Quo vadis Europe?.

Carlos Sánchez & Mateo Mathaus


Robert Skidelsky, probably the best known living economist Keynes's work (not as suspicious of liberalism) has recently written a delightful article that says things platitude, but often forgotten by policy makers. Remember that Skidelsky has long been associated with life indebtedness wasteful and apathy, and if a person is in debt, was considered a badge of honor to settle the obligation by selling assets, reducing consumption, working more or a combination of the three things. In fact, they used to pay debts not satisfied by imprisonment. Not through bankruptcy proceedings in which both parties agree on the amount returned.

The same rule was in force for the institutions. Banks were born of a procedure by which gold and silver smiths accepted deposits for safekeeping in exchange for a small fee. When lenders became its oldest rule was to maintain cash reserves equivalent to almost 100% of their deposits. Bankers, thus, avoid being out of funds in the unlikely event that their clients withdraw their money at once. Not at all went to the massive debt (now called leverage).

Such practices, as is known, fell into disuse for some time, but in his writings and Monetary Locke warned that there are only two ways to enrich a country without natural resources (he said 'no mine') through the conquest of territories or through trade. As the first is not always possible (fortunately, we should add), the English thinker recommended the second option. Unfortunately, however, that politicians still think there is a third choice, which is nothing to raise the apparent wealth of the citizens by increasing the debt to unbearable limits.

This is by far the worst of decisions. And not for purely economic reasons, it has to do with the actual quality of the democratic system. When a ruler to his country borrows more than is reasonable (it would be absurd to think that all debt is bad) they really do is defer the tax payment time. Not only that. Hides the nature of public spending, which is profoundly undemocratic.

Through recourse to borrowing, there is no real debate on the amount of taxes to be paid to the State at any time to fund the services needed to meet public demands the community. The paradox can be given even decide that a ruler to cut taxes to win elections by creating a wealth effect among citizens and at the same time, for the backdoor, increase borrowing, which in practice means an increase in the tax burden, but not noticed.

The debt is, in this sense, a painless remedy for the generation that enjoys a level of life that does not apply, and benefits from a volume of benefits is not proportional to the amount of taxes they are willing to pay. Everyone knows that someone will have to repay these debts, but hides that fact to win elections. The story is further complicated when a ruler instead of going to the capital markets to finance, which requires some fiscal discipline borrows money directly to the bank or savings bank in question, preferably if the same political orientation. The Spanish regions know much about this window of last resort.

Proteins market

Most surprising, however, is that these truths are hidden to public debate, undermining the democratic system. It is curious that those who criticize the behavior harder 'speculative' markets are precisely those who are fed protein that provides the public debt.

We, therefore, to a nonsense that leads inexorably to an economic neocolonialism. And if nothing done, it will end up being political

Figures like Krugman are, in this sense, pathetic. Not to mention some of their bad imitators in Spain. In recent years, the Nobel prize has not tired of attacking markets and arrogant by their nature speculative, but at the same time calls for greater public spending to cope with falling demand and economic activity, which has come to Now create a monster that devours the economies of peripheral countries. The markets are, and how would Herman Melville, the specter of horrible roar which lies between the grunt of the Leviathan and belching Vesuvius.

Dominate, as everyone knows, the political scene. To the extent the Eurogroup agreement on the restructuring of the Greek debt is just a kick to the democratic foundations of the European Union itself. Greece is a nation involved (a figure that does not appear in any of the basic texts of the EU) for a non-democratic government that is not presented to the elections. And the same goes for Portugal, Ireland and even Spain, whose room for maneuver in economic policy is irrelevant.

The shocking case, however, is that the medicine that you have provided to Greece creditor countries is precisely the same that has brought the country to ruin. The European Council has tested new aid equivalent to 109,000 million euros. However, if Greece is unable to repay 328 588 000 euros today owe to your creditors (excluding private debt) does not seem reasonable to think that adding another hundred billion to the account can solve the problem.

We, therefore, to a nonsense that leads inexorably to an economic neocolonialism. And if nothing done, it will end up being political. Indeed, and here's the contradiction, because those who believe that increasing public borrowing will solve the problems. The problem is not markets but governments and the European central bank itself have fed the beast with cheap money and enough to shake the foundations of the euro.

It seems clear, however, that survival of the single currency can only be articulated through the integration of the tax systems of the eurozone. Without coordination of budgetary policies, there is nothing to do. But it is obvious that the process of construction (including the creation of a pan-European Finance Ministry) should be made through democratic procedures. Otherwise the EU runs the risk of ending up being the opposite to what he was born. An area of ​​freedom in which all members are equal. It is not a trivial matter. It is the essence of democracy itself. The euro, as someone said, is and will become a currency without a state, but avoid a currency that is also without democracy.