A fresh proposal for escaping the euro crisis. Guest post by Alain Parguez

The following proposal is due to Alain Parguez, Emeritus Professor of Economics, University of Franche-Comté, Besançon-France ( www.neties.com/parguez ). Professor Parguez has been a longstanding critique of European Union affairs. His incisive critique of the eurozone’s architecture predates by many years the current Crisis. Always fascinated by his views , I am grateful for the opportunity he afforded me to post this piece. Looking forward to readers’ comments.

A Proposal

By decree of the European council wealthiest States whose debt is still rather well rated, create a pool , a special fund managed by the European Investment Bank (EIB), issuing euro-bonds sold to the ECB, technically to the respective central banks at zero or quasi zero rates.

Proceeds from euro creation by the ECB will be borrowed at quasi zero rates  by Greece, Spain , etc… which could cancel enough share of their debt to reverse private banks expectations.

The success depends on three conditions.

  • First condition :  No more destruction plans imposed on Greece. All existing destruction plans should be stopped.
  • Second condition : Proceeds of this acquisition of euro bonds should not be included into public debt, borrowing should be purely conventional.
  • Third condition : what about the future?

The technique is to fail if it only deals with past never to be reimbursed debt. It must free the future, allowing all member States to change the course of their policy and play again their anchor role. It means that the principle of privatisation of public finance should be jettisoned. Euro bonds must be issued by all member States to allow the reconstruction of the Euro-zone economy and society by public investments bypassing  the still frightened private banks. The counterpart of these bonds is the accelerated growth of the stock of public capital including of course its crucial component; human capital.

Proceeds will be transferred to all member States and especially to poorest States to reconstruct their real economy devastated by addiction to punitive austerity imposed by France and Germany alike.

Comments:

“Could this solution be accepted?  I have to express my strong doubts since it violates the hidden supreme purpose of the “Union”. Instead of an hyper-capitalist system which is dying it could achieve a new mode of production what could be deemed social-capitalism. How could this evolution be accepted by Germany and especially by France which  are more than ever starting the race to “Austerity” or “Rigor Mortis”?

No shrewd financial innovations can save what cannot be saved because it does not want to be saved. 

The dismantling of the State, its privatisation shared by the whole EU rulers is the true cornerstone of the Union. What would banks do with the money created to save them, invest it in private assets never issued for real value generating expenditures.  Henceforth, while destroying the real base of the economy and depriving public bonds of any real value, forced “reimbursement” of  the debts will generate a new wave of hyper-speculation and capital gains plus dividends to former productive corporations motivating them to abandon without remorse the real economy!  As for wished reimbursement before terms decreed by Germany and France for their own debt one can only cry before  such a folly of the ruling elite!!!

Finally, the loss of value of private assets, the collapse of the “financial markets” will be the twilight of the gods of EU Walhalla”

53 thoughts on “A fresh proposal for escaping the euro crisis. Guest post by Alain Parguez

    • Dude, you couldn’t resist could you? How extraordinarily childish. Guess you can’t/won’t take polite criticism. Don’t take things so personally, we’re here for reasoned debate. You only demean yourself with this sort of post.

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  2. Last Greek:

    U r wrong. The 3 Greek banks left have none of the characteristics of the global banking transgressors that you seem to be so eager to put in their place.

    I have no desire of debating the global banking system here. All I care about is Greece and only what is beneficial for Greece.

    To engineer a credible Greek economic comeback, I need the 3 Greek banks left intact. So hands off the Greek banking system or the smoldering pile that is left of it.

    If you want to do your thing against banksters then be my guest to do it in the rest of the globe. Gather your friends around and start chanting the anti-Semitic nonsense of the Rothschilds and the global banking conspiracy that is eating your lunch. You will find no sympathy from me because I do not suffer fools very well.

    • That’s a rather insulting and arrogant reply to someone who has only posted reasonable arguments till now. It rather undermines your credibility as a proponent of reasonable discourse. In fact, your reply sounds like you have taken the issue personally. Surely the discourse here should be as objective as possible in order for it to be rational? Instead you have resorted to name calling. I am surprised and disappointed.

    • Gather your friends around and start chanting the anti-Semitic nonsense of the Rothschilds …

      What are you talking about? I am not sure I follow you, Dean. The makers of J. D. Rothschild’s Premium Hot Chocolate Blend are anti-Semitic? Theos kai Panagia, Dean! They make the best hot chocolate on the planet.

