European Politics discussion
Borrowed from predictions thread and to give some context.
Crediting Shadout for first two;
1. Russia testing the limits of NATO and EU unity.
Over the next 2 years Putin will start to poke at Eastern European countries. Russian minority protests, violence toward said minorities, violence from said minorities. It will be incited and coordinated by Russia, but evidence will be weak, and the various 'Putin verstehers' in US and Europe will defend Putin.
There will be increasingly frequent Russian military activities in Baltic and Scandinavia (Finland /Sweden), continuously breaching their airspace and national waters. At least one incident will have casualties.
2. French election.One of two:
a) Marine Le Pen narrowly win presidential election in France, promising to end the "Islamic threat" and referendum on leaving EU.
Or
b) The conservative candidate wins, but it happens by running a campaign that is virtually identical to Marine Le Pens.
3. Renzi to loose referendum for reform in Italy
The Italian PM, Matteo Renzi, is attempting to reform Italian politics. While the mertis of the referendum can be debated, Renzi has staked his political future on them. If he resigns and another general election is called (leading to the 64th government in 71 years for Italy) that sets up the prospect for the populist Five Star Movement to govern.
4. Germany will remain a Liberal Democracy
France will swing right, Austria might vote for far-right head of state, the Dutch Freedom Party could be part of the the next goverment in Holland but Germany's election will see Liberal values being promoted. With a strong Green Party there as well, Climate Change could be a large issue as well.
The Moldavian and Bulgarian Presidents that were elected are far less pro-Russian than reported.
The headlines announcing that pro-Russian candidates have won the presidency in both countries are bound to alarm many in the West and bring applause from Moscow. But the reality is that politics in both countries is driven by domestic forces, most prominently oligarchs’ efforts to secure their financial interests. Their leaders are well versed in the art of playing the West and Russia against each other. Expect more of that, rather than any dramatic geopolitical shifts.
It's worth pointing out that generally in Europe Presidents are heads of state and not leading the government. There is no real direct comparison in the US.
France is one exception to the President rule.
With Populists Poised to Quash Italian Referendum, Renzi Takes a Page From Trump’s Playbook. Grillo and Renzi are now both trying to out anti-establishment each other. Does the end justify the means? Very torn, myself.
EU moving away from austerity. Looks like Brexit and Trump have made people realise that austerity can only go so far. I have a suspicion that the above elections are also a factor.
Axon wrote:I will concede, as somebody who supported the German led austerity of the past decade that now is the time for the EU to become far more fiscally active.
EU Austerity was always wrong. All that happens is aggregate demand falls and the economy stalls.
And when it's real bad you get massive unemployment (running up to 20% in Spain, Italy, Greece, Ireland) which causes migration to better functioning economies (Britain, France, Germany). Which in turn leads to resentment in the local local population. You can draw a straight line between complete fiscal mismanagement of the Euro and the success of the Brexit vote.
I' like to point out that I'm not dogmatic about fiscal policy so don't take this the wrong way but you've got your order of events quite backwards there. Ireland's unemployment was not caused by austerity, it was caused the banks having their ability to lend curtailed due to the collapse in the property market. Unemployment shot up due to SMEs failure to get access to lines of credit (I was one of those*). That was in 2008. The bail out and austerity didn't hit until 2010. The rate of unemployment did increase to nearly 20% but is it now currently 7.7%. It was roughly 5% during the boom. Growth is also back to roughly 4% (Ignore Eurostats figures, our CSO one are correct. Long story). Things are not perfect by a long shot and you could certainly have done things differently but cannot say that austerity is always bad in all situations.
It's also worth remembering that all the countries in Europe had slightly different reasons to resort to austerity. Ireland, Spain, Estonia, Latvia and Lithuania all had similar property/banking bubbles. All, eventually, solved them by similar methods. Italy and Greece had and still have public debt/economic activity issues. Slightly different problem that is proving more difficult to address due to quite dysfunctional political structures. Hence Renzi's referendum.
I'd like to also point out that austerity does involve choices. The Tories version of it was markedly different to that of ours. There was a much greater focus to attack the welfare state in Britain than in Ireland, for example. Austerity is only the means to reduce government deficits. That can be achieve through taxes or cuts. Either is painful but there are choices.
