Last week, we asked if you thought the European social model was under threat, or whether the consensus for austerity (if it ever existed) had been smashed by recent elections in France and Greece. Events have been moving quickly and, unable to form a consensus, it now looks like Greece will be holding another election in June. Meanwhile, speculation is rife about the country’s future in the eurozone, adding to the nervousness of financial markets.
After the elections, Debating Europe attended a European Movement International (EMI) briefing in Brussels and interviewed Jo Leinen, a German Social Democrat MEP and President of the European Movement International. We put some of your comments about European austerity to him, to see how he would respond.
First up, we had a comment from Fabian about the “European social model”. Fabian argued that: “I’m not suggesting that we directly eliminate all these services, but rather that we start a public debate on which services we want the healthcare system to cover and which services should be privately paid for. Fostering and moderating this discussion throughout Europe should be a top priority for European policy makers.“
Next, Joe sent in a comment arguing that austerity was not something to be ignored: “[Greece, France and other countries may] not agree with austerity, but if they have no money, they can’t spend it.“
Franck, meanwhile, sent in a comment saying: “I think our leaders must quickly find reasonable compromises between austerity and recovery plan without giving blank checks, because the people will not be patient forever.“
Finally, Gerry was most controversial: “There should be greater transfer of wealth – human resources, industrial resources, commercial resources, military resources and financial resources – from richer parts of the eurozone to poorer parts…“
What do YOU think? Would abandoning painful austerity measures introduce a “moral hazard”, and force rich countries to pay for their profligate neighbours? Or is a transfer of wealth exactly what’s needed for Europe to function with a single currency? Let us know your thoughts in the form below, and we’ll take them to policy-makers and experts for their reactions.
Is it a moral hazzard to worry more about moral hazzards than instant social impact?
Did west Germany consider its integration (with favorable transfers of funds) of East Germany a moral hazzard?
I am not sure about wealth tranfers from “rich” countries to the “poor” ones can work because, with the exception of Germany, I can’t really think of other countries with big surplusses.
In my opinion what we first need is to realize that since we are in a common currency environment (eurozone), we can’t be antagonistic between each other, we must be united as one.
What is for sure is that, as long as we allways do “too little, too late” for countries that are in trouble, we just contribute to the worsening of the crisis.
If for example Greece was helped efficiently and on time in 2009, we would have probably never faced same problems for the other economies. Not helping Greece (which represented the …3% of the eurozone economy, it was a piece of cake) was a huge mistake of Mme Merkel and more than that, with her critics about “financial morality” she caused the rise of nationalism around Europe.
First, ive said that, reason ..the wealth is stacked up, not being able to flow thru the markets freely.
This is comparable to a dam.
Then there is that solidarity tax.
first of all, those who offer the bail out loans, do so with an interest!! so in fact they are making a profit out of the misery of other people… how dare you talk about a moral hazard? the moral hazard is when a “Partner” is making a profit out of the misery of another “Partner”…. So could the countries that are offering the loans stop scapegoating Greece and Portugal and Ireland? it is business! Tell your citizens that they are going to make loads of money out of the interests paid and stop the nonsense about “oh dear, we are paying for those “lazy” Greeks!!” And yes, if you want to have a better functioning eurozone, a transfer of wealth is INEVITABLE!!! if you want to have Greece and Germany under one currency, that means that their economies will have to be more harmonized thus Germany allowing Greece to become a bit more industrial, productive and an exporting country. There is no other way to save the common currency…!! Sorry folks…!!!
And behold how the ranks of the europhiles decimate, as this bold attempt of uniting the European continent unfolds into a ordinary routing.
The EU lacks a trustworthy political establishment on the supranational level but also in some of its member states, an obvious example is Greece. And there is no hope that this will improve, given the decline of democracy under EU rule. This given, the call for a political union as expressed by Jo Leinen can only make living conditions in the EU worse. It would negatively effect those member states where government is still comparatively sound.
About transfer of wealth from the richer to the poorer parts of the EU: This is already taking place for decades through EU funds and the €uro arrangements, but with little positive or even reverse effect as Greece shows, which is benefiting from such transfers since 1981.
About the call for Eurobonds: With common low interests rates the main characterisics of Eurobonds practically existed throughout the whole first decade of the €uro. It did not prevent the current crisis in the southern states, caused rather the oposite.
The current EU system has failed. More of this type of EU will simply produce more failure. The way out could be a smaller €-Zone of more like-minded countries (eg. the former DM-Zone), strengthening the national societies by improving democratic participation, and more competition between the countries, not less. EU-Europe will only get stronger in global competition with strong individual members, not by the way of more centralization.