      LOL … You gotta try harder, Dean.

      Yani, I thought the comments here are moderated. What’s with allowing meritless, bs anti-semitic accusations to be posted?

  3. It seems you [Xenos] are confusing investment banking with regular banking.
    It seems you [Xenos] are confusing investment banking with regular banking.

    There was no confusion on Xenos’s part, Dean; I thought he nailed it … and quite eloquently I might add.

    Greece does not have any Goldman Sachs type of institutions or anything that comes close(in terms of scale, size, ability).

    In 2008, Konstantinos Karamanlis with a stroke of his pen (or was it a wave of his hand? not sure) bailed out the Greek banks to the tune of nearly 30 billion euros. Sure, that is not so much in Goldman Sachs terms (remember: they rule the world … lol). But on a per capita basis, that compares to the United States. The Greek banks, when they were not too busy laundering money, were lending to emerging markets like there was no tomorrow. One such market was Turkey — you know, the country that illegally occupies one third of Aphrodite’s island. Anyway, let’s not let a little thing like international law get in the way of profits.

    Of course, money laundering is not just a Greek banking habit. (Wachovia). But hey — when you got a liquidity problem, you do what you got to do … for the shareholders’ sake!

    • Last Greek:

      For starters, you let me be the judge of who nailed whom unless of course you want to go by the way of the last Mohican.

      In all your ramblings about past events you are failing to explain what the Greek banking sector today at 10% or less of its former valuation has anything to do with reprisals or exacting revenge on banksters.

      What banksters? These are paupers now and you want to subject them to a 50% haircut? What for? The present banking system in Greece is already bald.

      Before offering opinion here, what are your credentials? Do you have an MBA or education in finance or you just talking?

    • Before offering opinion here, what are your credentials? Do you have an MBA or education in finance or you just talking?

      Would you like me to post my C.V., Dean?😉

      Btw … no reprisals, no revenge — just the application of the rule of law … globally.

  4. Europe nowadays is like the Merkosy cat chasing it’s tail. The Merkosy cat is of a different, very special breed. Not only it can actually snap it’s tail, it can also force all the other cats in the yard to behave as “reasonable” as Merkosy cats. They say “Look, i can catch my tail if i try hard. Why can’t/won’t you do the same?” And if someone, anyone, points out that tail-catching is utterly pointless, then her country’s spread skyrocket, she becomes one of the pigs, she is personally or nationally rediculed by the likes of Bild and Le Monde, she is not allowed to have elections etc. So every other cat keeps on chasing the tail and pretend that this is everything that can be done.

    Is tail chasing an instict or an acquired behaviour? It is both. A kitten will play so as to become sharp and fit. A mature one will do it only if the owner teaches the cat that this is some kind of silly game before meal. The owner plays upon the instict in order to create a certain behaviour. Merkosy cats are customarily in the habbit of doing nothing reasonable and their owners/sponsors just enhance this behaviour in order to promote their own multi billion penny interests. No real training needed.

    Last but not least:
    Merkosy cats are the only known shepherd cats. They breed PapaBerlousco rats for food and labour and tend to snack them when the rats grow too fat to be of any other use. So, if you ever come across PapaBerlousco rats, don’t panic. They are just edible pets.

    Source: EuroPedia

  5. I don’t know much, but I know that politicians are not stupid, neither narrowminded.
    In order to survive in politics, one has to have developed a certain mix of characteristics. These, include the ability, among others, to take advice from experts (in image making at least). The idiotic moves we have all been experiencing, coming either from european or from greek politicians, are not the product of incompetence in my humble opinion.

    I am almost convinced, that all this situation is just a cover for pushing the public opinion to accept a hyper european government, elected not directly by the people but by the markets. The system of creating shock and owe in people is very easily seen around us without much fantasy anymore.

    Unfortunately I have no proposition to make, as to how to react to all this. Even overthrowing all european governments simultaneously, wouldn’ t make possible to change much, since we are not ready to offer a real new ,”clean” from bribery, political party.

    We live in the aeon of information and information channels are almost totally cntrolled and even monitored constantly by the “authorities”.

    So my proposition to everyone, is to change ourselves first. To become more conscious about our needs and wishes, so that we may become immune to bribery.Then our immediate environment may change. Then our more external environment will change. Then we may see some real change.

