TLDR News: Germany Takes Over EU Presidency: Germany's Plans for Europe, COVID & Brexit Explained

Germany has just taken over the Presidency of the European Council, and important role within the EU. In fact, that role has rarely been more important with Germany leading the union through turbulent times with economic uncertainty, Brexit negotiations and the pandemic. In this video, we discuss Germany's leadership, their plans and their ongoing influence over the union.

Social Europe: EUR-bonds in the corona crisis and beyond (10th April 2020)

In crisis times like these, sovereign debt is of pivotal importance as safe assets. Due to their countercyclical price movement, safe sovereign bonds serve as an anchor of macroeconomic stability. In an economic downturn or after an exogenous shock, a flight to safety increases the price of these bonds, simultaneously lowering their yield. The lower financing costs increase the fiscal space, while the higher price improves the banking system’s balance sheets. [...]

It is debatable whether the president of the European Central Bank, Christine Lagarde, acted wisely when she said that ‘we are not here to close spreads … there are other actors to actually deal with those issues’. Yet, despite the unfortunate timing, she raised a valid point: it was the responsibility of governments in 2010 to dispel fears of a Greek default and it is their responsibility to have each other’s back in today’s crisis. In the same vein, Lagarde called upon euro-area governments to act and issue eurobonds, a demand also formulated by groups of economists on March 20th and March 21st, as well as by nine of the 19 euro-area governments on March 26th. [...]

The governments simply agree, in this time of crisis, to ask the ECB to package their bonds into EUR-bonds as a signal and an instrument of solidarity, unity and determination. The ECB could even buy these bonds on the secondary market as part of its purchase programme. Ideally, however, EUR-bonds would be purchased by banks and other investors as safe assets, whereas the ECB would focus its purchasing programmes on eliminating any sovereign-yield differentials which may persist—despite the signals sent out by euro governments in issuing debt together.

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Social Europe: Here we go again: Europe’s inability to face the coronavirus crisis

On March 16th, the president of the European Commission, Ursula von der Leyen, proposed a 30-day closing of the union’s external frontiers. Many governments have however locked national borders, with no European co-ordination. The same day, a meeting of eurozone finance ministers—with a co-ordinated economic response anticipated—failed to take significant action. The chair, Mário Centeno, merely expressed a general will for fiscal stimulus while emphasising the permanence of European rules: ‘[T]he Stability and Growth Pact has all the flexibility needed to cater for this situation … We welcomed the commission guidance on the scope for supporting firms that is available within state aid rules.’

In fact, such rules are openly—and wisely—being broken by all governments facing the pandemic. Europe’s attitude leaves open the possibility that damaged countries are again asked to follow a stricter path of adjustment of public expenditure, leading to a new round of austerity. [...]

Policy action in the face of the pandemic is indeed difficult. Monetary-policy tools are less effective than in previous crises. On the day of von der Leyen’s announcement, new liquidity announced by the US Federal Reserve and the ECB failed to prevent a stock-market collapse. The indirect stimulus of expansive fiscal policies and tax relief is crucial to rescue damaged economies. But the most effective tool for containing the crisis is probably a large direct increase in public spending—on public services, the purchase of domestically produced goods and investment in new production activities. [...]

In fact, a key lesson from the pandemic is that health is a global public good, vulnerable to deficits in its supply and to the emergence of epidemics from any point on the planet. Another lesson is that public-health systems—with universal and egalitarian coverage—are the best protection from the pandemic. A third is that the model of Europe’s welfare state, with public responsibility for providing fundamental services—health, education, universities, research, pensions, social assistance—to all citizens, regardless of their ability to pay, is an effective alternative to the operation of markets.

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BBC4 Analysis: The Next Crash

What could cause a future financial crash? Ian Goldin, professor of globalisation and development at Oxford University, talks to some of the world's leading economists about whether we have learnt lessons from the 2008 financial crash and whether countries are now better prepared to meet the next crisis. Or are we condemned to another economic meltdown, perhaps even more severe, which would provide new fuel to the fires of populism? A decade ago, the world was taken by surprise. Will it be again? Featuring contributions from the IMF's Managing Director, Christine Lagarde, Lord Nick Stern, Professor Peter Piot, Pascal Lamy and Jeffrey Sachs. Producer: Ben Carter

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Jacobin Magazine: Closed Rooms and Class War

He presents himself as both insider and outsider to this world. As if sketching a scene for a film script, he recounts a meeting with Larry Summers in a Washington bar, where Summers tells him that he must decide which he is going to be: an insider or outsider. It is clear that Varoufakis glories in being one of them, while still wanting us to believe that he is simultaneously on our side. He speaks of how great it was to have the support of Larry Summers, Norman Lamont, and other figures on the Right, but it was support for whom, for what, and in whose class interests? Class analysis is far from the foreground of the picture sketched out here. [...]

