is as low as governments assumed when they embarked on their austerity programmes in 2010. And that will make austerity much harder to sustain.

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It was disguised as a technical appendix, but it turned out to be an act of insurrection.
IMF has published results from a study, which show that the impact of fiscal policy on growth is higher than previously estimated.
The policy conclusion of a large fiscal multiplier is obvious: excessive austerity defeats itself. It must end.
Wolfgang Münchau, Financial Times, 14 October 2012

One has to be clear about what this statement says, and what it does not. The IMF does not say that austerity is too hard, too unfair, causes too much pain in the short term or hits the poor more than the rich.

It says simply that austerity may not achieve its goal of reducing debt within a reasonable amount of time.

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Peter Wolodarski, signerat DN 14 oktober 2012:

Internationella valutafonden, IMF, tar upp frågan i sin senaste stora rapport och konstaterar att man tidigare underskattat den så kallade multiplikatoreffekten, det vill säga hur omfattningen av en åtgärd förändras när den fortplantar sig genom ekonomin. Tidigare trodde man att multiplikatorn låg på ungefär 0,5. Nu tycks den vara så hög som 1,7.

Översatt till vanlig svenska betyder det att en budgetbesparing på 1 procent av BNP kan leda till ett BNP-ras på hela 1,7 procent. Effekterna av finanspolitiken – såväl åtstramningar som stimulanser – verkar bli extra stora när centralbankens ränta ligger nära noll och ekonomin befinner sig under sin normala kapacitet, så som i dag.

Det är intressant att IMF nu officiellt tar avstånd från åtstramningarna, med tanke på att man under lång tid rekommenderade krisande ekonomier att just spara sig ur sina problem. I början av 1990-talet försökte fonden få Sverige och Finland att tillämpa sådana metoder, vilket lyckligtvis inte blev verklighet i Sverige

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Peter Wolodarski

Bank of England raised interest rates to 7 per cent in 1920.
The aim of this was to support the return to the prewar /USD-GBP/ parity. Coupled with the consequent deflation, the result was extraordinarily high real interest rates.
This, then, was how the self-righteous fools in the British establishment greeted the hapless survivors of the hellish war.
Martin Wolf, Financial Times, 9 October 2012

What happens if a large, high-income economy, burdened with high levels of debt and an overvalued, fixed exchange rate, attempts to lower the debt and regain competitiveness?
This question is of current relevance, since this is the challenge confronting Italy and Spain.
Yet, as a chapter in the International Monetary Fund’s latest World Economic Outlook demonstrates,
a relevant historical experience exists: that of the UK between the two world wars.
Martin Wolf, Financial Times, 9 October 2012

"Lätt som en plätt"
Egentligen handlar eurokrisen om att Sydeuropa aldrig lyckats hålla jämna steg med konkurrenterna från Nordeuropa.
Så länge varje land hade sin egen valuta var det ingen tragik i detta.
Skillnaderna i produktivitetsutveckling kunde då regleras med att den tyska D-marken årligen förstärktes någon procent mot de svagare konkurrentländerna.
Peter Benson, SvD Näringsliv 14 juli 2012
RE: Lyasande och pedagogisk. Highly recommended

Början på sidan

Republicans are dead wrong
The latest devastating demonstration of that wrongness comes from IMF, which has just released its World Economic Outlook,
a grim and disturbing document, telling us that the world economy is doing significantly worse than expected,
with rising risks of global recession.
Paul Krugman, New York Times, 11 October 2012

But the report isn’t just downbeat; it contains a careful analysis of the reasons things are going so badly. And what this analysis concludes is that a disproportionate share of the bad news is coming from countries pursuing the kind of austerity policies Republicans want to impose on America.

O.K., it doesn’t say that in so many words. What the report actually says is: “Activity over the past few years has disappointed more in economies with more aggressive fiscal consolidation plans.” But that amounts to the same thing.

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World Economic Outlook

The tipping point
How much austerity is too much?
Portugal - cautionary example of the dangers facing governments which attempt to push austerity beyond the tolerance of long-suffering voters.
The Economist print Sep 22nd 2012

"the spectacular failure of austerity policies in Europe"
Investors are, in a sense, offering governments free money for the next 10 years
So what is going on? The main answer is that this is what happens when you have a “deleveraging shock,”
in which everyone is trying to pay down debt at the same time.
Paul Krugman, New York Times 26 July 2012

That said, you should be a Keynesian, too. The experience of the past few years — above all, the spectacular failure of austerity policies in Europe — has been a dramatic demonstration of Keynes’s basic point: slashing spending in a depressed economy depresses that economy further.

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Jag tror att man kan hitta en del nyttiga insikter bland Karl Marx läror
Dr Krugman ordinerade en rejäl återställare. Han hällde upp ett stort glas whisky som alkoholisten genast sög i sig. Det där gjorde susen, sa han och log
Patrik Engellau, SvD Brännpunkt, 19 juli 2012

Dr Merkel är förbundskansler Angela Merkel och alla som med henne tycker att greker och spanjorer ska lida och spara och Dr Krugman är nobelprisvinnaren Paul Krugman och alla andra nykeynesianer som anser att statsmakterna bör spendera mera för att stimulera ekonomierna.

