Monday, May 6, 2013

6/5/2013: Self-contradictions & EU Commission

Trapped in their own failures, EU 'leaders' are no longer simply contradicting each other - they are now contradicting themselves. And, I must add, via ever more apparent and bizarre statements.
Behold the latest instalment of absurdity from one of the multiple EU 'Presidents': the man in charge of the EU economic policies and performance, European Commission chief Jose Manuel Barroso. As reported in the EUObserver (, Mr Barroso stated that "What is happening in France and Portugal is not Merkel's or Germany's fault … The crisis and their problems are not a result of German policy or the fault of the EU. It is the result of excessive spending, lack of competitiveness and irresponsible trading in the financial markets."

  1. Loose monetary policy by the ECB that was custom-tailored to suit German needs during 2002-2007 period had nothing to do with the crisis in the peripheral states, despite the fact that it triggered vast inflows of capital from Germany (and other core states) into the euro area periphery, inflating assets bubbles left, right and centre, and leading to unsustainable debt accumulation in these economies.
  2. ECB (heavily influenced by German ethos and political economy) and EU Commission and regulatory bodies' insistence on treating all sovereign bonds issued by the euro area states as risk-free assets on banks balance sheets (the main trigger for Cypriot crisis and the reason for massive transfers of banking sector costs onto taxpayers in Ireland and other member states) had nothing to do with Berlin or with Berlin's insistence on closing its eyes on what was happening in regulation / enforcement EU-wide.
  3. Berlin's inability to reign in German (among other) banks' gross misplacing of risks in interbank lending to other euro area banks had nothing to do with the crisis.
  4. Berlin's insistence, repeated parrot-like by Mr Barroso and his colleagues in the Commission, that the whole crisis can be addressed via fiscal adjustments (recall, that was the position the EU Commission occupied for the last 6 years) and current account rebalancing has nothing to do with mis-shaped economic policy responses across the EU since 2008 crisis onset.
  5. Berlin's 'guidance' toward internecine and economically illiterate Fiscal Compact, eagerly endorsed by Mr Barroso and his colleagues in recent past, has nothing to do with the failure of Europe to respond to the crisis.
  6. Berlin's opposition to the half-baked EU ideas about stimulating growth in euro periphery that shut the door on any real stimulus has nothing to do with the crisis.
  7. Berlin's opposition to increasing domestic demand and abandoning contractionary pursuit of current account surpluses, also noted by Mr Barroso's Commission in the past, had nothing to do with the crisis duration or depth.

Mr Barroso also claimed that Chancellor Merkel is "one of the only [leaders], if not the only leader at the European level who best understands what is going on."

Really? Suppose so. In this case, Mr Barroso has either no clue what is going on, or simply doesn't care to be consistent with his own exhortations of the recent past, because he openly and directly contradicted Ms Merkel couple of weeks ago by claiming that 'austerity was overdone' and had "reached its limits."

Irony has reached so far in Mr. Barroso's waltzing across the ideological & economic policy landscape that according to the EU's 'President', Ms Merkel's brilliance also encompasses the fact she is presiding over German economy currently sliding toward a recession. IMF analysis shows real GDP growth in Germany will fall from 4.024% and 3.096% in 2010 and 2011 to 0.865% and 0.613% in 2012 and 2013. This might be better-than-average record for the euro area, but it is hardly an achievement worth praising.

Someone should point to Mr Barroso that eating one's cake (taking a populist position against austerity, and thus Ms Merkel) and having it (taking an appeasing position toward the major architect of all economic policy blunders so far deployed in Europe since the onset of the crisis) is just something that doesn't happen outside the make-belief world of Brussels.

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