Europe is more than common currency. It’s more than EU, with or without borders – part of world that has produced the best and worst. The present frame was about money and the future disintegration is going to be about money…sad but true.
This financial mess did not begin in Euroope, and unless Europe decides to take the step to remove itself from the situation it allowed to infect it, nothing will move on. Cannot move on, as it will simply disintegrate altogether under he weight.
Why is there a reluctance to address the circumstance from the onset, be open to the reality of what happened and why. And from their take steps to eliminate the source of difficulty. And I am not referring to Greece here. Greece is simply a scapegoatused to reduce Europe’s Euro threat to other failing currencies.
This clip beow is a guy telling you what you already know, but, in general refuse to look at. Listen to his analysis. it can lead to the thinking that will help adjust the downfall from trauma to stability. He is slow in his presentation but worth the time because he is more right than any of the others..
And his take on Greece.
Bastian the EU funds in some cases did more bad than good as you say…Why? because in fact they encouraged states NOT to produce anything. So the rich countries were getting what they needed tax free, and in a way they were preventing the poorer to be more productive, in other words to produce anything else that the rich countries did not need and sell them to them to the price that they wanted to pay. In other words it was a double loss for the poorer countries, and the funds they were receiving was to make sure they did not produce anything, or to compensate for the lack of competitiveness that those EU rules was encouraging in their countries. But the rich countries’ citizens always saw it as “we poor lots of our taxes to those lazy southerners”. Little did they know about the truth though, that the ones who were actually losing were the citizens of the poorer countries… So it was NOT a transfer of money in fact, it was more like a cash enslavement.. We pay you not to produce, and we will slander you for not doing so…. The sooner the rich countries change their policies and they allow for a REAL transfer of funds and wealth to the “Peripheral” states, meaning transfer of productivity and industries, the sooner they will have to be bailing out those poorer states and moan about it….!! period!!
oops…sorry I meant ” the sooner they won’t have to be bailing them out”…!! Why isn’t there an edit button on this website…?? I would love to edit my posts every now and again….!!! ;o)
Austerity measures introduced are the consequence of our inability of controlling the greed process emerged during the last decades and irresponsible management of public funds. This resulted in a reality check we are now in called “crisis”.
Basically our economy is geared to achieving growth and in times of recession the economic policy is all about returning to growth. The financial crisis is an opportunity for some basic rethinking about what the economy is for, and how through some fundamental restructuring of our financial system we can safeguard our economic stability in the future, as well as achieving wider social and environmental benefits.
The project “Europe” is a collective ambition with a joint responsibility and solidarity. The shared responsibility calls for helping each other. Honoring the purpose of a single currency should secure wealth and if a transfer is needed we have failed to manage it. Both the EU politicians as the EU private sector have got to address the dysfunctionalities, align the common goals and share the burden. We cannot mortgage our future generation.
“Moral hazard” is not an issue. Everybody, public and private, have made mistakes. ALL need to do a soul search and take one’s responsibility in all honesty. If every European citizen would comply with the law, rules and regulations, hence pay taxes correctly the budget would be in equilibrium, including Greece. So, stop blaming and accusing and start cleaning up one’s own kitchen.
The connections and conflicts between sustainability, wellbeing and growth can be sorted by focusing on investment in innovation and education. We now see that the benefits of growth have been distributed unevenly, with a fifth of the world’s population sharing just 2% of global income. Even in developed countries, huge gaps in wealth and well-being remain between rich and poor.
Austerity is the medicine and innovative investment the cure. Now is the time to work out preventive messures.
I wrote on here the day before yesterday, but, they didn’t add my post. I have no idea why, so I am trying again.
Really, I have been saying for some time all that this guy Prof: Richard Wolff, economist, says, so I will leave it to him to tell it like it is.
On another thread I already give an outline of what I believe would be the start of the solution to the entire crisis.
This crisis is political and can be solved politically, if they want to, that is. They don’t want to as the haircut will rest with the rich and powerful and not the ordinary man in the street.
Germany is forgetting its own History. When after the 1st WW Germany got an inflation rate of 18,000% because it has to pay the war compensations, when a policy of austerity was applied to Germany generating over 6 millions of unemployed just to pay a debt that was not possible to pay it had created the environment for the conquer of power by Hitler’s party. Now Merkel is applying the same recipe to countries in debt. When Merkel is so adamant to allow ECB to create Eurobonds, allowing Governments to borrow at 1% interest rates, is favouring the German banks to lend at 3, 5 and even 8 and 10%. What is in question, it is not the creation of an European Union and the solidarity that is implied, but just plain greed of Germany and its banks. This is already favouring the extreme parties and the future won’t be bright, but dark and unstable. when all those countries will stop buying the German Mercedes and BMW, when they stop buying Siemens, and the anti-german feelings grow, they too, will feel the recession and the dream of an united Europe and as an economic power and the lighthouse of civilization in the world, will perish and the Chinese way of low wages, no rights, no democracy, will prevail.