Alkoholisten sökte upp Dr Krugman, som ordinerade en rejäl återställare. Han hällde upp ett stort glas whisky som alkoholisten genast sög i sig. Det där gjorde susen, sa han och log tacksamt mot Dr Krugman. Doktorn lutade sig förnöjt tillbaka i stolen, satte fingertopparna mot varandra och förklarade att modern forskning visat att avhållsamhet i hundra procent av fallen skapar lidande för alkoholister, medan en stor sup i hundra procent av fallen ökar välbefinnandet. Dr Krugman misstänkte att avhållsamhetsförespråkarna egentligen bara var gammaldags moralister.

Dagens politiska och ekonomiska debatt och skeende – läs det ständigt pågående europeiska toppmötet om euron, Grekland, Spanien, Portugal, bankerna etc – handlar egentligen inte om hur krisen ska lösas utan om hur krisen ska administreras. Krisen kan inte lösas.

Fordringar på någon som inte kan betala är i realiteten värdelösa. Det är bättre att inse detta och ta konsekvenserna än att låtsas som om en smärtfri bot vore möjlig.

Dr Merkel och Dr Krugman. Vem har rätt? Ska den grekiska staten, för att ta ett exempel, spara eller stimulera ekonomin?

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Kommentar av Rolf Englund
Ny-Hooveristen Patrik Engellau är väldigt trevlig och synpatisk, men han är ju konsult.
Krugman har väl inte rekommenderat Grekland att stimulera ekonomin på annat sätt än att lämna euron
Däremot har han påpekat att alternativet, att spara och genom massarbetslöshet uppnå en intern devalvering, inte är en framkomlig väg.
Ungefär som Assar Lindbeck, sent omsider, har kommit fram till.

Marknadsekonomin samlar då och då på sig en massa kapital som kräver avkastning men inte kan få det, kort sagt kapital som blivit överflödigt,
en kvarnsten om systemets hals, och måste förstöras för att marknadsekonomin ska överleva.

Jag tror att detta är själva grunden för dagens kris. Det finns en massa kapital vars existens är hotad, som när som helst kan – och behöver! - utraderas genom statsbankrutter, bankkonkurser, snabb inflation eller andra motsvarande sammanbrott, skriver Patrik.

Det är svårt att förstå vad han menar.

När en låntagare inte kan betala brukar långivarna få ta förlusten

Patriks artikel verkar gå ut på att någon bör ta förlusten så fort som möjligt

Den process som pågår verkar gå ut på att flytta fordringarna från de tyska och franska bankerna till skattebetalarna. Därefter kan man ta konkursen.

Men Patrik skriver ingenting om hur Grekland m fl skall återfå sin konkurrenskraft. Han nöjer sig med att skylla på marknadsekonomin och "nykeynesianen "Krugman.

De som tror att man kan finna sanningen hos Marx har aldrig förlåtit Kenyes för att han räddade kapitalismen på 1930-taelet.

När staten och den privata sektorn samtidigt kapar sina skuldberg
är det svårt att få schvung på ekonomin.

Dagens Nyheter, huvudledare, 15 juli 2012

Kommentar av Rolf Englund
Det är inte svårt. Det är omöjligt. Om man inte kan öka exporten och minska importen
Det gör man genom att växelkursen sjunker, eller, om man har euron, genomför en intern devalvering

– Flera av de länder vi ser har varit 4-5 år i kris, de har flera år av reformer framför sig.
Men uthålligheten brister, befolkningarna orkar inte, deras företrädare orkar inte,
så då vill man ha en lösning där andra ska ta över deras skulder eller täcka deras underskott.
man har problem med korruption och är inte konkurrenskraftig. Det hjälper man sig inte runt genom att fördela skulderna.
Fredrik Reinfelt, Ekot 27 juni 2012

Their costs are 30-40pc out of line with Germany's. It is a fantasy to believe that such a gap can be closed by "reform".
Consequently, when nominal values get out of line, the problem can only be solved by a price or exchange rate adjustment.
Theoretically, this could be through internal deflation but that would increase the real value of debt and depress aggregate demand still more.
Deflation is the road to catastrophe.
Roger Bootle, Telegraph 24 June 2012

Sällan har så många haft så fel
Ett misslyckande ska kallas ett misslyckande. Det måste också gälla euron.
Det här är min första text om euron, någonsin.
Om det är den tyska vägen som gäller måste krisländerna genomföra drastiska lönesänkningar - så kallad intern devalvering - för att kunna konkurrera med den tyska jätten.
Anna Dahlberg,Politisk redaktör (chef för ledarredaktionen), Expressen 3 juni 2012

Peter Wolodarski, Dagens Nyheter 24 juni 2012:

Förespråkarna av denna strategi – däribland finansminister Anders Borg – hävdade att en hård saneringspolitik med snabbt sänkta utgifter och höjda skatter kommer att vinna marknadens gillande. Räntorna pressas ned och i ett trollslag lyfter åtstramningen ekonomin.

Inget av detta har inträffat, konstaterade i veckan en av Europas ledande makroekonomer, Charles Wyplosz.(RE: Read it here)

Såväl de ekonomiska som politiska resultaten vittnar om ett flagrant misslyckande.

En redan skyhög arbetslöshet har spätts på, krisländernas statsskuldsräntor är ohållbara och den sociala och politiska oron tilltagande.

Den rådande laga efter läge-strategin, kombinerat med uppläxande och direkt kontraproduktiva krav på kortsiktiga budgetsaneringar, kommer bara att förstärka splittringen och depressionen i Europa.