    Perhaps then, there might surface a social system that will be based on personal and mutual in the same time, profit. To me, having studied enough the human nature, this seems the only chance we stand, to make reason prevail over the personal greed of a few who have the means to govern our world as they do now.

    • So my proposition to everyone, is to change ourselves first …. Then we may see some real change.

      Yes, but can we arrest and prosecute some banksters (and their minions the politicians) first, so that the “99.99%” (yeah, my figure is more precise) can have a little semblance of justice? 🙂

      Yani, in your “Modest Proposal” you bring up the Europeanization of three realms: management of (existing) public debt, banking sector, and investment policy. How about a Europeanized financial regulatory agency that oversees and monitors the markets/banks, AND enforces the laws?

  6. Xeno:

    It seems you are confusing investment banking with regular banking. Greece does not have any Goldman Sachs type of institutions or anything that comes close(in terms of scale, size, ability).

    The current proposal on the table for a Greek bank haircut does not make any sense at all. It simply piles on more loses for Greece(ultimately payable by the average Greek citizen) without making Greek fiscal policy any more viable.

    It’s punctuated nonsense cooked up in Berlin whose simple aim is to damage Greece further.

    It’s the equivalent of after killing someone you then proceed to the scene of the crime, fully loaded with medicine, pretending to be of assistance if only the unfortunate victim was alive.

    • I am not confusing anything that is not already confused. That is why the UK is starting to make a legal distinction between high street banking and investment banking. In the case of Greek banks, although the extent of speculative banking is rather limited, it does exist.

      However, I do agree that the haircut for Greek banks is a disaster in the making. It seems fairly clear to me that the Franco-German strategy always was to delay Greece’s inevitable default in order to protect northern European banks, while doing little or nothing to help the Greek banks. This is why Papandreou should have insisted on default as a serious option two years ago; now, Greece is just left with the threat to leave the euro and undergo even further hardships as a result. Hardly a good negotiating position…

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  8. Xenos et al:

    Banks are simply recycling mechanisms. They use deposits for which they pay a certain rate and re-lend such deposits at a higher rate for profit. Simply put they offer lubrication for commerce.

    In the Atlantic ocean we have a phenomenon called the conveyor belt, whereby warm waters of the equator travel northwards towards the British Isles and as they transfer their heat become heavier and sink around the North Sea and then come down again through Canada to the Equator to be re-heat again for the same process to repeat.

    If the conveyor belt of the Atlantic were to stop for some reason we will then experience an Ice Age and the British Isles will be frozen over.

    The same with the banks.When they stop functioning our system comes to a complete stop.

    We can argue here who contaminated the global system with cheap credit, or cost of capital close to zero, and to what extent Greek banks deviated or followed practices of other global banks and whether they should have done so or not. The fact remains that Greek banks were caught naked on a low tide but attempting to regulate nakedness after the fact is the same as closing the barn door after the cows have left.

    I completely disagree with the notion that regulating the 3 Greek banks left, after they experienced a 90+% erosion of value, accomplishes anything. This is like putting lipstick on a pig hoping for a fashion show call.

    • This is not a correct account of how banks operate. They do not so much recycle money as create credit. When this was sufficiently well-regulated, they tended to perform the role of facilitating the real economy. For two decades now, they have been operating without oversight, have created many trillions of extra credit, and over-extended themselves with liabilities that they now expect us (the taxpayers) to pay for.

      Since almost all banks operate in the private sector, and their decisions are in the commercial sphere, their actual bankruptcies are a reasonable outcome of their past decisions. No voter was accountable for the global financial disaster: it is the responsibility of bankers themselves, along with some politicians and political parties of the right.

      Of course, since the Greek banks have been operating in a different environment, they may be extended some special protection. It is, indeed, true that we need banks — at least, in terms of facilitating transactions and providing small loans to businesses and individuals. It is far from clear that we need the sort of speculative banking that merchant banks have been engaging in: indeed, I am of the strong opinion that their parasitic behaviour means that we would be better off without them. Any gaps in the market can be filled with new properly regulated forms of financial mediation: of course, all neoliberals are horrified by such talk, just as they are horrified even by the proposed Tobin tax of the EU. Money-grabbing is their business, after all.

    • This is not a correct account of how banks operate.

      Very well said, Xenos. Dean’s reply to how banks operate was a simple description of a “mom and pop” banking operation and does not help one understand how this banking mess came to be.