In the end though austerity wasn't a choice. It was a necessity. We needed money and the only people willing to lend it attached strings. Now as the political and economic landscape is changing, it's time to reassess. Seems the EU Commission has.
I' like to point out that I'm not dogmatic about fiscal policy so don't take this the wrong way but you've got your order of events quite backwards there.
You're right to take me up on this, I don't think austerity causes unemployment per se it just makes it much worse and longer lasting than it needs to. With rare exception the current depression was caused/triggered by the total implosion of sub-prime housing markets (mostly the US) in various places.
The rate of unemployment did increase to nearly 20% but is it now currently 7.7%.
7.7% is still awful (and by awful I mean we should all be appalled if the unemployment rate is consistently above 4% in any modern country)
It's also worth remembering that all the countries in Europe had slightly different reasons to resort to austerity. Ireland, Spain, Estonia, Latvia and Lithuania all had similar property/banking bubbles. All, eventually, solved them by similar methods.
The Private Debt to GDP ratio (mostly in excess of 200%) for these countries suggest that this issue is anything but solved, put off for the time being but there still remains a massive private debt bubble that can burst at any time.
In the end though austerity wasn't a choice. It was a necessity.
Governments can also make up deficit shortfalls by creating growth through stimulating demand in the economy. Austerity polices overwhelming reduce the amount of consumer demand and in turn reduce growth. Or governments can also debase their currency. Or they can default. Or creditors can write off unpayable debt. There are plenty of other options, as a rule I would tend towards the Keynesian option of stimulating demand rather than the neo-liberal austerity option.
Some amount of austerity in Ireland, Spain, Italy, among others likely made sense under the circumstances.
But it was silly to drag all the relatively healthy European countries into it, since you then hit the aforementioned countries twice, by also reducing their export to/tourism from everyone else.
Europe had one major long term debt problem with the aging population which needed to be improved. Sounds like a majority of Europe has addressed that during the crisis, which is good. But all austerity beyond that has only hurt us during a recession imo.
For some years now the main thing holding back danish economy has been low spending - with people instead saving up like crazy. No wonder they do that when you keep telling them that the sky is falling and cutting in welfare benefits, which they might then have to save up for themselves.
From a pure environmentalism point of view I can appreciate lowered consumption due to the crisis, but that is not the way.
While there can be exceptions from time to time, during recessions you should over-spend, and pay back during growth periods. Of course for politicians it is so much easier to over-spend during growth periods and then panic during recessions :/
We had a moronic minister of finance who in the early 2000s, when the central bank warned that it was time to reduce spending to slow down the booming economy, he pretty much argued that it was unnecessary since we 'were rich enough to buy the world' - talk about being short-sighted...
These days he is unsurprisingly in full austerity mode (and in some sick twist of events, he recently got his old job back). I kinda hate voters.
In the end though austerity wasn't a choice. It was a necessity. We needed money and the only people willing to lend it attached strings. Now as the political and economic landscape is changing, it's time to reassess. Seems the EU Commission has.
If only anyone ever listened to the EU Commission these days :/
Hofer, far-right politician running for President of Austria, has lost. Perhaps there is a hard limit to the support of those views after all.
Just to clear, in most European states President is purely ceremonial. Still regarded as an indication of political mood.
Italy not looking good. We may see a massive banking bailout on foot of Renzi loosing referendum. Which will only stoke voters to swing towards extreme positions.
So, good and bad news.
Phew. Some good news from Austria at least. If you can call nearly 50% of the votes for a extreme right-wing candidate good news...
If only we might be as lucky in Italy. Doesn't look good at all.
Italy may turn out to be a bottle of smoke in the end. The ECB may issue a statement tomorrow morning indicating it's support for the Italian bank in the case of a No vote and Banca Monte dei Paschi di Siena (oldest bank in the world) get's it's €5 billion away. Bit of a wobble but no long term harm.
Fingers crossed.
Even if an Italian No does not become an EU catastrophe, it is bad for Italy. Italy could really use a stable government and reforms.
Exit poll is indicating 55% no :/
Even if an Italian No does not become an EU catastrophe, it is bad for Italy. Italy could really use a stable government and reforms.