Peter Wolodarski, Dagens Nyheter 24 juni 2012

Peter Wolodarski (PW) fortsätter sin omprövning av DN:s tidigare EU-politik
PW måste någorlunda dölja den viktigaste slutsatsen för Europas framtid, nämligen att det är EU-politiken och framför allt eurosystemet som
både har vållat den ekonomiska katastrofen och har gjort det nästan omöjligt att komma ur den.
Nils Lundgren, Newsmill 17 juni 2012

Han är intelligent, välutbildad och stilistiskt elegant och han ger enligt min (och nog enligt de allra flesta ekonomers) mening nu en korrekt och pedagogisk analys av hur eurokrisen har uppkommit.

Spanien och Irland kan inte så lätt välja den svenska vägen till välstånd och ekonomisk stabilitet. Det är svårt att byta från euron till en egen valuta.
De är redan av det skälet dömda till en lång och socialt plågsam anpassningsperiod fylld av politiska risker för demokrati och sammanhållning.

Sverige i slutet av 80-talet och, framför allt Spanien och Irland, från eurons införande 2002 drabbades av en kraftig och långvarig ekonomisk överhettning genom en bygg- och fastighetsboom finansierad genom lån till låga räntor.
Spanien och Irland hade gått med i euron och därmed överlämnat penningpolitiken till Europeiska centralbanken (ECB). ECB måste hålla en låg räntenivå eftersom eurozonens största ekonomi, den tyska, då hade svag konkurrenskraft och hög arbetslöshet.

När sanningens timme slår i ett sådant läge finns det två lösningar.
Den en är att staten fortsätter att öka sin skuldsättning för att privatsektorn skall kunna minska sin.

Den andra lösningen är att landets valuta får falla kraftigt
Sverige kunde välja den andra lösningen tack vare att landet hade en egen valuta och står nu med EU:s starkaste ekonomi.

Med svenskt stöd har nu den s k finanspakten införts. Denna innebär att länderna måste minska sina budgetunderskott dramatiskt redan nu och sedan aldrig dra på sig strukturella budgetunderskott i framtiden.

Detta betyder att det inte bara är en katastrof att ha euron som valuta i detta läge utan det är en katastrof att vara underkastad eurozonens regler som alltså går ut på att hindra den överföring av skuldsättning från hushåll och företag till staten som är så viktig för att göra anpassningsprocessen mindre brutal och politiskt farlig.

Och notera slutligen finanspakten är i stort sett helt irrelevant för att hindra nya eurokatastrofer. Den förbjuder budgetunderskott, men Spanien och Irland hade inga budgetunderskott när de gick in i katastrofen.

Om målet är att kunna balansera de nationella ekonomierna, kan man inte ha gemensam valuta. Den amerikanska valutaunionen fungerar därför att arbetskraften flyttar över delstatsgränserna från stater med arbetslöshet till stater med hög efterfrågan på arbetskraft.

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För 20 år sedan befann sig Sverige i en svår finanskris
Om inte det stora budgetunderskottet släppts fram under en övergångsperiod hade krisen blivit ännu värre
Regeringen borde ta intryck av den i sin beskrivning av dagens eurokris
Peter Wolodarski, DN 17 juni 2012

Början på sidan

Detta är själva syftet med den nu förda politiken, som ju går ut på att sänka offentliga utgifter och höja skatter
så att skyhög arbetslöshet och företagskonkurser tvingar fram fallande löner
Det är det man menar med uttrycket ”interndevalvering”
Nils Lundgren, 22:e januari 2012

RE: The Ultimate Article about EMU and the Eurocrisis
Without the option of devaluing their currencies, uncompetitive economies are left with “internal devaluation” – otherwise known as wage cuts and mass unemployment.
In theory, the eurozone might rectify this error by moving to a real political union
Sacrificing national self-rule on the altar of the euro is inherently objectionable
– and would invite a nationalist backlash across Europe.

Gideon Rachman, Financial Times 21 May, 2012

Latvia, Internal devalutation
Oh, wow — another bank bailout, this time in Spain. Who could have predicted that?
The answer, of course, is everybody.
Paul Krugman, New York Times June 10, 2012

For years Spain and other troubled European nations have been told that they can only recover through a combination of fiscal austerity and “internal devaluation,” which basically means cutting wages.

It’s now completely clear that this strategy can’t work unless there is strong growth and, yes, a moderate amount of inflation in the European “core,” mainly Germany.

Consider, for example, what Jörg Asmussen, the German representative on the European Central Bank’s executive board, just said in Latvia, which has become the poster child for supposedly successful austerity.

Latvian success consists of one year of pretty good growth following a Depression-level economic decline over the previous three years.

True, 5.5 percent growth is a lot better than nothing. But it’s worth noting that America’s economy grew almost twice that fast — 10.9 percent! — in 1934, as it rebounded from the worst of the Great Depression.

What explains this trans-Atlantic paralysis in the face of an ongoing human and economic disaster?

Whatever the deep roots of this paralysis, it’s becoming increasingly clear that it will take utter catastrophe to get any real policy action that goes beyond bank bailouts.

But don’t despair: at the rate things are going, especially in Europe, utter catastrophe may be just around the corner.

