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Next Up For A "Recovering" Europe: A 30-50% Collapse In Wages In Spain, Italy And... France

Tyler Durden's picture


Several weeks ago Europe officially entered a double dip recession, and based on various secondary economic indicators, even Europe’s primary economic powerhouse, Germany, is on the verge of negative economic growth. The reasons for Europe’s woeful macroeconomic state are numerous, but boil down to two primary ones: i) massive external imbalances among Eurozone nations (think soaring peripheral debt) coupled with the inability to devalue the common currency as that would mean a failure and collapse of the joint currency union, ii) a desperate need for the periphery to regain price competitiveness (via wages and labor costs) with Germany in order to arrest and collapse an unemployment rate (general, but especially youth) that not even the most optimistic pundits dare claim is sustainable.

Said otherwise, most European countries (including France) face a desperate need for external devaluation, which is impossible under a monetary union, leaving only internal devaluation as an option. This is where the much maligned concept of austerity comes in:  from a macroeconomic perspective, austerity is not so much an exercise at moderating the pace of debt increase (as neither Spain nor Italy have reduced their rate of debt issuance), but of gradually becoming more price competitive with Germany: a key outcome that will be needed for the Eurozone to have any chance of survival, i.e., lowering sticky unemployment rates from levels that virtually assure social "disturbances" in the months and years ahead.

And herein lies the rub: because while protests against “austerity” (which as we observed recently has still not been truly implemented in Europe, and certainly not in Portugal or Spain) are a daily event in most PIIGS nations, “you ain’t seen nothing yet.“ The reason: to achieve the unavoidable macroeconomic rebalancing, and to collapse the spread between soaring labor costs in the periphery and those of Germany (see chart below), the bulk of European countries will need to see wages collapse by anywhere between 30% and 50% to compensate for the lack of state-level currency devaluation optionality. And yes, this includes France.

Goldman’s Huw Pill explains the scary future facing peripheral European workers:

We ask the following question: For the Euro area countries of interest, how big a real exchange rate depreciation (which (to recall) in monetary union means (to a first approximation) a relative wage cut) is required in order to establish a sustainable external position.



The results of our exercise are shown below. They demonstrate that relying solely on internal devaluations to correct existing imbalances implies a need for very large wage and cost adjustments. For the small and vulnerable peripheral countries (Greece and Portugal), we would need to see wages fall by at least 50% relative to Germany (from their level at the start of 2011) if this mechanism alone were to re-establish external sustainability. And even for larger and richer countries such as Spain and France, relative wage reductions (on a comparable basis) of 30%+ are needed.

Which begs the question: how will the long-suffering workers of Greece, Spain, and Italy (and also France), who are confident they have gone to the 9th circle of hell in the past 4 years, react when they realize that none of the needed internal devaluation has actually taken place yet?

In other words, what happens when Spanish wages tumble by another 30%, as they must if the EUR, and the Eurozone, is to survive? Alternatively, if there are no labor cost cuts, how many more years and months of 1%/month unemployment increases will the unemployed in the periphery suffer before it realizes that chronic 25%+ unemployment is here to stay, as is the European Depression. What is most sad is that the economic reality is that regardless of the “all clear” that central-bank-manipulated market indicators tell us, the European imbalances continue deteriorating at a rapid pace.

And the paradox is that as long as market indicators aren’t flashing red, no politician has the urge to enact the critical laws needed to fix the underlying problem, as that same fix will lead to an immediate end of said politician’s career.  

Needless to say, not even Goldman thinks that kindly asking for Greek and Spanish workers to take another 30-50% pay cut is feasible and would lead to anything short of revolution (and the alternative: asking Germany to adopt a wage increase and watch German inflation surge is just as ludicrous):

We view relative wage cuts of this magnitude as unfeasible: it is difficult to imagine France accepting a one-third fall in living standards relative to Germany. Of course, one could rely on Germany to raise wages, so as to redress the competitiveness gap from the other side. But ultimately such an approach would imply Germany accepting much higher rates of inflation, say above 4% pa for a decade or more, assuming the ECB met its target of keeping area-wide inflation close to 2%. We doubt the German public would countenance such an eventuality….

So does this mean that despite all best efforts to the contrary, when one looks beyond the daily hollow rhetoric emanating from Brussels and focuses on the simple economics of it all, that the Eurozone is doomed? While our pessimistic opinion on the viability of the failed European project is well-known, not even Goldman can bring much words of encouragement:

To answer that question, we need to explore the implications of relaxing some of the assumptions that underlie the exercise described above. First, we could implement the necessary relative wage adjustment through resort to nominal exchange rate changes. But allowing exchange rates to vary implies exit from the Euro area and reintroduction of national currencies. Relying on this mechanism implies recognising the impracticality of the euro, rather than describing how it can be saved.


Second, uncompetitive economies could suppress domestic demand to contain imports and run with mass unemployment on an ongoing basis. In our view, this is not politically feasible. British experience in the late 1920s (following Winston Churchill’s decision to put Britain back on the Gold Standard at its pre-first World War parity) demonstrates as much. High unemployment, recessionary conditions and lost export markets were the precursors to abandoning gold rather than mechanisms for sustaining British adherence to it. One would expect as much for the Euro area periphery: if mass unemployment become endemic and permanent, it would eventually precipitate euro exit.


Third, uncompetitive peripheral countries could be subsidised on an ongoing basis by the more competitive surplus countries, i.e., a system of fiscal transfers from north to south could close the current account deficit and eliminate the existing imbalances. Such mechanisms are quite normal in continental monetary unions: witness the transfers from wealthy New York to poorer West Virginia via the federal government in the United States.


But the institutional mechanisms and political support for such area-wide redistribution are (as yet, still) lacking in the Euro area.

It is worth pointing out that the ad hoc and very much informal (after all Merkel’s reelection chances are much lower if the German people understand what is really happening in Europe) transfer union has worked so far primarily because it funded the relatively modest economy of Greece. Yet even ordinary Germans understand that the Bundesbank’s TARGET2 claims are nothing more than Germany’s implicit fiscal transfer mechanism to the rest of Europe (one which happens to benefit German exporters: i.e., a public to private transfer scheme), one which is soaring by tens of billions each month.

To be sure all such indefinite ad hoc attempts to delay the day of “labor-cost equivalency”-reckoning using piecemeal and incomplete fiscal transfers from Germany to everyone else, will one day fail, when surging nationalist parties across Europe just say “nein” to ceding sovereignty to Germany which will eventually demand all Europe bow down to it in exchange for a full-blown fiscal union and Eurobond initiative in which Germany officially bears the cost of “temporary-to-permanent” Current Account imbalances, by shifting from TARGET2 to a wholesale German-funded fiscal union. This “unthinkable scenario” is quite thinkable by most, especially Europe, but in this case certainly Goldman:

A number of the options listed above are feasible for the smaller peripheral countries. Since the magnitude of structural change required to make them sustainable is so large (and the institutional capacity to implement those changes open to question), it is likely that we will see a prolonged period of both mass unemployment and subsidisation if they are to remain within the Euro area. This has been the experience thus far. Indeed, recent discussions over the terms of financial support for Greece in Brussels can be seen as a codification of how the subsidies will be provided in that case.


