Mitchell, B. (2014) “The German experiment has failed“, Mainly Macro Blog, 07 Οκτωβρίου.
In the last week, several new data releases have shown that the Eurozone crisis is now consolidating in the core of Europe – France, Italy and … yes, Germany. The latter has forced nonsensical austerity on its trading partners in the monetary union. And, finally, the inevitable has happened. Germany’s factories are now in decline because the austerity-ravaged economies of Europe can no longer support the levels of imports from Germany that the latter relied on to maintain its growth and place it in a position to lecture and hector the other nations on wage and government spending cuts. The whole policy approach is a disaster and is exacerbating the flawed design of the euro monetary system. The leaders should find a way to dismantle the whole charade and allow nations to seek their own paths to prosperity with their own currencies. The German experiment has failed.
October opened with the release of the Manufacturing PMI data from Markit which summarises the state of orders to factories (October 1, 2014):
The headlines for each of the Reports were:
- Eurozone – “Eurozone manufacturing edges closer to stagnation – Output prices and input costs both fall”.
- Germany – “German manufacturing stagnates in September as PMI drops to 15-month low – New orders fall for the first time since June 2013 – Production growth slows further – Companies reduce their selling prices amid sharper drop in input costs”.
- Greece – “Production at manufacturers drops slightly in September – Output levels return to contraction as new orders fall – Factory employment remains in decline”.
- France – “French manufacturing sector downturn eases in September – Business conditions deteriorate at slowest pace in four months – Rates of decline in output and new orders moderate – Pace of job shedding eases”.
- Italy – “PMI ticks up, points to slight improvement in manufacturing business conditions – Modest increases in output and employment recorded… but new order growth slows to near stagnation – Output prices reduced as cost inflation hits four- month low”.
In all of that is a story of policy failure building on top of a monetary system that cannot deliver prosperity in its current form. Not only are there essential elements that are necessary for a monetary system to function effectively in all circumstances (for example, a lack of a federal fiscal capacity) but also the elites have placed this design failure in a straitjacket that only serves to magnify the failure (for example, the Stability and Growth Pact, Fiscal Compact, Two-Pack, and Six Pack).
If millions of people were not without work because of all this then we could nominate the political elites in Europe for the prize of best comedians of all time. It is almost unbelievable that these characters still strut the world stage and accept massive salaries and other perquisites when they have failed – systematically – for so long.
Human societies are very malleable it seems. Revolution is rare. But in the case of Europe – definitely warranted.
Further information about the failure of European policy came out yesterday when the Retail Sales PMI data was released (October 7, 2014):
Σχετικές αναρτήσεις:
- The European Magazine: Conversations, Interview with Philippe Legrain, “Germany is undermining future growth“, 20 Σεπτεμβρίου 2014.
- Daveri, F. (2014) “The German surplus and the Eurosceptics“, VoxEU Organisation, 28 Μαΐου.
- Fazi, T. (2014) “Is German Policy The Greatest Eurozone Threat? A Response To Jürgen Stark“, Social Europe Journal, 16 Απριλίου.