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Germany’s Man at the ECB, Jörg Asmussen, popped up in Riga yesterday at a conference on the theme of the lessons of the Baltic adjustment over the last 5 years for other European countries.
His message: it was better to take a huge hit to GDP up front
P O Neiln, fistfulofeuros, June 6 2012

If an internal devaluation in a country suffering from a lack of international competitiveness were to succeed,
the real burden of the country’s debt would increase.

This would be true not only for its public debt,
but also for all indebted households and businesses.
Stefan de Vylder december 2010

Levelling out competitiveness in the euro area will be costly
Greece must lower its real exchange rate, by cutting prices and wages.
This is proving a painful process.
Nice chart EMU Unit Labour Cost 1999-2013
The Economist online May 22nd 2012

One measure of progress, unit labour costs (the average cost of staffing per unit of output), is declining and will continue to do so, according to the OECD’s latest Economic Outlook.

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OECD’s latest Economic Outlook


In 1931, Austria was attempting to deliver the kind of austerity now being witnessed in parts of southern Europe.
The crisis culminated in the failure of Creditanstalt, a major Viennese bank – the 1931 equivalent of Lehman Brothers.
A handful of years later, Hitler was welcomed by cheering crowds in Vienna.
Stephen King, HSBC Group’s chief economist, Financial Times, 9 May 2012

What helped was that other countries inflated away from Germany.
That has contributed greatly to Germany’s success.
Financial Times, 19 April 2012

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A devastating analysis by the economist Luis Garicano has convincingly argued that the fiscal consolidation needed in Spain to meet any given level of deficit reduction would be up to double what the government is projecting.

The /Spain/ government’s calculations are based on a simple extrapolation of the necessary fiscal adjustment from nominal GDP.
In an economy of roughly €1 trillion, the 3.2 percentage point targeted reduction in the deficit would,
on the government’s thinking, therefore require a €32bn consolidation.

You hardly need to be an economist as accomplished as Prof Garicano to figure out that ripping 3.2pc of demand out of the economy will cause it to be smaller at the end than it was at the beginning.
Jeremy Warner, Telegraph 18 April 2012

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The fall in the value of the pound in 2008 was one of the largest depreciations to have occurred in a major industrial country since the war
- and produced an increase in UK competitiveness of around 20%.
Spain now has to pull off the same thing, but without changing its nominal exchange rate by one peseta - because,
to state the obvious, it doesn't have pesetas any more. It has euros.
Stephanie Flanders Economics editor 16 April 2012

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The survival of the eurozone now depends on Italy and Spain.
They are the countries that are too big to fail – or to rescue.
Structural steps are painful for any government. They are devilishly difficult without growth.
Robert Zoellick, president of the World Bank, Financial Times 16 April 2012

The firewall preoccupation distracts from the fundamental issue: what should the EU do to help Italy and Spain retain political support for reforms?

Instead of quarrelling over firewalls, Europeans should add just a fraction – say €10bn – to the capital of the European Investment Bank.

EIB could use more capital to borrow and then invest to support structural reforms, showing Spaniards and Italians that their sacrifices will draw productive investments.

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IMF still won't admit truth about the euro
Discussion will once again focus on the creation of a firewall big enough to provide for bigger eurozone bailouts, including Spain and possibly Italy, too. This misses the point, for it presupposes that the crisis is at heart just a confidence issue that can be solved simply by creating a backstop large enough to convince markets they cannot break the euro.
Jeremy Warner, Telegraph 16 April 2012

Spain could be the next European economy brought down by German-led mismanagement of the euro-zone crisis.
It need not turn out that way. But it surely will unless Chancellor Angela Merkel and her political allies
acknowledge that no country can pay off its debts by suffocating economic growth.

New York Times, editorial, 12 April 2012

Columbi ägg?
If Germany were the one to leave, the euro would be the currency that fell in value, relative to Germany’s new national currency and also to the dollar.
The weaker European countries would get to keep the euro but still get the devaluation they need, which would reduce their labor costs far less painfully than through wage cuts.
Michael Sivy, TIME 12 April 2012

In addition, the value of their outstanding debt would decline along with the value of the euro, and they would be more likely to be able to make payments on that debt and avoid defaulting.

The trouble with thr conventional scenario is that it rests on a couple of big misconceptions – namely, that the chief problems of the weak countries are budget deficits and debt, and that if budgets are balanced and debt is managed down, those countries will be able to make interest payments on their bonds and the banks that own those bonds won’t have to suffer big losses.

In reality, though, the biggest problem of financially troubled European countries is not debt, but high labor costs.

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It would then be up to Germany to decide whether to leave, perhaps with Austria, the Netherlands and Finland.
The German people should be made aware that the results would include a soaring exchange rate, a massive decline in the profitability of Germany’s exports,
a huge financial shock and a sharp fall in gross domestic product.
Martin Wolf, Financial Times 13 September 13, 2011

All this would be apart from the failure of two generations of efforts to build a strong European framework around Germany itself.

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- Det som Tyskland fruktar, dvs. en kraftig förlust av konkurrenskraft mot södra euroområdet, är nödvändig för att komma ur eurokrisen.
Detta är inte en olycklig biprodukt utan själva syftet med den nu förda politiken, ”interndevalvering”, skrev Nils Lundgren den 22 januari.