At the same time, we should not ignore the possibility of exit: were the rest of the Euro area to develop sufficient robustness to manage the transition, one could easily imagine a Euro without Greece or Cyprus.


But for the larger countries, options are much more limited. It is unthinkable to have a Euro area without France; at that point, it would become little more than a greater Deutsch mark zone. The politics of perpetual mass unemployment are equally infeasible as in the small peripheral countries. And France and Spain are simply too large to subsidise on an ongoing basis. So there is no alternative but to implement a restructuring of the economies to reduce the needed real depreciation to a plausible level. But the nature of the restructuring needs to be tailor-made for the country concerned.

The only good news to date, if one may call it so, is that Spain has already taken some modest steps to address its internal devaluation. However that former AAA-stalwart, and now bastion of resurgent socialism, France has not. And it is here that those who took offense to that recent edition of The Economist with the ticking time baguette cover should be paying attention.

Spain’s economy is weak and vulnerable at present. But while of little comfort to those unemployed, there is a silver lining to that weakness: it is associated with a necessary restructuring that offers hope of a more balanced and competitive Spanish economy in the future.


Unfortunately, there are reasons for greater caution with regard to developments in France. Like Spain, France also needs to shift resources into the tradable sector in order to reduce its chronic and deteriorating current account deficit. But France’s problem is not a bias towards the construction sector as in Spain, but rather a bloated public sector. Public expenditure in France is 56% of GDP, compared with 47% in Germany: the inherently domestic-oriented nature of government spending implies that France produces too few tradable goods relative to Germany.


In Spain, a largely spontaneous bursting of the housing bubble initiated the necessary restructuring of the economy. But in France a conscious political decision to shrink the state is needed to achieve the restructuring. And the political obstacles to that decision are high. While the French authorities increasingly recognise the need to improve French competitiveness, developing an understanding that this implies a deep restructuring of the economy remains elusive, at least at the political level, as recent discussion of industrial policy attests.

And then there is that other wildcard: the UK. As CLSA’s Chris Wood writes in his latest edition of Fear and Greed:

Europe, the path ahead for the Eurozone was made crystal clear with a plan unveiled by European Commission President Jose Manuel Barroso on Wednesday, outlining the need for an overhaul of Eurozone institutions to pave the way for the collective issuance of debt. This fits GREED & fear’s base case; namely that the Eurozone is moving towards “debt mutualisation”, a  process which will ultimately lead to fiscal union. This week’s “deal” on Greece, with its extension of maturities and lowering of interest rates, is a further indication of the political determination to keep the Eurozone going in its present form and the unwillingness to contemplate the stresses of a Greek exit.


The above is also why the real political tension triggered by the direction in which the Eurozone has now embarked will turn out to be in Britain, not Spain or Greece. This is because there is real antagonism towards the Eurozone in Britain whereas in Greece and Spain the majority of people continue not to blame the euro for their problems. This is why it is possible that the Eurozone can make a deflationary adjustment, as indicated by the periphery countries’ improving current accounts. It is also why Britain’s fresh-faced Prime Minister, David Cameron,has a political problem.

All of the above is correct: the true European fulcrum nations have now shifted from the PIIGS to France and the UK, but it will take some time for this to become evident. What is unclear is the question of timing. And with Europe hell bent on actually addressing the real underlying causes for its persistent recessionary state instead of merely attacking the symptoms (soaring yield spreads, plunging equity markets, diving EUR FX rate), one can be sure nothing will change as long as the ECB gives the impression that European imbalances are under control, courtesy of a bond purchase backstop, which sooner or later will be activated at which point this too threat will become reality, and like QEternity, will lose all potency.

It is only then that Europe will have some hope of finally addressing that which is the true basis for its unsustainability: the internal imbalances which in the absence of currency adjustments can only be addressed through collapsing labor costs, and wages.

Yet telling a continent, which in its desperation is hopeful and confident that the worst is behind it (as its lying politicians take every opportunity to note) that the most acute of standard of living collapses is yet to come, is borderline cruel and unusual. So we will just keep our mouths shut and let Europe’s politicians bring this depressing message to their people. We are confident the reaction will be more than dignified.


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Sun, 12/02/2012 - 23:22 | 3028838 Charley
Charley's picture

So 25%  unemployment is not enough to reduce labor costs in Spain? Ha! Okay.

Sun, 12/02/2012 - 23:28 | 3028844 economics9698
economics9698's picture

Someday the peasants will wake up and realize government produces nothing.

Y = C + I – G + NX

Oh and having a central bank is not exactly a good idea either.


Sun, 12/02/2012 - 23:33 | 3028855 Charley
Charley's picture

"Y = C + I – G + NX" is not an explanation for what is happening in Europe, it is a tautology -- a definition of national income. No matter what C + I – G + NX is in reality, it always equals Y, by definition.

Mon, 12/03/2012 - 00:16 | 3028873 economics9698
economics9698's picture

Well according to the OECD Tables France, Italy, Portugal, UK, Greece, are all over 50% government, waste, aka deadweight loss.  Now if all those workers were given a real job I bet the living standards of Europeans would improve dramatically.  The EU is 50% government, 50% living off the other 50%.  That won’t last much longer.

You do not understand, if Spain cut it's government by 50% creating a tax savings for corporations they would immediately be competitive with high tax Germany and France.  Sometimes you ZH finance guys…

Why make workers pay?  Force the southern countries to cut government or leave the EU. 

And I bet if the central banks were eliminated the workers would be able to keep their increased production for themselves.  Getting rid of bankers printing the medium of exchange to hand out to other bankers is not sound economics, its theft.

Korea, 30% government, 33% public debt, does not seem to be having these debt problems.



Mon, 12/03/2012 - 00:39 | 3028930 Charley
Charley's picture

I agree with your take on government. But, that is still not an explanation. Since government spending controls so much of the economy, the loss of the spending will only depress final demand. And this would be on top of an already astronomical 25% unemployment. Who will be left to buy anything from corporations. Corporations don't just consider costs-- their market is much more important -- that is why they are the biggest defenders of big government.

Mon, 12/03/2012 - 01:01 | 3028947 economics9698
economics9698's picture


It’s not complex.  Government produces nothing.  Government borrows, prints, or taxes money from the producers to its balance sheet.  It then spends that money on what it deems appropriate, medical, social security, and defense.  In the process of moving money from the right pocket to the left pocket there is inefficiency. 

Some programs are very good at moving funds from taxpayers to consumers, social security, but that is the exception not the rule.

Most tax dollars must go through a bureaucracy and studies have shown, it depends, varies all the time, that about 55 cents of every dollar is misallocated or wasted.