However, Varoufakis’s book conceals as much as it reveals. Most importantly, it does not clearly conceptualize the sociohistorical forces at play, both because of an overbearing egocentrism and a lack of systemic analysis. Capitalism disappears in the play of elite personalities, primarily his own. [...]

Varoufakis constantly uses phrases like “my solitary struggle” and tells the story in a way in which everyone else’s role is blurred, distorted, or even invisible. Syriza barely exists. The Greek Left are nearly absent. The Greek people fade into the background. It is a landscape of elite players and anonymous masses. [...]

He declares early on that there are “no goodies or baddies in this book,” but only people doing their best, as they understood it, in circumstances not of their choosing. This is not, however, how he writes it. He characterises some players as goodies, primarily himself and his band of star foreign economists, and others as baddies, although he is kinder to the troika than to certain figures in Syriza, whom he accuses of treachery. His preference for figures of the Right, such as Norman Lamont and Jeffrey Sachs, over the Left, in addition to his conceptualisation of many matters, make me wonder if he even understands the difference between right and left.

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Al Jazeera: Eurogroup approves $9.5bn bailout for Greece

The Eurogroup praised Greece for legislating all 140 prior actions required to pass its second review under the programme – specifically in terms of tax reform, pension reform and labour market reform, all of which aim to make its economy more competitive.

In terms of debt relief, the Eurozone made two concrete concessions. First, it promises to link Greece's rate of debt repayment to its rate of growth. The better the economy does in a given year, the more Greece will pay back. The corollary is that if Greece has little or no growth, it ought to receive a reprieve from creditors. This was a key demand of former finance minister Yanis Varoufakis in 2015, who claimed that a depressed economy could not reasonably be squeezed for debt repayment. [...]

Second, the Eurogroup agreed to defer and extend repayment of Greece's second bailout loan by up to 15 years. This loan, which ran from 2012 to 2015, was Greece's largest and $145bn (€130bn) of it is still outstanding. That amounts to almost half of the entire debt.

These two measures will be put into effect between now and the end of the programme, but the Eurogroup will specify further debt relief measures to take effect after the summer of 2018. It has to specify these by July 27, in order for the IMF to become a participant in the third bailout. [...]

The Greek economy was forecast to grow by 2.7 percent this year, but the Hellenic Statistical Authority reports that it Grew by just 0.4 percent in the first quarter. The Federation of Greek Industry today reports 53.6 unemployed people for every job vacancy. 

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The Guardian: Unequal Russia: is anger stirring in the global capital of inequality?

Measuring levels of inequality, rather than simply tracking absolute poverty levels, has become a watchword for economists of late, with some believing it is the uneven distribution of wealth that is one of the key factors driving political discontent and disenfranchisement globally.

At the World Economic Forum in Davos in January, the head of the International Monetary Fund, Christine Lagarde, said increased inequality was one of a number of factors leading to the rise of populism around the world – adding she had first warned of these dangers four years ago, but that after the victory of Donald Trump in the US and the increasing popularity of far-right parties across Europe, she hoped people would now pay it more attention.

A recent report by Credit Suisse showed that Russia is the most unequal of all the world’s major economies. The richest 10% of Russians own 87% of all the country’s wealth, according to the report, compared with 76% in the US and 66% in China. According to another measure, by VTB Capital, 1% of the Russian population holds 46% of all the personal bank deposits in the country. [...]

Approximately 23 million Russians – about 16% of the population – now officially subsist below the poverty line, and there are increasing signs that the huge concentration of wealth in the hands of a tiny percentage of the population is starting to annoy more Russians – especially as many of the richest people are government officials, or those close to them. A recent report found that 41% of Russians say they struggle to get enough money together for food and clothing.

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