The tightrope PM Rajoy is trying to walk between austerity and human costs is the fault line dividing the whole of Europe.
Louise Armitstead, Telegraph 29 March 2012

Spain now finds itself at the centre of a great eurozone laboratory experiment designed
to show that a pro-cyclical increase in fiscal austerity in a deep recession can lead on to growth and debt sustainability.

Markets, which are wrongly assumed always to favour the fiscal hair shirt, are torn on the issue.
John Plender, FT, April 10, 2012

The eurozone must do more to support the internal devaluation pursued by the countries at its periphery.
Wages in these member states will eventually fall enough, but the process will be long and painful.
A co-ordinated fiscal move could make the process smoother.
Financial Times editorial 9 April 2012

The mantra of austerity and its resulting ritual – the fiscal compact – were bound to create short-term misery, particularly in the eurozone’s periphery.

Countries such as Spain and Italy should shift taxation from labour to consumption, but Germany and other surplus countries could help by doing the opposite. The effect would be to stimulate consumption in the core, while reducing unit labour costs in the periphery.

There is room for further monetary easing. A new three-year longer-term refinancing operation should take place only in a real emergency.

The ECB should cut its policy rate, however, which is currently at 1 per cent.

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There is no central bank shortcut to the goal of full employment.
If one is really determined to boost demand, production and employment by pumping money into the economy, the clear preference should be for the fiscal pumps.
Dan Kervick, neweconomicperspectives, April 6, 2012

Jag tycker det är skriande uppenbart att räntan världen över är för låg
och att en större del av stimulanserna borde ske via finanspolitiken.

Rolf Englund blog 5 december 2009

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Policy makers now exhibit a zealot-like faith that the necessary discipline can be established over the next two or three years.
As they impose austerity on countries that lost market access and are in a recession, they make matters worse, of course,
but more ominously they also show they still fail to grasp that fiscal discipline is a long-run concept.
Charles Wyplosz, Bloomberg April 2, 2012

The reality is that a few years of surpluses or deficits hardly tell us anything about fiscal discipline. Thus the zealots, who are broadly part of the euro-enthusiast group, provide the euro’s opponents with a solid argument: namely, that the euro area is unable to deal with its own flaws.

This case, however, is not made loudly by the euro’s opponents because they fear they might be listened to, and that the euro area would end up fixing its most glaring flaw. (They should relax, the euro has many other failings, some potentially lethal, but now is not the time to list them).

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"The problem lies in the fact that the tailing off of GDP is now going faster than the deficit reduction.
The 5.3% of GDP deficit target set for this year, and next year's 3.0% is not just a stretch of the financial imagination... it is impossible
Stephen Pope, of Spotlight, BBC 5 April 2012

The founders of the euro thought they were forging a rival to the American dollar.
Instead they recreated a version of the gold standard abandoned by their predecessors long ago.
Unable to devalue their currencies, struggling euro countries are trying to regain competitiveness by “internal devaluation”, ie, pushing down wages and prices.
Charlemagne, The Economist print 7 April 2012

Vad som sker just nu i Europa är något helt annat än vad Sverige genomförde på 1990-talet.
Att skära ner i en liten ekonomi när resten av världen går bra (och dessutom bli belönad med lägre och lägre ränta) är en sak.
I Sverige vågar dock nästan ingen säga det av rädsla för att stöta sig med våra modiga män och kvinnor på finansdepartementet.
Vi är helt irrationella i den här frågan.
Katrine Kielos i en ledarkrönika Aftonbladet den 8 april 2012

Utan genomgripande reformer driver Italien närmare ett grekiskt tillstånd
Det vore en katastrof för Italien och för Europa
Rolf Gustavsson, SvD 8 april 2012

Yes, Mussolini pulled off a 20pc cut in wages in the late 1920s.
How can a democracy bring about such cuts in private sector wages without use of police coercion?
Portugal, Italy, and Spain need an "internal devaluation" of around 20pc
to claw back competitiveness within EMU. This means draconian wage cuts for year after year.
Ambrose Evans-Pritchard, 5 April 2012

You can erode real wages through inflation, but it is nigh impossible to cut them in absolute terms.
They are famously "sticky", as Keynes warned in the 1920s. Call it cultural resistance if you want, or human psychology, or common sense.

The Baltic states have done so in very particular circumstances, but mostly with devastating falls in GDP (26pc top to bottom in Latvia, and some have the gall to cite Latvia as a success story). Such economic contractions across Club Med as a whole would be large enough in aggregate to tip the whole eurozone into catastrophe.

The combined public and private debt burden in Spain, Italy, and Portugal is much larger as a share of GDP than in Estonia, and even Latvia.

The Federal Reserve Bank of San Francisco has an essay on its website showing that US wages in the industries in most trouble have scarcely dropped at all since the onset of the Great Recession - despite economic - even though the country has one of the most flexible labour markets in the world.

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Portugal, Italy, and Spain


Hur skall Portugal, Grekland och Spanien kunna pressa ned lönekostnaderna så att de kan konkurrera med tyska fabriker?
Klarar de politiska systemen de påfrestningar som skapas när var fjärde person är arbetslös?
Jens Henriksson, kolumn SvD Näringsliv, 4 april 2012

Förr gick det att devalvera sig till konkurrenskraft. Mer euron är den vägen stängd.
Hur högt måste då arbetslösheten stiga för att löner skall kunna omförhandlas?

Och klarar de politiska systemen de påfrestningar som skapas när var fjärde person är arbetslös?