In the private sector investments have to make at least 100% plus a “accounting profit” of 3%.  Most fund managers, in normal times, look to make a “economic profit” of inflation, 2.2%, plus a decent return, say 3% or 5.2%.

This is why countries with small government sectors do so much better than large bloated government sectors.  The private sector MUST allocate resources in the most efficient manner possible or companies’ go out of business and people get fired.  If a private fund manager loses 8% of his portfolio what do you think will happen? 

Fired of course.

Government, on the other hand has no “price” mechanism, profit, loss, signals and if a program does not work simply raise taxes to “make” it work.

The key to economic growth is the efficient allocation of resources.  Moving resources out of government for Spain, Italy, Greece, Ireland, and Portugal, and into the private sector, lower taxes, should be priority #1 if the EU wanted to hang around.

If they were real economists they would proportion the amount of government each EU country could have to be “equal.”

But they are not real economists, they believe in garbage and they will never figure it out, and thank god for that.  The EU is evil one world government and needs to end.


Mon, 12/03/2012 - 01:51 | 3028983 Milton Waddams
Milton Waddams's picture

Govenment is the (imperfect) check on efficiency-driven 'private sector investments'.  It is quite literally the cog in the machine churning toward a global wage singularity.  In this view, government is, by definition, inefficient, corrupt, bureaucratic, et al.

Mon, 12/03/2012 - 06:34 | 3029112 Richard Chesler
Richard Chesler's picture

espoir et changement

It worked well for the local banksters' stooge.


Mon, 12/03/2012 - 07:59 | 3029165 GetZeeGold
GetZeeGold's picture



Chart that and it turns out to be parabolic curve.....not really sure what it's called.

Mon, 12/03/2012 - 08:09 | 3029183 Shevva
Shevva's picture

Government = Bureaucratic over sight of every part of your life and licences to show that they approve what you do in your life. (Unless you got the money to pay them off then do what you want).


Politics = Mediation between children.

Mon, 12/03/2012 - 02:57 | 3029021 John_Coltrane
John_Coltrane's picture

Hey, just wanted to complement you on a top notch explanation of the importance of the profit mechanism and not using other people's money as capital (i.e. taxes).   

For those scientists in the audience I would add the following analogy: the difference between using energy to generate heat via friction vs doing useful work (i.e. driving a piston).    Friction, both economic and mechanical is inevitable (entropy must increase), but the private sector driven by profit and fear of failure, minimizes it.  Its the fundamental law of economics just as entropy rules thermodynamics.

Mon, 12/03/2012 - 03:32 | 3029037 macholatte
macholatte's picture


Yea, yea, yea.

Everything the guys above are saying is spot on and a good discussion and they have my thanks for that. Only problem is they forget one thing, maybe the most important thing ...... government does not give a rats ass about effeciency.  Government is all about power & control. Nothing else matters.



Shoot first and ask questions later, and don't worry, no matter what happens, I will protect you.
Hermann Goering


Mon, 12/03/2012 - 05:58 | 3029097 Acet
Acet's picture

It's more complex than that: the purpose of Government is to regulate shared commons (so as to avoid tragedies of the commons), to arbitrate and police the set of rules and the borders between one person's rights and another person's rights and to pool resources for protection against long-tail events (especially invasions by foreign powers).

Governments don't make products (nor should they), they provide services which by their own nature are needed by the community as a whole, rather than single individuals.

That said, governments the world over have spread far beyond this.

Mon, 12/03/2012 - 06:49 | 3029121 Lebensphilosoph
Lebensphilosoph's picture

The purpose of government is whatever those governing think it to be. A community, on the other hand, is an object of thought, and doesn't 'need' anything. Only the individuals of the community can deem that they require something for some purpose.

Mon, 12/03/2012 - 07:48 | 3029156 Acet
Acet's picture

Actually communities are subject to a form of natural selection: communities that decided they didn't need a centralised professional group of armed men were wiped out of history by invading neighbours; those that decided that they did not need some kind of ruling and rules enforcing mechanism were destroyed from the inside by chaos and confusion as the assholes in the group made life miserable for everybody else (typically, everybody leaves - same dynamic as when you go out with a group and a couple of them are assholes); those that decided they need not have some central management of common resources were destroyed by resource exhaustion and starvation.

Even amongst those that adopted and never went beyond some kind of simple, traditional form of governance (say, a council of elders) were sooner or later overwelmed by neighbours with more centralised forms of governance, by catastrophes which are beyond a small community's ability to overcome (simple forms of governance don't work with bigger communities) or simply by evolution of technology and the loss of the younger members to communities that were more nimble to adopt new ways.

So no, in practice the individuals in a community have little or no choice when it comes to adopting some kind of governance: either they do it or some other community does it for them or their community ends up collapsing from internal abuse or from some kind of tragedy of the commons.


Mon, 12/03/2012 - 10:26 | 3029332 Lebensphilosoph
Lebensphilosoph's picture

'Actually'?  Is this supposed to form some sort of response to my points? No 'community' ever decided anything, because a 'community' is not a sentient being capable of making decisions.


[quote]Actually communities are subject to a form of natural selection: communities that decided they didn't need a centralised professional group of armed men were wiped out of history by invading neighbours; those that decided that they did not need some kind of ruling and rules enforcing mechanism were destroyed from the inside by chaos and confusion as the assholes in the group made life miserable for everybody else (typically, everybody leaves - same dynamic as when you go out with a group and a couple of them are assholes); those that decided they need not have some central management of common resources were destroyed by resource exhaustion and starvation.[/quote]

History is replete with examples of peoples that defened themselves with no standing professional army. Tell me how well those Romans fared against the tribal Germans, why don't you. It is also replete with examples of peoples with no 'central state' in the modern sense who survived centuries in their way of life without one (and of cnetral states that collapsed utterly within centuries). In fact, if anything, that is the norm. We look at ancient Greece. When the Greeks knew no Greece but only a collection of independent polis, the Greeks prospered. When the time for Athenian empire-building and Alexandrian megalomania arrived, their destiny as the enslaved schoolmasters of Roman children was written in stone.Which reminds me: a state is not a community, and your next point utterly fails to provide grounds for your praises of centralisation in that regard. You also blather a lot without citing examples, but what example can you provide of your central state that 'survived' indefinitely? And what examples can you cite for 'resource exhaustion' where there was no 'central management' as you envision it? I can think of the Sumerian and Mayan empires and their troubles, or of Lenin's regime in centrally mismanaging agriculture, or of the Roman Imperium leaving deserts in its wake in once fertile regions of the Mediterranean. I can also think of centuries, or millenia, of agriculture in 'barbarian' and 'feudal' Europe which saw no more a centralised 'management' of resources than the village or the lords of the estate.

Sun, 12/09/2012 - 18:36 | 3047415 e-recep
e-recep's picture

try to start a community without a governing body and watch it being eaten alive by a well governed neighbouring community. you libertarians are naive dreamers.

Mon, 12/03/2012 - 04:50 | 3029070 JuliaS
JuliaS's picture

Thanks to leverage and fractional reserve lending the amount wasted out of every dollar spent is actually closer to 2 dollars.

