Austerity versus Stimulus Prabhat Patnaik

It is obviously silly to push for austerity in the midst of a recession, not just silly but cruel, since it prolongs the pain of unemployment. The recession is caused by a deficiency of aggregate demand. To overcome it what is necessary is an increase in demand which requires larger expenditure. Since private expenditure on consumption is restrained in a recession by the fact of unemployment and low income, since private expenditure on investment is restrained by the fact that when markets are not expanding capitalists have little desire to increase their productive capacity, and since the rest of the…

Fundamental Flaws in the European Project George Irvin and Alex Izurieta

The euro was informed by a neo-liberal view of leaving policy entirely to market forces. In consequence, by way of its specific design, it removed three essential policy instruments from the domain of national policymaking - exchange rate management, monetary policy and fiscal policy- and it intrinsically weakened labour and welfare policy. These are the fundamental flaws in the design of the European project. Fundamental_Flaws    (Download the full text in PDF format) (This article was originally published in Economic and Political Weekly, VOL 46 No. 32 August 06 - August 12, 2011.)

The European Upside Down World: Why the nth European agreement is a step back Sergio Cesaratto

How to judge the nth European agreement ''to save Greece'' stipulated on Thursday 21st July? The financial markets have already provided their verdict: on Friday 22 the spread between the Italian ten-years Treasury Bonds and the German Bunds was still 258 basic points (2,58%), a level unsustainable for the Italian public finances. The next week begun (at the time of this writing) with Moody's downgrading the Greek sovereign debt again, and even higher spreads on the Italian and Spanish bonds. These had jumped over 300 points at the beginning of July, and did not fall much after further restrictive fiscal measures by…

New Issue Newsletter on EU Financial Reform

The financial costs of resolving the financial crisis that erupted in September 2008 are now taking a heavy toll on the economy, democracy and society of Greece, Ireland, Portugal and many other economies. It is time that decision makers and the financial sector change their old ways of acting and thinking before the crisis gets completely out of hand. The new issue of the newsletter EU Financial Reform, edited by SOMO and WEED, is online. You can view and download it as PDF-document at the WEED homepage: eu_financial (Download the full text in PDF format)

The Stupidity of Financial Markets Jayati Ghosh

In the global economy, the past few months have been as bizarre as anything that could be imagined. And nowhere is this more evident at the moment than in Europe, where the crazy and unsynchronized tango between financial markets and governments now threatens the lives of ordinary citizens. Consider the fear that is now supposedly spooking the markets, that of the possibility of sovereign default. At the frontline is Greece, the country that is being asked to impose an unbelievably severe austerity package that is bound to cause employment and incomes to spiral downwards, in return for a supposed “improvement”…

Should Greece Follow Estonia’s Example? Rainer Kattel

One of the suggestions regarding Greece’s current woes is that it should cut its public spending, just like Estonia. But, Estonia’s massive cut in public spending, praised by both the EC and the IMF, has resulted in a 15% contraction in Estonia’s GDP in 2009, as compared to only 2% of Greece. Such simplistic fiscal retrenchment may thus worsen matters for Greece. Greece_follow_Estonia (Download the full text in PDF format)

Should Greece Follow Estonia’s Example? Rainer Kattel

One of the suggestions regarding Greece’s current woes is that it should cut its public spending, just like Estonia. But, Estonia’s massive cut in public spending, praised by both the EC and the IMF, has resulted in a 15% contraction in Estonia’s GDP in 2009, as compared to only 2% of Greece. Such simplistic fiscal retrenchment may thus worsen matters for Greece. Greece (Download the full text in PDF format) (This is a write-up of the author’s presentation at the last week’s Hyman Minsky conference at the Ford Foundation in New York. For a look at the US debate on financial regulation,…