Jens Henriksson född 1967, är sedan 2010 VD på Stockholmsbörsen. Henriksson har tidigare arbetat på Finansdepartementet, bland annat som statssekreterare 2002-2006

Ingen länk

Eurokrisen i ett ord: 23.6
Den 17 mars skrev jag på denna blog att euron redan har kollapsat men att vi av någon konstig anledning inte märkt det.
Vi har förblindade undvikit att se det uppenbart orimliga i att flera länder i Europa har en arbetslöshet runt 20 procent, med ungdomsarbetslösheten 25-40 procent.
Rolf Englund blog 3 april 2012

Eurokrisen, fisksoppan och elitens olidliga dumhet och
varför en extern devalvering är bättre än en intern
Rolf Englund blog 5 april 2012

Början på sidan

Tyskarna gick in i EMU med en övervärderad kurs
Efter återföreningsbubblan som lämnade dem med en svag ekonomi i ett halvt decennium.
De arbetade långsamt tillbaka konkurrenskraften den hårda vägen, genom att pressa löner och driver upp produktiviteten.
Det är helt förståeligt att de nu tror att Club Med kan och bör göra samma sak.
De är helt fel, naturligtvis, eftersom Tyskland kunde sänka relativlöner under
a) en global boom, b) mot andra EMU-stater som inflaterade C) och med räntor som var låga även under de svåra åren.
Ingen av dessa faktorer gäller Italien eller Spanien nu.
Ambrose Evans-Pritchard, 2 December 2011

The Germans entered EMU at an overvalued rate
after the Reunification bubble, leaving them in semi-slump for half a decade.
They slowly clawed back competitiveness the hard way, by squeezing wages and driving up productivity.
It is entirely understandable that they now think Club Med can and should do the same.
They are profoundly wrong, of course, because Germany was able to lower relative wages during
a) a global boom, b) against other EMU states that were inflating c) and with benchmark borrowing cost that stayed low even during the dog days.
None of these factors apply to Italy or Spain now.
Ambrose Evans-Pritchard, December 2nd, 2011

Few have realised the most dangerous feature of Emu: it has locked Germany into a seriously uncompetitive real exchange rate
Martin Wolf, Financial Times, March 31, 1999

Wolodarski och Tysklands framgång med Ådalsmetoden

Början på sidan

Nouriel Roubini: markets are “schizophrenic” they cannot decide whether to reward or punish countries such as
Spain and Italy for their austerity plans. “Without growth, the socio-political backlash will become overwhelming for some governments.”
The euro needs to sink to parity with the US dollar in order to restore Europe’s peripheral economies to growth
CNBC 30 March 2012

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Spain and Italy

Regaining competitiveness is hard through only “internal devaluations” associated with tight fiscal policy.
Moreover, the regional economic environment is not enabling, as all countries in Europe are trying to reduce their budget deficits at the same time.
It’s hard to grow when both you and your trading partners are cutting consumption too.
Andrew Bosomworth, Pimco January 2011

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Hary Flam vill ha lönesänkningar i krisländerna
"Eurokrisen är inte över trots skärpta budgetregler.
Det framkom på en ekonomisk debatt i Europahuset i Stockholm på fredagen"

Europaportalen 23 mars 2012

Christian Danielsson, vice generalsekreterare i EU-kommissionen, pekade på att när den ekonomiska krisen slog till mot EU-länder 2008 var det uppenbart att regelverket som skulle hantera krisen var helt otillräckligt.

- Som det ser ut nu har jag ingen anledning att tro annat än att medlemsländerna kommer att gå in i detta fullt ut och med kraft, sade Christian Danielsson, som tidigare varit Sveriges EU-ambassadör i Bryssel.

Förra gången det var ekonomisk kris bröt Tyskland och Frankrike mot regeln att inte ha större budgetunderskott än tre procent men pressade igenom regellättnader 2003 för att slippa undan. Frågan är hur det blir denna gång för Tyskland och Frankrike när EU-reglerna blivit betydligt tuffare.

– Det kommer vi att se inom en inte allt för lång framtid, sade Christian Danielsson till publikens muntra skratt.

Först ut i debatten var den moderate Europaparlamentarikern Gunnar Hökmark som sade sig vara rätt optimistisk när det gäller vägen ur krisen.

Ekonomiprofessor Harry Flam: Det är ett fruktansvärt dilemma att de åtgärder som krävs för att få ner skuldbördan och få budgetbalans kommer att försämra konjunkturen i Europa.

– De måste få tillbaka konkurrenskraften. Det innebär att de måste ha lägre /ökning av / priser och löner än andra länder.
Är det så att man inte kan hålla tillbaka successivt i tio år, som Tyskland har gjort, då måste man sänka dem, sade Harry Flam.

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Som Calmfors utvecklar, är huvudproblemet nu att krisländerna tvingas strama åt finanspolitiken i ett läge då deras konkurrenskraft
gör det svårt att kompensera inhemskt efterfrågebortfall med ökad export och ökad produktion i den importkonkurrerande industrin.
Det stålbad som nu inletts och kommer att pågå i många år kommer att leda till gigantiska sociala och ekonomiska kostnader
och möjligen till politiska reaktioner som hotar hela det europeiska projektet.
Nils Lundgren, 13 mars 2012

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Rolf Englund: Bekymret är hur långt stålbad villaägare, väljare och regering klarar. Det är den fråga många inom och utom landet ställer sig.
Anne Wibble: Självklart kommer vi att klara det eftersom vi måste klara det.
Nationalekonomiska Förenigen, januari 1992

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Räntefallen i Sydeuropa och Irland när euron infördes kan ses som en gigantisk asymmetrisk störning som stimulerade till överbelåning.