This might be true but, from my Italian colleague, these reforms would massively reduce the amount of political representation people have in government. Italian government may well need profound reforms but this "plan" is pretty anti-democratic.
Sounds like it is inspired a little by UK making it much easier to get a majority. I would normally be against such a system, but really, when you look at how many governments Italy has had over the last 60 years, it might be for the better.
Also a lot of centralizing, making the regions less powerful, which in Italy's case sounds like a good thing. There is a lot of 'regionalism' in Italian politics. I imagine people would (rightfully) see that as losing representation in government. But that loss might still be worth it.
A lot of the "details" in there might certainly still be problematic though. But it is not like the current system is perfect either.
Italian PM Matteo Renzi just resigned.
Keep an eye on MPS today. EuroFin has made soothing noises and the ECB is keeping quiet because the markets are not getting spooked yet. We'll have a better idea later today.
Here's quite a left-y take on the Italian referendum
Interesting article. Though hard to know exactly how left-y it is.
I've generally had a positive view on Renzi, not necessarily because of the details of his politics, but at least for seeming to try to improve the situation, no matter how incremental. Though I also liked Monti, who supposedly was supporting No, so maybe some of the changes in the referendum really was a step too far.
Though I then see some of the critique they bring up against Renzi.
But it was Renzi’s government that succeeded even where Berlusconi had failed. The worst reforms passed by his government included measures like the Jobs Act, which abolished Article 18 of the Statuto dei Lavoratori, which made impossible for employers to fire a worker without justification, and introduced further forms of casualization of labor; and the reform of the public school system, which significantly strengthened the corporate-style management of schools, gravely affecting work conditions for teachers and the nature of the curricula for students.
Losing article 18 sounds bad the way they frame it, but hard to know without context. In the end it is not that hard for companies to make up a reason for firing people, if they don't have a legitimate one.
But it sounds like a real problem in some, especially southern European countries, that the way they have implemented worker protection is to make it really difficult and expensive to fire people. Which in turn also can make them more reluctant to hire people.
Having been shaped by a country with the so-called flexicurity labor market model, with the attempt of making it both easier to hire and fire, with a welfare net picking people up in between, that does not sound good, not from a Left viewpoint either.
"Corporate-style management of schools, gravely affecting work conditions for teachers"? Again it sounds bad, but I wonder what it really means. In Denmark the teacher union a few years ago had to accept a new collective agreement being forced down their throat against their will, after a prolonged strike with no end in sight. They were royally pissed and the left-wing likewise. But at the same time it was really hard not to look at their previous agreement and see how they had gained favors over the years that were extremely unreasonable compared to other jobs, and maybe even detrimental to their own work conditions in the long run, due to too little flexibility.
There is a rapidly increasing amount of problems in the world today that the Left should fight against, but sometimes it feels like they/we are picking the wrong battles.
Yeah I'm not totally familiar with the ins and outs of it. My Italian colleague certainly led me to believe that Italians are somewhat interested in government reform with regards corruption and unneeded bureaucracy but against further (any) centralisation of power.
The reason Monti and that group were against it was fear that it would give too much power to a populist movement like 5 Star.
Yeah, the labour laws in Italy (and several other Southern European states) are not great. On top of the other problems to cite, Shadout, what many business do is pay people under the table to avoid the regulations while the same employee still claims welfare. This has the triple wammy effect of suppressing wages, reducing tax take and increasing the welfare budget.
ECB not prepared to give MPS more time raise funds needed for capitalisation. This is looking like another bail in. This lead to complications.
Remarkably, ordinary savers were encouraged to invest in risky bank bonds at the height of the crisis, with the result that an estimated €200 billion of bank bonds are held by ordinary retail investors, including €5 billion of subordinated debt in the country’s third-largest bank, Monte dei Paschi di Siena, the oldest surviving bank in the world.State aid rules, beefed up in the wake of the banking crisis, set out a strict hierarchy of creditors that must be bailed in before taxpayers’ money can be used to recapitalise banks. Similar rules underpin the much-feted bank resolution and recovery directive (BRRD), a method for resolving banks once a bank is deemed insolvent.