      For two decades now, they have been operating without oversight, have created many trillions of extra credit, and over-extended themselves with liabilities that they now expect us (the taxpayers) to pay for.

      For bank trivia buffs:

      In the states, the repeal of the Glass-Steagall Act in the 90s (a bipartisan achievment!) …

      and in Britain, Thatcher’s Big Bang deregulation of the City in ’86.

      I am of the strong opinion that their parasitic behaviour means that we would be better off without them.

      I could not agree more — serial criminals the whole lot of them (hence, the apropos term “bankster.”

  9. BTW, so that you know my expectations of debating here.

    I ask of two attributes (a) exceptionalism (especially from my fellow Greeks as a means of re-establishing our purpose and mission) and (b) constructive input.

    Just remember that when we speak of Europianism, we speak about western patterns of thought. And when we use western thought patterns we become and act as Greeks:

  10. Even the Americans now believe that Merkozy decides whether Obama gets re-elected.

    BTW, it’s always refreshing to focus on a larger picture and undestand heavyweight politics because they certainly affect featherweight politics around the globe:

  11. Kat:

    This “let’s break the banks” movement is a leftist idea and it’s a bit naive.

    At this stage in my life I am not interested in ideology, rather I am interested in clever solutions that benefit everyone. As such, I reserve the right to use a mix of tools/approaches whether to the right or left of the political spectrum; ideas which are most promising in producing a solution. My objective is to win one for Greece and not be a prisoner of any particular movement or approach to the problem.

    Generally speaking, I am an open minded person despite my otherwise fiery disposition.

    Here is my problem with the left and especially the Greek left:

    The unions and all other special interest groups (which major clients of the left ) are the mortal enemy of true democracies.

    They know very little or nothing about economics. Their only talent is how to organize, make louder noises than the vast majority and then drown the opposition in never ceasing argumentation. They proceed to brand everyone who has a different opinion as fascists and racists.

    And this is a tell-tell sign. When Turkish propaganda uses the leftist agenda verbatim in undermining your country you begin to understand that a fool and your enemy is one and the same thing. Not that it was ever not, but it underscores and emphasizes this fine point.

    • You are mistaken in thinking that the opposition to the outrageous special pleading by banks and financial institutions comes only from the Left. There are even some neoliberals who consider that it is important for businesses (including banks) to fail, as a necessary aspect of market functioning. What has happened since 2008 is that politicians have decided — after the disaster with Lehman Bros. — that they prefer recession, possible global depression and mass unemployment to financial crisis. This is also partly the result of the powerful banking lobbies in US and EU politics.

      Since the financial sector is now proving to be a very serious impediment to US and EU recovery, wholesale reform of its operation is essential and actually should be painful for them, since it is they who made bad decisions and strategies and not ordinary people. Far from comprehending this, banks continue to pay excessive salaries and benefits to their senior staff — failing, in fact, to accept responsibility and expecting governments to bail them out. Voters will not accept this, and the EU is proceeding in a suicidal direction.

  12. I don’t know if this solution would work, but from what I understand of it, it would be much more difficult to persuade the surplus countries to follow it than what Yanis’s proposal.

    Meanwhile, I think we (all Europeans) are in deep deep trouble. From what I hear in the news, Merkel with her followers in the surplus countries are dragging Sarkozy into a change of European treaties towards the foundation of a Germanic empire. And at the same time Greece, but more importantly Italy, the third power of the Eurozone, are ruled by weak technocratic governments that are interested only in numbers and not in people. Perhaps it is too late to save our economies but at least we should try to save our right for freedom and democracy. All Europeans should fight against this. Especially the people of Italy and Greece should rise up and shoot down their technocratic governments and go to elections. Maybe the new governments will not be the best to guide us out of the economic mess we are in, but at least they will not help take us back to the Middle Ages.

    • I have a better idea. How about the UK people rising instead?

      Enough of trying to use Greece and Italy in this malexperiment.

      It’s about time that you quit giving advice and get the chestnuts out of the fire all by yourselves.

      And enough with this morbid curiosity about Greek affairs. We wouldn’t take advice from your kind even if you were the last people standing on the face of this earth.

    • @Dean

      As I write “All Europeans should fight against this.” So this includes the people in UK. But, if we want to be realistic about it, it is not easy for people to rise unless their backs are already against the wall. That’s why it is easier to start with Italy and Greece, where the current governments are not a product of democratic elections.

