Wednesday, May 30, 2012

Another sign of how the neoliberalism adopted by Germany's SPD is causing them problems

I did and do respect former German Gerhard Schröder's (SPD) foreign policy performance, especially his opposition to the Iraq War.

But his downside was his open-armed embrace of the neoliberal economic doctrines that are now, in their Angela Merkel-ified form are strangling much of Europe. In Chancellor Altkanzler Schröder warnt Sozialdemokraten vor Hollande, Die Zeit reports that neither the experience of countries like Greece and Spain, nor the electoral problems of pro-austerity social-democratic parties in those two countries and others, have persuaded him that some rethinking may be in order.

Schröder is saying no, no, the SPD should actually copy the French Socialist Party's successful course under François Hollande, oh no, that won't do at all!

Taking pretty much an Angiebot line, Schröder said, yes, some kind of growth measures or other would be nice, "kritisierte aber die mangelnde Bereitschaft, Strukturreformen beispielsweise auf dem Arbeitsmarkt oder in der Verwaltung umzusetzen." ("but he criticized the insufficient readiness [of Hollande] to adopt, for instance, structural reforms in the labor market or reorganize the bureaucracy.") In the neoliberal vocabulary, labor market reforms = lowering wages, weakening unions; reorganizing the bureaucracy means cut government services.

And he emphasizes that, goodness me, you can't raise taxes on the Job Creators! He didn't actually use the Job Creator phrase the Republicans apply to the One Percent, but it wouldn't surprise me if he started doing so. The SPD is formally in agreement with the former Chancellor on that, sadly enough.

It's not clear from that report whether Schröder supports or opposes the SPD current position that they will vote for Angie's fiscal suicide pact only if fiscal stimulative measures accompany it. The SPD's position certainly leaves them wiggle-room to agree to some basically cosmetic stimulus proposal from Angie as an excuse to approve the fiscal suicide pact, officially named the Intergovernmental Treaty on Stability, Co-ordination and Governance in the Economic and Monetary Union.

The fiscal suicide pact is a screamingly bad idea. It essentially outlaws counter-cyclical Keynesian stimulus policies even in a depression like this one, when they are most needed. Because it's based on debt ratios to GDP, it makes stimulus especially difficult in times like this, when GDP's are shrinking or growing very slowly.

Hollande is threatening to reject the treaty if the text isn't renegotiated to allow stimulus. We'll see how serious he is about that over the next month. It's hard to see how any responsible treaty that protected the need for deficit spending in a depression could contain the provisions that Angie likes the most, the ones that restrict public borrowing especially during the worst economic times.

The fiscal suicide pact isn't worth adopting unless it's changed to the point that it no longer is a fiscal suicide pact. It would write Chicago School economics into the constitutions of the countries foolish enough to ratify it.

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