I Grekland och Portugal skuldsatte sig offentlig sektor för mycket.
I Irland och Spanien gjorde privat sektor det, vilket skapade en fastighetsprisbubbla som, när den sprack, kraftigt försämrade de offentliga finanserna även där.

I alla fyra länderna, liksom i Italien, steg löner och priser fram till 2008 så mycket att den internationella konkurrenskraften gick förlorad.

Problemet med budgetnedskärningarna i krisländerna är att de samtidigt minskar BNP och därmed också skatteintäkterna.
Om krisländernas finanspolitiska åtstramningar väsentligt ska minska budgetunderskotten, måste ekonomierna samtidigt växa.
Men det kräver reala deprecieringar som återställer konkurrenskraften.
Lars Calmfors, kolumn DN 13 mars 2012

Budgetkonsolideringen i Sverige 1994–2000 är ett exempel. Trots kraftiga budgetnedskärningar var tillväxten hög.
Det berodde på den stora reala depreciering som skedde i och med kronans fall 1992 och som fick nettoexporten att öka kraftigt.

Euroländerna har inga växelkurser som kan förändras mot varandra. Det finns då endast två sätt att göra en real depreciering på.
Krisländerna måste antingen sänka sina lönekostnader i förhållande till övriga euroområdet eller öka sin produktivitet mer. Italien har i stället ökat sina produktionskostnader relativt de andra euroländerna.

Eurosamarbetet kommer förmodligen att fungera bättre i framtiden.
Men det förutsätter förstås att valutaunionen överlever den akuta krisen.

För det krävs nominella lönesänkningar i krisländerna
Annars riskerar kraven på finanspolitiska åtstramningar och på ytterligare räddningsinsatser att bli så stora att de inte kan hanteras politiskt.

Men det är mycket svårare att få acceptans för att sänka reallöner på detta sätt än genom en valutadepreciering.

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”Situationen i euroområdet har fått utvecklas till en sådan djup kris att inga enkla lösningar längre finns att tillgå”,
skriver åtta tunga ekonomiska ekonomer i den årliga EEAG-rapporten.
Krisländerna måste ta ner prisnivån i landet så att varor och tjänster blir konkurrenskraftiga. Och därmed få i gång en tillväxt.
Det finns två sätt att göra det på.
– Antingen genom att lämna euron och devalvera eller genom kraftiga fall i löner och priser, sade John Hassler
Leif Petersen, SvD Näringsliv 7 mars 2012

Greece suffers from both heavy indebtedness and a lack of competitiveness. Attempts to cut back on the debt by austerity alone will deliver misery alone. Only measured austerity combined with economic growth offers a way out. But while Greece is so uncompetitive it is difficult to see where growth will come from.

The solution offered by Germany and its allies is that austerity will lead to an internal devaluation, i.e. deflation, which would enable Greece gradually to regain competitiveness.

The greatest threat to the euro is that Greece will make a success of default and devaluation.
Suppose that once the new drachma has fallen by 30pc to 50pc, Greece begins to show signs of growth.
How would it then be possible to persuade the electorate of Spain, Portugal, Italy, and even Ireland, that there is no alternative to years of misery?
It is all very well building firewalls to stop financial contagion, but how do you build firewalls around the voters?
Roger Bootle, Daily Telegraph 26 February 2012

Risken är stor att det nya räddningspaketet också bygger på alltför optimistiska antaganden,
och att Greklands skulder så småningom måste skrivas av helt
Medelhavsländerna kan inte klara sin skuldkris om de inte lyckas med konststycket att spara och veva i gång tillväxten samtidigt
Svenskt Näringslivs chefsekonom Stefan Fölster, DI 22 februari 2012

"events have a habit of demolishing dreams" - Portugal, internal devaluation
Greece’s unemployment bomb has detonated.
Ambrose Evans-Pritchard, 19 Feb 2012

After a deceptive calm, the surge in job losses since last summer is shocking even for those who never believed that combined fiscal and monetary contraction could possibly lead to any result other than ruin.

A variant of this lies in store for Portugal as its "internal devaluation" starts in earnest.
The young Schumpeterians in charge of the Portuguese economy insist otherwise - cocksure that shock therapy will triumph without the cushion of debt relief and devaluation
- but events have a habit of demolishing dreams.

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Greece - Portugal

Det som Tyskland fruktar, dvs. en kraftig förlust av konkurrenskraft mot södra euroområdet, är nödvändig för att komma ur eurokrisen.
Detta är inte en olycklig biprodukt utan själva syftet med den nu förda politiken,
som ju går ut på att sänka offentliga utgifter och höja skatter så att skyhög arbetslöshet och företagskonkurser tvingar fram fallande löner
Det är det man menar med uttrycket ”interndevalvering”
Nils Lundgren, 22:e januari 2012

Alla vet att Grekland, Italien, Spanien och Portugal måste förbättra sin konkurrenskraft mot Tyskland och Nordvästeuropa. Eftersom de inte har någon egen valuta som kan falla, måste detta ske genom att de klarar att hålla en lägre pris- och lönestegringstakt än framför allt Tyskland under många år, dvs. tysk industri måste förlora konkurrenskraft mot dem.