Mon, 12/03/2012 - 04:53 | 3029072 Non Passaran
Non Passaran's picture

The government "produces" something out of nothing (in terms of the equation) by creating debt and pulling future demand into present time. Needless to say we'd be better off without such "help".

Mon, 12/03/2012 - 09:49 | 3029338 sessinpo
sessinpo's picture

Right on economics9658. Up arrow for you.


What charley seems to miss is a very basic concept that you have expressed several times, 'Government produces nothing".

Government only transfers things. There are only a VERY few exceptions where government has been the seed of a productive technology simply because the private industy was not willing to take the risk at the time. Space technology is one example. But you are right. In over 90% of the time Government produces nothing.


And here is the sentence where charley exposes his error "Since government spending controls so much of the economy, the loss of the spending will only depress final demand."

What charley doesn't see, is that in MOST instances, if the market demand is there, private industry would step in to meet demand because they can profit from it.

And to keep my post consistent, since I stated that Government only transfers, Government often misallocates resources when they transfer causing malinvestment - as an example, can anyone say Solyndra?



Mon, 12/03/2012 - 00:56 | 3028942 Tao 4 the Show
Tao 4 the Show's picture

Great point and the real answer to the Europe mess that seemingly NO ONE has the guts to deal with.

But a finer point has to be made as well: The needed cuts in government, in places like Italy, are cuts to corruption and siphoning off of govt funds into someone's pocket. The amount of abuse going on is staggering. And it seems to be increasing.

Much of the corruption is largely hidden from view when deals are made at high levels for construction, projects, etc. but another huge amount is hidden in plain view with outrageous salaries and benefits for politicians, state-owned TV execs, etc., etc.

Monti deals with none of this and instead tries to squeeze working people and pensioners who are living on a pittance. The great proposed savior of all this is Brussels, another layer of corruption.

Europeans have mostly seen government largesse coming out of Brussels and don't yet seem to grasp that all that is only bait on a barbed fishing hook. The little outcry building among the public is mostly against austerity.

Only a few voices catching a fraction of public attention are discussing the problems with Eurofication. And the black hole of corruption remains undiscussed.

Mon, 12/03/2012 - 01:07 | 3028953 TBT or not TBT
TBT or not TBT's picture

The outcry isn't just against austerity, it's also against work, and at the same time against anyone ever losing their job or benefits, or early retirement.

It's...well..let's say it, simply delusional.   

Count on the zero(sum)peans to go zombie on each other as they've done for centuries, one mo' time.

In the U.S. things are like this with only about half of the population.   In Europe it is over 80%

Mon, 12/03/2012 - 07:26 | 3029051 Ghordius
Ghordius's picture

you are indeed making finer points, including the neverending fight against corruption

nevertheless "Europeans have mostly seen government largesse coming out of Brussels" is utterly wrong

the whole next EU budget that is being discussed at the moment is one trillion - for seven years. compare it to the national budgets

if you want to be nasty compare it with the US spending patterns between states and federal

the truth is that the EU partecipates very visibly and very often to national spending programs, particularly in infrastructure

this gives the wrong impression of the EU building lots of things and spending like a drunken sailor


remember that there are no european taxes. the whole EU budget is carried by budget items in the member's national budgets, "powered" by national taxes

Mon, 12/03/2012 - 08:11 | 3029185 GetZeeGold
GetZeeGold's picture



neverending fight against corruption


A little napalm in downtown Brussels should do the trick.

Mon, 12/03/2012 - 08:15 | 3029189 Acet
Acet's picture

Actually VAT is supposed to be an EU tax.

I get what you say about the EU system being a far smaller burden on EU citizens than national governments. The perception of it amongst english-speaking people is much worse probably because a lot of the English media (and English politicians) have made a habit of making noise against the EU as a way to distract the plebes from the plundering that's going on in their own country. If you read newspapers in other languages the image is far more nuanced.

That said, there are things like the CAP (Common Agriculture Policy) and the common fisheries policies that are in dire need of fixing. Also the whole EU commission is a non-representative gathering of would-be elitistic statesmen that needs to disapear and the council of ministers has too much power (it's a common occurrence for a leader of an EU country to try and push-through unpopular measures via the council at an EU-level rather than directly impose them on their own country and then blame the EU). A proper representative European Union would relly solely on it's only directly elected body - the European Parliament.


Mon, 12/03/2012 - 12:54 | 3029939 Ghordius
Ghordius's picture

collected by the nation states and then given to the EU by them, as per treaty

it all goes back to the fact that the EU is still a Regional Treaty Organization that endless propaganda is painting as a "superstate"

and giving too much power to the EU Parliament is a step in the direction of federation, instead of confederation

yes, you are correct with "it's a common occurrence for a leader of an EU country to try and push-through unpopular measures via the council at an EU-level rather than directly impose them on their own country and then blame the EU"

but this is a challenge for the informed citizenry and the press, isn't it? those kind of shenigans are in every kind of organization

Mon, 12/03/2012 - 08:02 | 3029169 Acet
Acet's picture

This is exactly the same thing that is happening in Portugal and, from what I heard, Spain and Greece.

There's all sorts of ways in which money is siphoned out from the State to private individuals (often politicians) which have been pointed out again and again (in Portugal it's Foundations setup by polticians that get state money, sweet public-private initiative deals with no risk for the private side paying huge interest rates and gold-plated state pensions for well-connected people) and yet the "Austerity" is always about squeezing the middle class.

Mind you, I live in the UK at the moment and the place is also seriously corrupt at the highest level, though it's usually via the "I take care of you now, you take care of me later" mechanism rather than direct monetary payments, which is why you see politicians retiring to high paid jobs in financial institutions, people that work in the regulators moving to the companies they regulate in private sector after a couple of years and people that manage other people's money (such as pension fund managers) moving to the companies they invested that money in or from which they bought services.

This, together with fake democratic systems where not all votes are worth the same (i.e. electoral circles) so that there is in practice a two party-system, makes it far more likelly that the end-game in such places is going to be some kind of revolution.

Tue, 12/11/2012 - 03:42 | 3051275 Joe A
Joe A's picture

I agree, government spending should be cut. But why would southern European countries cut government spending when the north is bailing them out anyway? There is no arm twisting to cut government spending. That is the problem. Government jobs plus extra 13/14/15/16 salary bonus = votes.

Mon, 12/03/2012 - 04:33 | 3029058 Hobbleknee
Hobbleknee's picture

I don't think they teach that in the government-run schools.

Mon, 12/03/2012 - 02:45 | 3029012 AmCockerSpaniel
AmCockerSpaniel's picture

Just look at the US. Every day we lower the cost of our labor as a nation. It's called free trade, and the people love it.

Mon, 12/03/2012 - 04:36 | 3029060 Hobbleknee
Hobbleknee's picture

There is no such thing as free trade.  So called "free trade" agreements are thousands of pages long.  Is it really free if you have to abide by thousands of pages of rules?

