Challenge for the American Left: Go on Record For Hollande's Socialist Program

During the French presidential campaign, pundits assured us that Francois Hollande was simply playing to his socialist base. Once in office, he’d prove to be a pragmatist. All his talk of 75 percent income tax rates, wealth surcharges, infrastructure banks, new taxes on dividends, hiring more public employees, not giving an inch on entitlements, and punishing the financial sector was just talk. Two months later, we know Hollande meant every word. Armed with a solid parliamentary majority, he is carrying out his socialist agenda, no holds-barred.

It is time for our anti-austerity, pro-stimulus, and ueber-fairness crowd to go on record in support of Hollande. I’d like to count them when the French economy goes down the toilet, as it certainly will unless Hollande changes course.

The American Left counts among Hollande’s many cheerleaders. At long last, a leader of France is standing up to the austerity crowd. Liberal New York Times columnist, Paul Krugman, rails against the Hollande hysteria of the staid Financial Times and the stingy Germans. Per Krugman: we need not fear someone who genuinely believes in the need for a fair society, and we know the mess we get into when the government does not run things.  By ignoring the austerity nonsense, Hollande offers the “possibility of something better” not only for “new Keynesians and old socialists” but for France, Europe, and the world economy.

As they say, time will tell.

go to forbes.com

The Euro Crisis Is Over but No One Told me

Yesterday I caught the tail end of  an MSNBC commentator saying something to the effect: "Now that the Euro crisis is over...." This caught me by surprise. Yes, bankrupt Greece received a tranche of rescue funds (and was declared officially bankrupt). These funds were given on the condition that Greece stick to the austerity measures promised by its two major parties. The conservative government in Spain is apparently amending bit by bit its austerity measures. In France, the socialist candidate currently stands to beat Sarkozy in a run off election. In Spain and Portugal there are almost daily demonstrations and riots. Greek palace guards must be equipped with special eye drops for tear gas. Yes, Germany apparently agreed to increase its contribution to the stabilization fund to the outrage of German voters. Newspaper accounts inform me that few Irish are paying their property taxes.

The Euro crisis is far from over. Imagine that the two major Greek parties lose to the nationalists, communists, and other splinter parties, the Spanish conservative government dilutes austerity, and the stimulus-inclined socialists win in France. Those saying the crisis is over would be proven fools.

I Repeat: There Is No Greek Solution

The press announced another agreement. The markets rose. The Greek parliament approved more austerity measures demanded by the troika of international agencies to release the next tranche of Greece’s bailout funds. Maybe Greece will indeed get some more international money to stave off default, but this will be a temporary band-aid.

It is too late for Greece.  Greece is no longer governable.  Angry crowds will get angrier and larger. There will be general strikes. With an upcoming election, any parliamentary candidate who backs the austerity program will lose. Greek politicians can promise the Germans, the IMF, and the European Central Bank austerity until they are blue in the face, but they will prove impotent in the face of  public anger and intransigence.

Greece has held on so long by making promises it cannot keep, which its European neighbors pretend to believe. This farce is coming to an end. Either Europe must decide to look the other way and unconditionally bail out Greece or let Greece default. Both outcomes are bad, but the choice must be made and soon.

My Advice: Ignore All Headlines on Solution of Euro Crisis

Yesterday’s headlines read something like: “Europe Decides on Fiscal Union,” or Merkel Wins on Fiscal Discipline.” Ignore such headlines as most others. Europe is no closer to a solution of its problems than it was a week ago or three months ago.

If you read the articles on the fiscal union, you see the same rehashed ideas. Debtor countries are to be fined if their deficit exceeds a certain percentage of GDP. Now it is .5 of the structural deficit. The European Court of Justice is being brought into the picture as the supposed police man of the agreement.

One can drive a truck through this new “agreement.” No one really knows how to calculate the structural deficit (the deficit at full employment). The rule can be broken for a range of emergency situations, and how do you fine a country that is broke? The Greek debt issue has not been resolved. Portugal needs more money.

So far I have counted about 25 announcements that the Euro crisis has been resolved or is about to be. I guess these headlines are wishful thinking.