Detta är inte en olycklig biprodukt utan själva syftet med den nu förda politiken, som ju går ut på att sänka offentliga utgifter och höja skatter så att skyhög arbetslöshet och företagskonkurser tvingar fram fallande löner (och fallande priser på inhemska non-tradeables som turisttjänster).

Det är det man menar med uttrycket ”interndevalvering” som är en samhällsekonomiskt och socialt enormt kostsam metod att återställa balansen i en ekonomi.

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Hur skall Portugal, Grekland och Spanien kunna pressa ned lönekostnaderna
så att de kan konkurrera med tyska fabriker?

Klarar de politiska systemen de påfrestningar som skapas när var fjärde person är arbetslös?
Jens Henriksson, kolumn SvD Näringsliv, 4 april 2012

Greklands interndevalvering och Ådalshändelserna
Rolf Englund blog 2011-11-08

Början på sidan

What Greece has in essence committed itself to is an internal devaluation lasting years, if not decades into the future.
There is no discernible end to the austerity
Greece also faces a massive hit to nominal wages and living standards as it seeks to impose competitiveness
There is not a hope of Greece growing its way back to debt sustainability while still in the euro.
Jeremy Warner, 13 Feb 2012

Quantifying Eurozone Imbalances and
the Internal Devaluation of Greece and Spain

Claus Vistesen

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Claus Vistesen is a 23 year old macroeconomist

Could the West simply start saving and paying back its debt?
If too many debtors pursued this path at the same time, the ensuing reduction in consumption would lead to lower growth, higher unemployment, and correspondingly less income,
making it more difficult for other debtors to save and pay back.
This phenomenon, described by Irving Fisher in 1933 in The Debt-Deflation Theory of Great Depressions, can result in a deep and long recession,
combined with falling prices (deflation).
David Rhodes and Daniel Stelter, via John Mauldin, January 2012

A new report released by the European Commission late last week
underlines the devastating consequences of the financial crisis on youth employment,
and acknowledged the difficulty in implementing policies to alleviate this crisis as the European Union focuses on austerity.
The Wall Street Journal, 19 December 2011

“Young people remain the hardest hit by the crisis and its aftermath,” says the report, and the faltering recovery is expected to make things worse.

“In short, income shocks may prove permanent and income losses at the bottom of the distribution can be persistent.”

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Brussels – Against the backdrop of Europe’s persistent jobless youth rate of 21%, the Commission is pleading for Member States, workers’ representatives and business to join forces and take decisive action to tackle youth unemployment. The new ‘Youth Opportunities Initiative’, adopted by the Commission today,

“The Youth Opportunities Initiative – President of the European Commission José Manuel Barroso said – shows young people across Europe that we are attentive to their situation.
IEWY News, december 2011

Mr László Andor, EU Commissioner for Employment, Social Affairs and Inclusion stressed the urgency to tackle the youth jobless rate saying: “The current situation for young people in many EU countries today is becoming dramatic. Without decisive action at EU and national level we risk losing this generation with a heavy economic and social cost”. Underlining that estimates show that the burden on society of current youth unemployment levels is about €2bn each week, or just over 1% of EU-27 GDP, the Commissioner added: “The current trend cannot continue, we must give young people hope. They are our future.”

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Recent events have given us a dramatic demonstration of
the reality of nominal wage stickiness.

Despite crushing unemployment, wages in Ireland and Latvia have come down only slightly
— but Iceland, by letting its currency devalue, achieved a quick 30 percent fall in wages relative to the euro zone.
Paul Krugman. December 24, 2011

The compact will not resolve today’s troubles.
The package dwells too much on austerity, and too little on growth.
If in the coming years elected governments that impose austerity stir up civil unrest,
outside enforcers in the EU will before long become a target for popular rage.
The Economist print, Dec 17th 2011

As I keep pointing out, there are no easy choices left.
Some countries must choose between difficult and very bad, and others are faced with either disaster or calamity.
John Mauldin, 12-31-2011

Greece simply gets to choose what it wants to be the cause of a depression. Long and slow or fast and deep? Choose wisely.

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Rolf Englund:
Det finns ingen lösning, bra eller dålig, på eurokrisen

Även om man, på något sätt, skulle kunna ta hand om medlemsländernas skulder så återstår arbetslöshet och stagnation förorsakat av felaktigt kostnadsläge.

Att klara det genom nominella lönesänkningar, Ådals-metoden, kallas på fint språk för Interndevalvering, är inte praktikabelt.

Felet är att eurozonens ledare inte vill inse att allt var fel från början. De vill inte inse att tanken, att ha en gemsam valuta för Tyskland och Grekland, Finland och Cypern, var och är en felaktig tanke.

Allt var fel från början, precis som kommunismen.
- Om bara inte Stalin hade kommit...
- Om bara inte Grekland hade misskött sin ekonomi..

Mer om detta via länkarna nedan.

Wolodarski och Tysklands framgång med Ådalsmetoden
Rolf Englund blog, 4 december 2011

Greklands interndevalvering och Ådalshändelserna
Rolf Englund blog, 8 november 2011

Det finns ingen lösning, bra eller dålig, på eurokrisen
Rolf Englund blog, 21 oktober 2011

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