Analysts believe that some sort of exception for Italy will be worked out. As was the case at the height of the crisis, Italy is simply seen as too big to fail.
A precedent of sorts exists. In the lead-up to the European banking stress tests in July, the European Commission and Rome agreed a compromise plan whereby public funds could be injected into banks, together with a plan converting junior debt into equity and a compensation plan for retail investors.
Technically known as a “precautionary recapitalisation,” the idea is that this can help banks sidestep bail-in rules if they are recapitalising and strengthening their balance sheets as a result of stress tests.
Although the European Commission has declined to comment this week, except to confirm that it is in discussion with Italian authorities, this deal is understood still to be on the table.
One expects the bolded part is where the politics of this will be interesting. If reality meagre investors loose money expect 5 Star and Berlusconi to benefit.
MPS is going to have to be bailed out. And by bailout I mean bailin. Bond and shareholders first as it should be. How this will be done and if small retail investors holding bonds are protected remains in doubt.
Privatized profit, socialized risk. This is terribly, terribly toxic. Failures need to be allowed to happen, or the system doesn't correct.
After all, the various professionals involved were earning a profit in exchange for for running the risk. If, in fact, they weren't running the risk at all, that means they were just looting the public treasury all the way along, and they'll keep doing it.
If they know the government will backstop them from really huge failures, then it's to their advantage to load up on as much risk as they can possibly find, because if a failure happens, making it really large means they'll get bailed out.
Well, we had plenty of working regulations to prevent that stuff, by both limiting business scope for banks and other lenders, and directly monitoring the activities of financial institutions. Worked for around 85 years or so. But the deregulation hardliners succeeded in getting rid of the most effective of those rules, so... here we are. That part of the libertarian vision has already been tested. 
That part of the libertarian vision has already been tested.
That has nothing to do with libertarianism, that's just looting the treasury. Libertarians would never support a public bailout of an institution that was running risk for profit, and misjudged its risk profile.
This is capitalists doing what capitalists do, removing annoying impediments to profit.
This is capitalists doing what capitalists do, removing annoying impediments to profit.
Indeed.
And it's worth noting it is not just financial risk that gets socialised. Just about anything that can get externalised gets externalised. Don't want to pay your workers enough to live? That's fine, welfare will make up the difference. Want to strip a mine bare and leave behind a series of ghost towns? Not. a. problem.
That has nothing to do with libertarianism, that's just looting the treasury. Libertarians would never support a public bailout of an institution that was running risk for profit, and misjudged its risk profile.
This is capitalists doing what capitalists do, removing annoying impediments to profit.
No, they just advocate privatisation and less powerful goverment. Then, having just created a massive shift of power into the hands of capitalists, and finding the same capitalists using that power to skew the market and minimize risk, they're shocked, shocked to find that gambling is going on in here!
they're shocked, shocked to find that gambling is going on in here!
No, they wouldn't be shocked at all. They would also refuse to bail anyone out. If you want to run risk for profit, that's fine, but that means you're really running the risk.
Deregulation plus bailouts is an anti-libertarian as any policy could get. That's just capitalism.
I'm a couple of drams into my weekly whisky of despair right now, so I don't know if the use of a gambling movie quote in a bailout context muddied the waters or you're just being obtuse. I'll rephrase:
Libertarians expressing outrage at capitalists exploiting the powers libertarian structures gives them are the equivalent of Captain Renault in this scene from Casablanca:
exploiting the powers libertarian structures gives them
Libertarian structures don't give capitalists that power. They give the freedom to fail, not the freedom to loot the treasury.
If you're asserting otherwise, you are wildly misunderstanding how it works.
Lads, just to point out that the issue here is that Bond and Share holders are going to be the first on the chopping block. It's hasn't been the case that losses are socialised for a while now and they won't be in Italy either. The issue in Italy is unique given the number of small depositors who were requested by their bank to store their deposits in bank bonds. I've linked articles above explaining the issue.
I really liked this long form piece on the prospects of the future EU. Touches on a lot of stuff I agree with. And in general is a great 'finger in the air' testing the political winds.
The only bit I don't agree with is the notion that the post-war epoch includes all of the 80s. I'd say the early 70s are a better marker for the point where the post-war, social democratic consensus begins to evaporate.
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