Also after worldwar 2. Germany got big help from the Marshal Planand also germany untill now didnt pay to Greece the compensation from the damage the nazis caused in Greece. Cause the Greek politicians agreed after worldwar 2, to wait untill West and East Germany will be united again, and Germany agreed to pay it after its reuniuon.Still now, …nothing…and the money is nore then our national debt. So, what Eu, what human rights, what is this Eu about? JUSTICE and equality and economical wealth for the people, this was the ideals the EU was based on i believed. But now all Europeans are watching day by day, how Europe is become a bank numbers numbers numbers…is this our EU we dreamed of? the esm-Treaty? Europe , where are You?
@ S.S. Papadopoulou
>Also after worldwar 2. Germany got big help from the Marshal Plan …<
The financial transfers Greece received from the EU since 1981 are about 150 times of what Germany received through the Marshal Plan, if you relate it to GDP.
< also germany untill now didnt pay to Greece the compensation from the damage the nazis caused in Greece. Cause the Greek politicians agreed after worldwar 2, to wait untill West and East Germany will be united again, and Germany agreed to pay it after its reuniuon.<
Interesting! Who told you this? As far as I know Greece and Germany have settled this question already in the Sixties (1960s). Also, international courts have confirmed it. So, no further transfers from this title.
Greece is caught in the traps of the EU and international finance. To get out of it, you need to teach a lesson to your political establishment on the 17th of June, 2012.
Bastian, from where did you hear that the issue between Germany and Greece was settled on the WW2 damages, and how if I may ask? Because we did not receive a penny.. I am very sceptical on dealings between two governments under the table. What has Germany given to Greece or promised to Greece in order Greece to drop its demands on this issue..?? Think about it!
For individual claims see the decision of the UN court.
For claims of the Greek state see the Paris Conference on Reparations after WWII, the London Debt Agreement of 1953 and finally the 2+4 Agreement 1990 (Berlin).
Hhhhmmm.. So Germany got somehow “immunity”.. I wonder how and why! The article is very general and it does not to whom Germany paid all those millions of dollars and how. Also how it got its immunity, under which law. I am not trying to say that Germany now must try to pay back.. Just to remember those who assisted the country’s rebuilding. If many states backed off of all those claims of their citizens and helped rebuilt Germany in a way by settling quickly open accounts, why now Germany is “kicking” (or at least part of its population) when it comes to assisting others.. We do not want or need money, rather some basic reforms in the eurozone and the ECB, or even better the European economy in order to have equal opportunities to prosperity across Europe, not in just the rich north-west part of the continent…
Growth? Of course . As I said before though Euro Zone, the way is structured, has more political rather than financial problem. If we find a solution to the political problem then all the other problems will be solved quickly. Synchronized Euro Zone is an example for globalization procedures to the rest of the world. Greece has a few alternatives but it can only choose one and that is to stay in the Euro Zone and the Euro. With Greece out there will be the end of the Euro Zone shortly. Simply because when the other Southern European Countries see Greece getting financial healthier without Euro then they would like to do the same and that will be the end. So lets all Europeans be sensible and work towards finding solutions for the benefit of Europe and the creation of a common European Social Structure.
On the EU Fiscal Treaty Referendum in Ireland, May the 31st, 2012.
Greece should pay the debts with German compensations.
the demand of compensation from Germany, is not an act against our german friends, we can separate people from politics. how can a Union exist without JUSTICE between its members?
The truth Sofia, Greeks are also to blame. Every journalist going to Greece, write about how the Greeks did not use the EU subsidies to develop agriculture, just pocket in the money. How they do not prosecute corrupts (Siemens case for instance). Always write about informal economy and not paying taxes (one journalist said it was the national sport). Even interviews of Greek economists talk about that, the corruption, etc. I can quote you a few Greek academics. Yes, Germany should give more time for transition, but Greece must change. Particularly creating an effective machine of collecting taxes.
Too few too late.
Yes, i remember this it is like Draghi’s bumblebee speech :D in July ..
All central banks print money out of thin air. Which is..not gd and unsustainable.
Yes, being realistic about and not letting Bundesbank monetary politics overcame UE politics. Absorbing debt, as it is there anyway, and making it part of the euro currency, as it is anyway at the end of the line.