      The other Europeans must rise to force their elected governments to “quit giving advice and get the chestnuts out of the fire” by themselves as you write. The power of the people is really impressive as we Greeks realized last October the 28th, when the Papandreou government was forced to acknowledge this power and spasmodically try to stem the tide of resentment via the referendum. Of course, this was done in such an idiotic way that resulted in the fall of the government and the acceleration of events in the whole of Europe.

      As for the curiosity about Greek affairs, I agree with you that it is misleading: the issue is the whole of Europe and not just Greece. And I wholeheartedly agree that Europeans should stop taking advice from anyone that tries to persuade us that whole countries/peoples are “good” (northern Europeans) and others are “bad” (southern Europeans). This just tries to use the “divide and conquer” strategy in order to prevent a person in the UK, or in France or even in Germany who is being hit by the crisis, that his interests are the same as with a person in Italy, Portugal and Greece.

  13. excuse my comment cos its somewhat irrelevant to the current post but its a trend i see here, around and pretty much all over mrs varoufakis’ et al ideas: i dont see any sort of correlation between this crisis and china, india (to a lesser degree) an the rest of the emerging asian economies. Myself is not an economist but a positive scientist (chemist), however it seems to me that this factor is omitted for some reason. is it that irrelevant that almost 2-2,5bil peeps where introduced gradually to the world economy for the past 10-20 years?? In my mind these peeps, both a cheap working force but also consumers, should have some sort of impact on the world economics. 10-20 years ago these people didnt even exist in economic terms as they lived on a handful of rice to nourish themselves, driving wooden carts and at best smoking some opium. Nowadays china is producing everything one can think of, at a decent quality and sell half price at best (sometimes even 3 times lower). Given that big money can move around the world unrestricted while – and excuse my language – the rest of us get taxed even if we fart, it is no wonder that china and the rest emerging asian countries have a booming economy while the rest of us die slowly. this trend is further amplified by this very crisis: less and less income + unrestrained consumerism => chines cheap products become more relevant every day. It seems to me that this whole crisis will become worst in the near future and I dont see germany being in any better position than every1 else. they ll just receive their slap later on.

    As i said in the beginning im no economist myself. I have studied economics on my own and correct me if im wrong but everything in the economic life on this planet seems to boil down to one simple equation, if that word can ever be used: perpetual financial growth on limited (planetary) resources. imo this “equation” is a fundamental principle in contemporary economics. Needless to say that as a student of Nature’s ways, i find this notion laughable at best. There can be nothing perpetual running on limited “fuel”. If u want never ending growth then the obvious answer is that u need unlimited resources and theres one place with unlimited resources…up and beyond the Earth’s atmosphere.

    In any case could i have some feedback on the correlation between this crisis and china’s role (and other emerging asian economies)??

    Thanx in advance

    • Absolutely nothing to do with China.

      The only observation that can be made is that in the old days when one of the economies of the center (USA,Europe, Japan) experienced a decline usually the remainder was in growth mode and thus able to restore some balance.

      In today’s global economy it seems that all economies go down or up at the same time(disturbing synchronicity).

      There is no longer any balancing mechanism, only an exaggeration of the extremes: deeper declines and larger increases. The system today is far more unstable, but it would be naive to blame it on China not to mention prejudicial.

  14. Obviously central planning on the European level has to be the cornerstone of any effort to get out of this mess. Therefore, this proposal, as well as the Modest proposal, are very welcome, as they might give the right twist to future events.

    But, it seems that to an extent the specifics of the micromanagement of troubled ClubMed have to be considered as well. Austerity is not the same as privatization of the public sector, and we’d better be more precise about what we say to each of these. Do we need to reduce wages in the public sector? Do we have to lay off public workers? Should we slash military spending? Should taxes be increased? These questions warrant separate answers from the questions of whether electricity companies, airports, highways, and railways are to be public property. What are the expected effects of each on deficits and growth? These are important questions!

    This is not a matter of scientific completeness. It is crucial to the weight of any alternative political position we support. We need a counterweight to the current trend of assigning micromanagement to technocrat governments, and we must get out to play them on their field. Of course, we can always hope that vague positions about what has to be done in general will put us in a position of power. But then what?