Mon, 12/03/2012 - 02:57 | 3029020 piliage
piliage's picture

So 25%  unemployment is not enough to reduce labor costs in Spain?

Not if the other 75% are working for the government or unions, which they are.

Mon, 12/03/2012 - 03:50 | 3029045 Peter Pan
Peter Pan's picture

Reducing wages by another 30-50% will gut the real estate market and absolutely destroy the collateral held by banks for loans which in turn will destroy banks. Am I missing something or is someone dreaming about such a drop in wages in a common currency being the right thing for rebalancing?

Mon, 12/03/2012 - 07:32 | 3029144 samcontrol
samcontrol's picture

I just came back from three cities in Germany plus Paris, no cut in wages there and people running normal lives,,, just saying.

Mon, 12/03/2012 - 09:44 | 3029321 Debugas
Debugas's picture

it is not the question of is it right or wrong. It is a statement of what will inevitably happen - reduction in standard of living at least by half.

Mon, 12/03/2012 - 11:33 | 3029631 Omen IV
Omen IV's picture
rebalancing on the back of labor is an impossibility when the marginal cost of labor for private enterprise - manufacturing - is $1.00 to $2.00 per hour in the Far East - every analysis for every product to be manufactured - especially as QC continues to improve with equipment shipped from Germany to Far East  - will be 100% MOVE OUT OF EUROPE - rebalancing will not be 50% wage reduction but 80% - currency devaluation will be met by chinese with comparable change - this will not be a solution.  no escape - Murder by Neglect for 100's of millions of people  - the service business depends on disposable income - when there is no discretionary income then - those people are off the air as well  - requires a new paradym

change the definition of the Common Market and end the WTO ! only trade without tariffs with those with comparable wages - Canada /Western Europe plus the USA - 700 million people is enough for sustainability in a closed loop.

all other countries get tariff barriers unless they achieve comparable wages to core Common Market - NEWCO -


Mon, 12/10/2012 - 14:38 | 3049163 slaughterer
slaughterer's picture

Reducing wages by another 30% in Spain is the formula for European self-destruction.  

Mon, 12/03/2012 - 08:10 | 3029184 AnAnonymous
AnAnonymous's picture

So 25% unemployment is not enough to reduce labor costs in Spain? Ha! Okay.

It is well known by now that for 'americans', the only solutions to ailments of 'americanism' is even more 'americanism'

They will keep hammering their points until something happens so that they can attribute the change in situation to their points.

It is how 'americans' work.

By the way, if they end that trend, that would put so many of 'american' intellectuals, educated out of business.

Which would be bad for consumption.

Consumption, consumption, consumption, the 'american' duty.

Mon, 12/03/2012 - 10:23 | 3029437 midtowng
midtowng's picture

Only a return to fuedalism will satisfy the financial elite

Sun, 12/02/2012 - 23:32 | 3028851 nmewn
nmewn's picture

Surely if they just tax the "rich" everything will be fine. But in short order the "rich" will be anyone working for the states fiat.



Sun, 12/02/2012 - 23:32 | 3028853 pragmatic hobo
pragmatic hobo's picture

the whole euro-zone thing was to turn europe into USA, of course the whole economic process in the USA for the past 40 years was to turn US into first Japan, and now China.

Sun, 12/02/2012 - 23:44 | 3028872 Dan The Man
Dan The Man's picture

... and eventually North Korea.  The most perfect government.

Sun, 12/02/2012 - 23:59 | 3028890 Mr. Magoo
Mr. Magoo's picture

Now it looks like they want to turn europe into the new USSR

Mon, 12/03/2012 - 08:08 | 3029181 Urban Redneck
Urban Redneck's picture

I think that article uses a lot of buzzwords to generate a Pavlovian reaction among readers and masks an ugly truth-

Regardless of the insidious (wealth transfer) effects of Federal Reserve domestically, EVERYONE in the US receives benefit from the USD's reserve currency status, which lowers the costs of non-self-sufficiency.

Is a unitary supranational globalist hegemony best prevented by maintaining a unipolar (single super power) US dominated global trade paradigm, or by creating competing regional supranational powers?

Sun, 12/02/2012 - 23:34 | 3028856 Yen Cross
Yen Cross's picture

It's all good in " Unicorn Rainbow Land".. Fire up the undervalued "HP Meg Whitman"  printing presses...

 Failure to [ obfuscate] truth is soo in }VOGUE}... Ratings agencies and Accounting firms  belong on some small Island!

  We can call it the Google ghost Island!

Mon, 12/03/2012 - 00:23 | 3028911 Wun Hun Lo
Wun Hun Lo's picture

I luv Unicorn Wainbow Rand.

Mon, 12/03/2012 - 00:37 | 3028927 Yen Cross
Yen Cross's picture

I'm really stupid, or you are talking South Africa?

Sun, 12/02/2012 - 23:40 | 3028866 q99x2
q99x2's picture

The Goldman Sachs formally attacks the European people. Who will win. I guess we know Greece lost and Germany is losing. No wonder the US stayed out of WWII for so long.

Mon, 12/03/2012 - 03:08 | 3029025 Non Passaran
Non Passaran's picture

If nation states are managed by representatives of the people, then we can say it's a win-win situation - the ones who represent the people and Goldman Sachs are one and the same. They will win. We will win! Long live democracy!

Sun, 12/02/2012 - 23:44 | 3028870 Tirpitz
Tirpitz's picture

"the bulk of European countries will need to see wages collapse"

Good thing executive compensation won't be affected; again boni are safe.

Mon, 12/03/2012 - 03:06 | 3029024 Non Passaran
Non Passaran's picture

We can't have anarchy.
Someone must organize, manage and make sure the process develops in an orderly fashion.
Fortunately the EU is already cost-effectively organized in just such fashion and all the right people - Barroso, Van Rompuy, JUNKer, etc. - are already in place. How fortunate the masses are!

Sun, 12/02/2012 - 23:48 | 3028875 Pairadimes
Pairadimes's picture


Mon, 12/03/2012 - 04:19 | 3029053 Peter Pan
Peter Pan's picture

I presume that just your bundy clock wired up with explosives.

Sun, 12/02/2012 - 23:53 | 3028886 Kreditanstalt
Kreditanstalt's picture

Yeah...the U.S. and Canada desperately need wage cuts too. 

But it won't happen: all that we'll see is the comfortable mid-level management, technical and resource industry types, along with unionized government employees, keeping their comfy jobs, pensions, perks and high salaries while the rest of us are increasingly beggarized or unemployed altogether...

Mon, 12/03/2012 - 00:07 | 3028899 Jim in MN
Jim in MN's picture

If it laid an egg.....

,,,,it would fall down the back of the television set!

(Shocking observations of reality, simply shocking!)

Mon, 12/03/2012 - 00:19 | 3028906 CheapBastard
CheapBastard's picture

My family medicine doctor just went bankrupt. He's quiting medicine and applying for a postal job. Less stress and more money & benefits he told me.

