That Flushing Sound You Hear

...Just might be the EU.

Kevin O'Rourke Via Brad DeLong

This post was written by Kevin O’Rourke

Colm McCarthy makes some important political points in today’s Sunday Independent. He points out, quite correctly, that the ECB’s policy of favouring an Irish sovereign default later over a private banking default now (and it is important to be clear that this is exactly their position, whether or not they publicly admit it) is going to make it very difficult, if not impossible, to get public buy-in for the further austerity measures coming down the line; and is also virtually certain to lead to increasing anti-EU sentiment here (and in the rest of the periphery as well).

But it’s worse than that. By confusing fiscal and banking crises in the public mind, the ECB is also fuelling anti-EU sentiment in the core, since core taxpayers understandably resent the notion that they should subsidize feckless peripheral taxpayers. By contrast, greater honesty about the fact that we have a Europe-wide banking crisis would make taxpayers everywhere realise that they have common interests, and a common enemy, namely an out-of-control financial sector. In such a scenario, ‘Europe’ might be seen by ordinary voters as having something positive to contribute, since cross-border banking requires cross-border regulation. Right now, however, ‘Europe’ is seen as a big part of the problem, in the case of the ECB correctly so.
Like Colm says, it really is a slow motion train wreck.

Colm McCarthy:

Economist Paul de Grauwe has argued that the very design of the eurozone created high risks of sovereign default for non-core EU members who were rash enough to join the single currency.

It is patently clear that these risks were under-appreciated in Ireland but it is dispiriting to have to listen to lectures from ECB officials who appear to regard the European banking crisis as essentially a morality play about fiscal policy.

At some point, Irish taxpayers are likely to get tired of paying off those (mostly foreign banks) who were dumb enough to lend money to badly managed private Irish banks, and it's likely to happen elsewhere too.

Comments

Post a Comment

Popular posts from this blog

Anti-Libertarian: re-post

The most pointed critique of social security and liberalism in general is the libertarian critique. The problem with libertarians, for a liberal, is that we have too much in common. We both believe in individual rights, tolerance of individual differences, and dislike government prescription of religion. The basic difference, it seems to me, is the different answers we give to Cain's (with thanks to the Captain - my original version had the corpse asking the question!) famous question: "Am I my brother's keeper?" That's not really my basic bitch against the libertarians though. My real complaint is the same as my complaint against most religion - its premise is a fraud. For those who can't stand to wait for the punchline, I believe that trying to implement libertarian principles leads to tyranny or social disintegration. Demonstrating that takes some historical (and pre-historical) context. For all but the last 15,000 or so of the 100,000 years the human spec
Read more

Uneasy Lies The Head

Uneasy lies the head that wears a crown ........... Shakespeare Henry IV, Part II. So it is with us and our slightly distant primate cousins , so it seems. A 9-year study of wild baboons in Kenya by Princeton University and the Institute of Primate Research may turn conventional assumptions of alphas males upside down. The study found that alpha males have high testosterone levels, which allows them to dominate other baboons, get access to more food, and attract better mates. This is expected. Surprisingly, though, the alpha males also have high levels of stress hormone glucocorticoid, which scientists measured from their feces samples. In fact, the stress of alpha baboons was on par with low-ranking baboons. The convention wisdom is that access to food and females provides life security and thus less stress for dominant males. Conversely, weak males who are constantly threatened by starvation and physical violence from stronger males are thought to be more stressed. The st
Read more

We Call it Soccer

The US played its best, and maybe only good game of World Cup, but lost thanks to brilliant goalkeeping by the Swedish keeper and the bizarre method soccer uses to settle ties when three US stars could not put the ball on frame from the 12 yard spot.  At the end it came down to a blocked shot that spun in by maybe a couple of centimeters. Well, that's football - too much like life.   Which brings me to a modest proposal.  Replace the thirty minute overtimes with as many 7-player 15 minute periods as needed to settle it.  Scoring should be much easier with fewer players.
Read more