    • Absolutely. I support both his analysis and his anger, not to mention the lack of a solution when politics fails. We have all been betrayed by second-rate bureaucrat-politicians, who care only for power and self-aggrandisment. They are almost indistinguishable from Mubarak and the others in the Middle East.

  15. “No shrewd financial innovations can save what cannot be saved because it does not want to be saved.” I have the impression that it all comes down to this statement.

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  17. Two questions for Prof. Varoufakis (or anyone else that could be of help).

    1. What happens upon expiration of bonds (issued in Euro) when the state that has issued them has changed its currency in the meantime (e.g., Germany goes back to Deutsche mark)?

    2. What happens upon expiration of bonds (issued in Euro) when the state of the bond holder has changed its currency in the meantime (e.g., Greece goes back to drachmas)?

    I can imagine what the correct answers would be, but I need some kind of verification from an expert in order to satisfy my curiosity.

    • Bonds are issued in a specific currency, and will be redeemed in that currency. If the currency collapses/disappears, then effectively the bonds are worthless unless the issuers of those bonds negotiate a deal to transfer them into another currency.

      Specifically, Q1: if the euro still exists then the country of issue has to repay the maturing bonds in euros.

      Q2: The same as Q1: the country of issue has to repay in euros. If the holder of the bond is in Greece, then s/he would have the option of converting the euros to new drachmas.

      In both cases, the main issue is the survival of the euro. If it should collapse, then the implications for all of the EU (and the world) are horrendous. This is why it is in Germany’s interests to pull out all the stops. but they appear to be incapable of behaving intelligently.

    • Thank you for the reply.

      “If the currency collapses/disappears, then effectively the bonds are worthless unless the issuers of those bonds negotiate a deal to transfer them into another currency.”

      What happens then to the bank loans or private agreements (IOUs) that are issues in euros?

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  19. Hm… I agree with you. There is a certain point where ALL stakeholders cannot be equally happy. There is a proverb , well known in Greece: “you cannot make an omelet unless you break some eggs”. So let us break some bank’s eggs for a change.
    This may be the solutions to keep them going any way. To accept a loss now, according this proposal will most probably save them from a fatal loss, if Eurozone’s actual system blows up. Unless all this trouble is not about profit but about control. If this is the case any proposal that gives a way out of this crisis will be rejected by those who seek control. Chaos is preferable when Fear is the most powerful weapon in a non declared war.

    • Maria:

      You can break all the bank eggs you want but hands off Greek bank eggs because there are only 3 eggs left (National Bank of Greece, Alpha/Eurobank merger and Peiraios Bank).

      You can not ask Greek banks that they have seen their values evaporate by 90% to participate in any ill-conceived Merkozy haircuts.

      Now, if you want to give all other foreign banks a new salon treatment, I will help you set up an Haute Coiffure place that will knock your socks off.

    • @Mr.Plassaras

      When it comes to “egg breaking” we can not exclude greek banks. What happened to the 25 billion euros (aprox.) the greek banks received during the governance of Mr. Karamanlis a few years back? Where there any rules on how to use that money? Whose fault is it if the banks failed to come up with the right investments?

      Sorry to bring this matter into discussion during a conversation about the magnificent ideas of Mr. A. Parguez, but the recent protonbank events made so clear that some bankers are so well aquainted with government members, that they escape justice. So maybe we shouldn’t be lenient or naive.

    • Nationalize all the banks to get rid of all the bad assets, then re-IPO them. That would be a good start.

  20. Why are all ideas revolving around transfering money, debt or credibility from the North to the South? Are there no adults in the South that can survive on their own?

    Why don´t the ClubMed countries issue bonds that are senior to other claims to the respective country, such as pensions, public employee salaries etc ?

    • @ PCarx
      well it is dificult to give you a proper answer because there has to be a common ground to communicate with someone. Therefore, I can just say, you wanted those southern irresponible, immature chilldren (who will never grow up) so deal with them. Or even better live with them if you can. If u don’t like them take a hike. I am using the ‘you’ immaturely predicting where you come from, or where you stand. It has nothing to do with origins usually but with convictions.
      A technical question: is France included in the ClubMed? Who will issue these bonds exactly?

    • Of course France is included in the ClubMed.

      >>>Who will issue these bonds exactly?

      I am just asking why e.g. Italy is not issuing bonds that are senior to existing bonds and senior to any payments to government employees, pensions etc.

      This type of bond would bare lower interest rates and would not need any kind of European coordination. Less complexity, less fighting, less interest. Almost plain vanilla so to say.