  Most economies are very distorted for the foreseeable fututure.

Mon, 12/03/2012 - 00:38 | 3028928 jim249
jim249's picture

The post office is not hiring.

Mon, 12/03/2012 - 00:21 | 3028908 JustACitizen
JustACitizen's picture

Welcome to the great labor arbitrage game.

Let's see - we have unaccountable global corporations and a globalization ideology - what can go wrong? If you don't like the results - take your ass down to the WTO and spend 3 years arguing your case to a bunch of unelected bureaucrats - who are doubtless being paid off by someone.

In the long run - western living standards will fall - and most poor nations with even a hint of stability and infrastructure will end up rising a bit. It's tough to put the toothpaste back in the tube...

Good luck to all.

Mon, 12/03/2012 - 00:42 | 3028913 Yen Cross
Yen Cross's picture

Southern Europe is a quagmire/  The European Union thinks(pretends), France and Italy are solvent/....

  The ECB is carrying more debt then the FED!

The ECB thinks it can keep sterilizing it's markers? The ECB/BIS/ [Sovereign Ponzi Scheme], called the euro(€)...

  This is a fun tune/ Can You Save Me - full theme by Flint Eastwood (with lyrics) - YouTube

Mon, 12/03/2012 - 00:58 | 3028945 Bansters-in-my-...
Bansters-in-my- feces's picture

My mothers ,fathers,uncles,grandpas 2nd cousin makes $2000 a day working on the computer.....
You can too.

Mon, 12/03/2012 - 04:20 | 3029054 Peter Pan
Peter Pan's picture

I can understand you having grandpas, uncles etc....but how many mothers and fathers do you have?

Mon, 12/03/2012 - 02:00 | 3028987 ebworthen
ebworthen's picture

Mismanaged economies that favor banks and corporations cause this.

Consumer dependent economies that cut wages will end up collapsing in on themselves.

Where was all the austerity talk when these governments bailed out their banks and corporations?

Now we hear austerity after taxing their citizens at high rates to pay for wages and entitlements they are going to take away while they continue to bail out banks and corporations and print fiat currencies and place debt on the same citizens?

They deserve to collapse and have their banks, bankers, politicians, and top 1% liquidated if not hung from the nearest lamp post.

Mon, 12/03/2012 - 07:50 | 3029159 Bobbyrib
Bobbyrib's picture

"Consumer dependent economies that cut wages will end up collapsing in on themselves."

We are witnessing that in the US now. I would be surprised if holdiay sales (in dollars, not percentage) did not decrease this year. The sales are ridiculous this year. The corporations will tout a rise in the percentage of sales, but their profit margins will be lower. CNBS will tout the percentage that holiday sales rose and fools will buy retail stocks.

Mon, 12/03/2012 - 03:03 | 3029023 dunce
dunce's picture

Wages are tied to productivity and the large number of govt. employees are a cost burden on the actual producers with the effect of reducing total productivity. The insistance that all labor is equal is just socialist dogma. High cost unproductive government kills the goose that lays the golden eggs.

Mon, 12/03/2012 - 04:08 | 3029050 immanuelgeek
immanuelgeek's picture

The first graph is a very popular one, seen it everywhere, used it myself in an article. Just have to be careful: it shows nominal unit labor costs, which - in equilibrium - should grow with the inflation. So what it says is that German unit labor costs decreased in real term (and we know it was the case, just look at the various Harz laws, the recrudescence of part time or minijobs etc.).

Consequently, one might wonder: isn't it rather time for german wages to rise by 30%? ( Answer: yes, it is.)

Also note that the majority of German exports (a big chunk of which is - by the way - reexport of cars and machinery assembled in Eastern European countries) is bought by fellow eurozone consumers - whose wages everybody wants to cut. Well good luck, Merkel and Brussels.


Mon, 12/03/2012 - 11:31 | 3029641 Tekrunner
Tekrunner's picture

Also, I'm pretty sure a ton of people overlook the fact that this shows relative values, and not absolute ones. In absolute terms, the average wage in Greece is what, half of what it is in Germany? Of course it was catching up with Germany before the crisis, why would Greece have joined the Eurozone otherwise?

There used to be a time when rising wages were seen as a good thing, ie a dynamic economic offering an increasing standard of living. Now somehow it's all turned to "cut cut cut". We're asking people to earn less so that... uh, what exactly? So that the people owning billions of government bonds can earn more billions?

Despite the length of this article, the analysis is very shallow. You can't just talk about labor costs without looking at productivity figures, inflation, GDP, etc. You also can't talk about a Germany-funded Europe without looking at where Germany gets all that money to begin with (the answer to that is in the recession that's about to hit it).

Mon, 12/03/2012 - 04:43 | 3029064 FunkyOldGeezer
FunkyOldGeezer's picture

For anyone who still thinks Germany didn't gain the most out of the Euro, here's evidence to the contrary.

This is just as much a problem for the Germans, as it is for those countries that face the prospect of severe wage cuts being necessary. German exports have been priced waaay too cheaply until now. So who is ultimately up against the wall?

Mon, 12/03/2012 - 04:46 | 3029066 GreatUncle
GreatUncle's picture

Amusingly to regain competativness and a fall in wages will make sovereign debts unserviceable.

All tangible assets if they cannot be sold when a population cannot afford to purchase them will fall.

Then you do it all over again so that it moves past trying to restore competativeness and is now controlled by the need to service debt.

I say service because even Greece is showing with haircuts and debt forgiveness in a falling market the debt does not shrink does it?

Mon, 12/03/2012 - 04:47 | 3029067 pfairley
pfairley's picture

Lots of words...then"what is unclear is timing" More flexible USA lost HOSTESS company because of inflexible union.

 Expect first more  long strikes, failed offerings of corporate debt  and bankruptcies 


Mon, 12/03/2012 - 05:10 | 3029082 FunkyOldGeezer
FunkyOldGeezer's picture

There must be plenty of US states that are getting ticked off belonging to a unified currency?


Surely, some of the problem in the Eurozone has been the reluctance of those in the richer countries to pay a proper amount for goods and services produced in the others. It's impossible to have a tight union if Klaus wants his cheap holidays on the Costas, but doesn't want his exported BMW to be competitively priced, compared to the localy produced SEAT ( a VW company). The true wealth flow has been one way.

Mon, 12/03/2012 - 05:24 | 3029089 Volaille de Bresse
Volaille de Bresse's picture

Or another solution is to kick Germany out of the Eurozone.

Overnight the value of the Euro currency will be debased by 30% (a breath of fresh air) and Germany will have to find new solutions to maintain its growth  : as exporting to other Euro countries will become difficult. Solution? Raising wages (goodbye Hart IV) and building an inner consumer market? 

Mon, 12/03/2012 - 11:55 | 3029710 smacker
smacker's picture

However good it might appear, there are at least three problems with that idea:

- other EZ member states don't want Germany out because they want Germany to be the paymaster of last resort to settle their unsustainable debts.

- no Euro-pol wants to be the person who goes down in history as the one who wrecked the EU Grand Project of creating a new unelected socialist utopia.

- it may not be consistent with Germany's own secret plan to create the Fourth Reich, thereby dominating/controlling Europe.

Current actions in play according to this analysis (which I think is right) strongly suggest that the only thing preventing Merky from settling the EZ debts via EuroBonds or whatever is how to get it past her own electorate/constitutional court/Bundestag. After her re-election next year, we may well see her taking more decisive actions down this road.

Mon, 12/03/2012 - 05:47 | 3029092 THE DORK OF CORK
THE DORK OF CORK's picture

The article misses the point somewhat.

When you have a wage deflation a country cannot use its internal physical capital base to the best of its ability.


Its got nothing to do with Labour really.

As people don't consume exports.

Capital will be superior to labour as long as you have fossil fuel machines.

These countries are imploding because the spice cannot flow


The only good deal that I can see is getting out of the Eurozone and refusing to engage with false market state “savings” memes which are really transfers of wealth rather then organic real capital growth.

It (EEC)has been a series of core wage deflations & subsequent pointless capital exports to conduit economies since the days of the snake in the 70s.
Forming a series of Giant monetary onion rings.

ireland had this before remember ? - the 1970s agri land / car boom of the time - all that capital going up in smoke & methane and calling it “Growth”

Countries simply can’t adjust their own internal systems without their own currencies and of course their “leaders” having a sense for their country also.

Because the accounting is using a false unit of exchange any minister can claim he is making savings by liberalizing a market when in fact its just a simple wage arbitrage game which wastes real capital because of duplication in services.

We now have a global wage arbitrage game
A inter euro wage arbitrage game
And a domestic wage arbitrage game going on.

But where is the wealth creation ?

Have they learned nothing from the Irish ferries syndrome ?

All of the high energy input industries within Ireland suffered from this wage arbitrage / deflation DURING THE BOOM.
Be it Airlines , construction , agri processing , ferries etc etc.
This gave a false signal.
To fill the apparent demand hole the banks created consumer credit which was obviously malinvested as there was no rational wage demand signal.

Why did we really suffer from the biggest drop in airline passengers in Europe
See above.

Europe is the heart of Darkness.

Mon, 12/03/2012 - 08:08 | 3029179 smacker
smacker's picture

Sounds reasonable. Obviously Ireland does NOT need another one of these:


Mon, 12/03/2012 - 05:53 | 3029095 THE DORK OF CORK
THE DORK OF CORK's picture

If somehow we have the above arrangement continue.........

Germany will continue to export consumer capital goods (see cars) that the PIiggs cannot use.

In reality Its Germany which is a disaster.

We are seeing a gross subsidy of German malinvestement.

Mon, 12/03/2012 - 06:20 | 3029105 Yen Cross
Yen Cross's picture

I never forget good people

Mon, 12/03/2012 - 08:03 | 3029170 smacker
smacker's picture

Don't forget that Germany exports its products all over the world. It's a huge exporter with a huge positive trade balance. Exports may have fallen to ClubMed -- as they have to the US and mostly everywhere else -- I cannot see that has anything to do with German malinvestment.

If/when the global economy recovers, Germany will be well placed to expand exports. Not so ClubMed which is in terminal decline.

Mon, 12/03/2012 - 08:23 | 3029196 AnAnonymous
AnAnonymous's picture

If/when the global economy recovers, Germany will be well placed to expand exports.

If/when? Good one.

Unfortunately, in the very unlikely scenarii of an economic recovery, Germany wont be well placed.

If an economy recovey happens, it would mean that some other places will have put into place their own consumption patterns, that will come at the exclusion of the 'american' nations patterns.

Just like 'american' nations have destroyed so many other consumption patterns to make room for their own consumption pattern.

In this regard, PIIGS would be better off as they are used to being client states.

Mon, 12/03/2012 - 09:50 | 3029339 smacker
smacker's picture

I don't know what you're saying. Sure, a nation's consumption patterns change over time. But Germany keeps up with this and continues to produce a lot of goods -- especially cars and other engineered products -- that other nations' want to buy. Else they wouldn't be buying them. Sales of German goods may have fallen since the EZ crises and the serious global downturn, but Germany has expanded exports to Latin America and Asia, notably China, where it is the largest foreign car vendor...VW, Audi, BMW & Merc. By contrast, American car manufacturers have declined -- not because of a global economic downturn or a change in consumption patterns -- but because they lost the plot and their foreign markets. German cars are superior and in demand.

It remains to be seen if consumption patterns of other nations will change to the point where Germany is left with some of the world's most efficient manufacturing facilities lying idle because those nations stop buying their goods. If this happens, Germany will simply switch manufacturing to the new products in demand. Or are you saying that demand for a wide range of manufactured goods will simply fade away?

Economically, it cannot be wrong for a nation to produce goods that other people want to buy at a price they're willing to pay. Compare that to the mess of ClubMed countries and many others.

Mon, 12/03/2012 - 06:24 | 3029108 smacker
smacker's picture

This is a real good analysis of where the Eurozone is at.

It hasn't escaped my notice that the EZ crises was created by Euro-pols using an endless stream of lies to deceive their electorates. And now that their pet project to grab power and create a new nation: United States of Europe has hit the rocks and is sinking, they're dealing with it by using a new endless stream of lies.

It is way past time for the German people to wake up to the trickery and deception that Merky is up to, and for people in ClubMed to realise that -- far from being a journey to a socialist utopia they all crave for -- the Euro is in fact the road to hell and will not only destroy their economies and societies but their national sovereignties too.

Is it time to invest in piano wire and rope?

Mon, 12/03/2012 - 06:58 | 3029125 Hobbleknee
Hobbleknee's picture

Off topic: Can someone find that cool chart on zerohedge that showed Greek GDP expecations vs reality?


It was like this one, but had 3 forecasts for each bailout with reality continuing to sink.

Mon, 12/03/2012 - 07:21 | 3029135 Hobbleknee
Hobbleknee's picture

Yes, thank you very much!

Mon, 12/03/2012 - 07:11 | 3029133 smacker
Mon, 12/03/2012 - 07:25 | 3029138 Yen Cross
Yen Cross's picture

 I wish i could muster up the strength to send you a chart.

  I'm litteraly running on vapors/ I can't spell straight  I shorted gbp/jpy short term`>

Mon, 12/03/2012 - 07:30 | 3029143 Sandmann
Sandmann's picture

It is exactly the same problem as with the EMS back in 1992 when Italy had to devalue and Britain had to withdraw. German Unification was accompanied by Monetary Union as Kohl did an end-run on BUBA by giving the stupid 1:1 Exchange Rate and saddling the former GDR with mass-unemployment and a high cost-base as Subsidies to Corporates in the West inflated the cost of construction in the East making factory sites more costly nin the former GDR than in West Germany (believe me, I looked at deals there). The German Corporates should have sacrificed their export markets by allowing a Revaluation of the D-Mark as they focused on rebuilding the GDR - but they chose to manipulate their exchange rate within EMS and let Britain and Italy take the strain.