    • I am not an economist, but if I have understood correctly this is patrly being done, but again in your line of thinking you need to have a buyer..And a buyer willing to lose money and take a risk. Taking a risk will make borrowing more expensive and so on and so forth…
      And unfortunately this is a monetary union..have you ever considered why we are looking at the spreads, instead of the interest one country is paying to borrow? It is the by now hugely commented argument about a monetary union which is nothing but that…

    • “And a buyer willing to lose money and take a risk”

      So my proposal addresses exactly this point. It reduces the risk of a buyer.

      Bond A: Just another Italian bond
      Bond B: Italian bond that is senior to old Italian bonds and Italian pensions, Italian public employee salaries.

      The interest for bond B will be lower than for bond A

  21. This is a rational and indeed visionary proposal, that — at least at this time — will not be acceptable to Europe’s politicians. Primarily, the reason is that rationality is not what has informed the construction of European political and economic architecture in the last decade or so. Rather, political parties of the centre right and far right have swallowed neoliberal ideology wholesale and appear to be incapable of thinking outside that box of foolish and incorrect axioms.

    A crucial part of the boxed-in thinking is the primacy of banks over the real economy; another is a petty nationalistic approach to the eurozone (“it’s OUR money, why should we give it to the Greeks?”); yet another is the “commonsense” approach to economics, that Thatcher so successfully marketed (“you cannot spend more than you earn”, or the current one, “you must repay all of your debts, regardless of the consequences”).

    However, this discourse pits mainstream society against political parties, the financial system and the rich. By persisting with this arrogant abuse of power, including imposing unelected bureaucrats as prime ministers of Greece and Italy, Europe’s politicians are precipitating a fundamental crisis of democracy and accountability. In essence, they are recreating the paradigm that Marx described and undoing the political economy structures of advanced capitalism. We are all headed into a neofeudal future, which will be very nasty indeed. Thank you, Merkel, Sarkozy, Cameron and others: your collective contribution to European and world history will be a pitiful recital of weakness, pettiness and myopic arrogance.

    • Exactly right. One must pull back the curtain and clearly view the rational behind the entrenched Euro(banking)-interests. In doing so one will see the worst element of all driving present and future policy. One simple observation. The one element that has penetrated every single nook and cranny of Euro governance like a turbo-charged cancer and allowed the financial sector to engulf the world. The one element that trumps ignorance, pettiness and arrogance every single time…. GREED. The future looks bleak indeed. Because until this is brought in check, it will continue to inform every decision, and every action made at every single level. Its destruction cannot come from an organized response, but from individual “laser” focus and action.

  22. Many years ago, the rules were greatly tightened against any continuance of the long term, arms length, free enterprise, equity capital investments, that had been the traditional role of what were once described as “Savings Institutions”. Their role was changed to become a source of funding for government “Bonds”. A very good example is today, here in the UK, all pensions, when they reach maturity, must now be invested into government bonds so that the pensioner can only receive a “Safe” sic! fixed income….

    A second consequence was the increasing dominance of high street banking as a secondary mechanism to fund private sector job creation through lending against the value of fixed assets such as a house; which in turn became the driving force for the rapid increase of valuations of the fixed assets such as a house.

    What we see today is the, (being kind here), unintended ?? consequence of these rule changes, was that such Investment of savings into the private sector ceased.

    Today we are reaping the reward for these actions.

    Until everyone acknowledges that you cannot replace private sector investment of private sector savings as long term, arms length, free enterprise, equity capital, back into the private economy; with government investment of borrowed money from the “Markets”. Nothing will change for the better.

    PERIOD.

  23. The first requirement, for the modest proposal or Alain’s suggestion, to have the slightest chance of success, is to break the political power of Banks.

    I am afraid, and your mileage may vary, their political power increased in the past three years, resulting in a political landscape, on national and European level, that is torn apart by opposing views, paralyzed by political close combat propaganda. Instead of including the modest proposal in the public sphere, it is marginalized, of course it is, it comes from Greece!

  24. Another proposal based on punishing financiers for playing casino with public money.

    I approve. The banks will not. So it will be public opinion against the banksters, once again.

    The laws are made by elected officials, who can be bought. The purchase must be blocked.

    Where is the mechanism to do so. This proposal is redundant without blocking bribery, through election reform or bribery laws.

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