When the Euro came along in 1998 they then fiddled the D-Mark/Euro Conversion and Theo Waigel fixed the Maastricht Criteria by dodging deals on BUBA gold reserve valuations thus locking Germany in at an advantageous rate and causing Corporations to squeeze wage costs which had inflated through the Unification Boom. Amazing how much labour was shed in 1993 after the 1990 Unification Boom was wound down.

So the only way forward is for Germany, Netherlands, Austria, Finland to put a postage stamp on their Euro Notes as Czech Republic did with its Czechoslovak Crowns when Slovakia split from Czech Republic and then Club Med can cluster round France and the soft-Euro Bloc


Mon, 12/03/2012 - 07:55 | 3029161 Ghordius
Ghordius's picture

I fully agree with you up to the point of your "only way forward". because most of the implications are political and scenario-dependent

the key of european integration, including the common currency is still the Franco-German cooperation

the political will to integrate (I'm just stating a fact as I perceive it, not as I would like to have it) is strongest in 11 continental countries in the eurozone - the same that just had a meeting a short while ago

in fact we are fighting between those wanting more integration and those who want to keep it as it is

the "way forward" you mention, together with every other Euro-Break-Up memes is incredibly popular on Old Blighty, not on the Continent

it might change as soon as the implications of the European Fiscal Compact kick in, of course, or if the currency war progresses and escalates

Mon, 12/03/2012 - 08:21 | 3029195 smacker
smacker's picture

"...we are fighting between those wanting more integration and those who want to keep it as it is"

Yes and no. The call for more integration comes from those who see it as the urgent final solution to the Euro crises (especially the EU-crats who are fighting to protect their lavish EU lifestyle and dream of a EUSSR).

But even without a currency crises, IMO every other member of the EZ would support more progressive integration. It's really a matter of the timetable and how to get the massive deception past their electorates.

Mon, 12/03/2012 - 08:28 | 3029174 buzzsaw99
buzzsaw99's picture

New new topper:

Such mechanisms are quite normal in continental monetary unions: witness the transfers from wealthy New York to poorer West Virginia via the federal government in the United States...

This is the moist delusional thing I have read from the squid yet. They are a full flowing sewer now, backed up and  unreadable. Wall Street robs the people VIA the federal reserve. Nobody benefits more from the fed and fed gub than they. All the loot they have was stolen VIA illegal banking activities, some of it undoubtedly from the west virginia teacher's pension fund. If they pay more taxes it is only from ill gotten gains.

Mon, 12/03/2012 - 08:09 | 3029175 NaiLib
NaiLib's picture

I will be reached with "lawmaking" by the Communist Barroso at the head. Europe has chosen the Chinese way of "doing politics". Europes citizens will be degraded into state controlled slaves, by means of a police state. Its heading faster and faster towards the 4th Reich.

Mon, 12/03/2012 - 08:18 | 3029190 Samsonov
Samsonov's picture

"And the paradox is that as long as market indicators aren’t flashing red, no politician has the urge to enact the critical laws needed to fix the underlying problem, as that same fix will lead to an immediate end of said politician’s career."

That's backwards.  The market flashing red must first cause the politicians' careers to end before critical laws can be enacted. That's because the ones that are there now are the ones who created the problem, and fixing problems is alien territory for them.  The bad thing is that every known politician is for the most part basically the same, basically from the problem-creator class, so anyone capable of fixing the mess will be an outlier.  Watch out for the outliers.

Mon, 12/03/2012 - 08:27 | 3029198 AnAnonymous
AnAnonymous's picture

What recovery is this 'american' writing about?

With 'americans', everything is situational.

At present days, the number one game among 'americans' is how to preserve the consumption capacity (which goes through how to go deeper into debt).

Devaluating currency would mean no recovery. Only slashing consumption power and sliding even faster on the side of those who are much more consumed than they consume.

Ah, 'american' economics, political economists, traders, and all their lot.

They know no solution out of the 'american' mess but their job (and then their 'american' ticket to consumption) depends on them claiming they have.

But as long as the consumption duty is performed as a good 'american' must do in order to speed up the coming of depletion of resources, all is well as it can be.

Mon, 12/03/2012 - 08:41 | 3029215 nbtgm1
nbtgm1's picture

To all the government haters out there; massive wage reductions will obviously not help the eurozone countries. In a depression, only hope is for the Government to step in an provide massive expansion in purchasing power. OK, agree there is lot of waste and mismanagement in government, but you could choose tax cuts or direct QE to households. Whatever will be better than the current persisten stagnation.

Mon, 12/03/2012 - 08:50 | 3029225 Curtis LeMay
Curtis LeMay's picture

Huw Pill explains the scary future facing peripheral European workers

It should be noted that Professor Pill worked at the European Central Bank in Frankfurt where he was Head of the Strategic Policy Issues in the Bank's Directorate Monetary Policy.

He should know better than most as to what's going on with the euro...

Mon, 12/03/2012 - 08:53 | 3029227 rsnoble
rsnoble's picture

This BS is getting way out of hand before it even starts.

Mon, 12/03/2012 - 08:57 | 3029234 orangegeek
orangegeek's picture

Deflation folks.


Falling wages.  Collapsing institutions.  Markets haven't fallen hard yet (or since 2007/8), but they are up next.


SP500 weekly is trying to recover to new highs, but that's getting more and more unlikely.

Mon, 12/03/2012 - 09:20 | 3029263 Debugas
Debugas's picture

finally the honest discussion about what will inevitably happen -

"A 30-50% Collapse In Wages"

i can predict not less than 50% because 30%-50% prediction accounts only for primary effect to get on par with germany but does not account for secondary effects like total decrease in demand as a result of the decreased purchasing power and standard of living

Mon, 12/03/2012 - 10:21 | 3029431 lindaamick
lindaamick's picture

Citizens would not mind a 30-50% wage cut IF assets, goods and services were allowed to deflate.  Trouble is the financial sector will do anything to prop up prices and expect citizens to live in a country where prices remain high and wages get drastically lowered.

We will see how far the citizenry can be squeezed.

So far the slack is being taken up surreptitiously by citizens wiping out their savings to maintain a living standard.  When savings are drained and more and more people become desperate, revolution becomes a growing possibility.

Mon, 12/03/2012 - 15:29 | 3030317 De brevitate Vitae
De brevitate Vitae's picture

no need for austerity mesures to decrease real wages.

hint: ECB, OMT and inflation


Check out interview of UBS economic advisor on morning star:

Tue, 12/11/2012 - 03:49 | 3051281 Joe A
Joe A's picture

*Disclaimer. 30 to 50% wage cuts do not apply to EU officials, high government officials in EU countries and managers of public institutions. In fact, a negative wage cut of 30 to 50% would apply to them (we will call it a negative wage cut so the sheeple will think that due to the presenence of the word 'negative' the officials will also make sacrifices).

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