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Please: Do NOT be fooled by the German claim to “solidarity.”
Maas & Scholz are smart enough not to look Dutch — while doubling down on their rejection of Coronabonds.
A short thread on why & how the Germans are damning the Eurozone to disintegration 1/ https://www.auswaertiges-amt.de/en/newsroom/news/maas-scholz-corona/2330904">https://www.auswaertiges-amt.de/en/newsro...
Maas & Scholz are smart enough not to look Dutch — while doubling down on their rejection of Coronabonds.
A short thread on why & how the Germans are damning the Eurozone to disintegration 1/ https://www.auswaertiges-amt.de/en/newsroom/news/maas-scholz-corona/2330904">https://www.auswaertiges-amt.de/en/newsro...
To begin, the article commits the exact same category error that the EU has been making for over a decade:
It mistakes a crisis of *insolvency* for a crisis of *liquidity*.
Here they are, summarizing their core message: Europe needs more loans! 2/
It mistakes a crisis of *insolvency* for a crisis of *liquidity*.
Here they are, summarizing their core message: Europe needs more loans! 2/
Why is this bad?
Well, for one: You cannot lend to a dead man.
The fact that the ECB pumped €3 trillion into the Eurozone and yielded only ~complete & total stagnation~ should be evidence enough 3/ https://www.reuters.com/article/us-eurozone-ecb-qe/the-life-and-times-of-ecb-quantitative-easing-2015-18-idUSKBN1OB1SM">https://www.reuters.com/article/u...
Well, for one: You cannot lend to a dead man.
The fact that the ECB pumped €3 trillion into the Eurozone and yielded only ~complete & total stagnation~ should be evidence enough 3/ https://www.reuters.com/article/us-eurozone-ecb-qe/the-life-and-times-of-ecb-quantitative-easing-2015-18-idUSKBN1OB1SM">https://www.reuters.com/article/u...
But why does it not count as & #39;solidarity& #39;?
Because in the Eurozone, more loans to national governments mean more problems.
Specifically, they set up the Frugal Four to demand austerity (“reforms”) to pay them back. The idea that there would be “no Troika” is nonsense… 4/
Because in the Eurozone, more loans to national governments mean more problems.
Specifically, they set up the Frugal Four to demand austerity (“reforms”) to pay them back. The idea that there would be “no Troika” is nonsense… 4/
Why do I say that?
Because Maas & Scholz recommend the European Stability Mechanism (ESM) to save Italy & Spain — the same ESM that constructed the Eurozone debtors’ prison circa 2012.
Which gov& #39;t in its right mind would take these toxic loans? 5/ https://www.europarl.europa.eu/news/en/headlines/economy/20130923STO20628/alternatives-to-austerity-would-be-even-more-painful-warns-esm-chief-regling">https://www.europarl.europa.eu/news/en/h...
Because Maas & Scholz recommend the European Stability Mechanism (ESM) to save Italy & Spain — the same ESM that constructed the Eurozone debtors’ prison circa 2012.
Which gov& #39;t in its right mind would take these toxic loans? 5/ https://www.europarl.europa.eu/news/en/headlines/economy/20130923STO20628/alternatives-to-austerity-would-be-even-more-painful-warns-esm-chief-regling">https://www.europarl.europa.eu/news/en/h...
The point is not that these facilities cannot create liquidity for Eurozone members — nor that this money would go unused.
It is that the ESM creates a *stigma* that raises the costs of servicing debt, bringing back the "doom loop" 6/ https://twitter.com/VMRConstancio/status/1244996409675431937">https://twitter.com/VMRConsta...
It is that the ESM creates a *stigma* that raises the costs of servicing debt, bringing back the "doom loop" 6/ https://twitter.com/VMRConstancio/status/1244996409675431937">https://twitter.com/VMRConsta...
Think of it this way: if you are strapped for cash, you can always go to the loan shark….
…but you *don& #39;t* go the loan shark because you know that you might get trapped in debt, unable to climb out, and forced to pay whatever the scary thugs demand 7/
…but you *don& #39;t* go the loan shark because you know that you might get trapped in debt, unable to climb out, and forced to pay whatever the scary thugs demand 7/
The point of the Coronabond, then, is *not just* to raise money.
By issuing the debt jointly, the Coronabond neutralizes the centrifugal dynamics of debt in the Eurozone, binding all the countries together — rather than forcing each to fend for itself 8/ https://diem25.org/diem25-presents-covid-19-economic-response-plan-and-green-recovery-investment-program/">https://diem25.org/diem25-pr...
By issuing the debt jointly, the Coronabond neutralizes the centrifugal dynamics of debt in the Eurozone, binding all the countries together — rather than forcing each to fend for itself 8/ https://diem25.org/diem25-presents-covid-19-economic-response-plan-and-green-recovery-investment-program/">https://diem25.org/diem25-pr...
Maas and Scholz, by contrast, seem quite happy to let those centrifugal forces run free.
Their folly lies in thinking that the Germany — and the SPD, especially!! — will not get caught in the tornado… 9/
Their folly lies in thinking that the Germany — and the SPD, especially!! — will not get caught in the tornado… 9/
That is, of course, why & #39;solidarity& #39; is such an important concept here.
Solidarity is not charity; it is the recognition of mutual interest.
Maas & Scholz can bleed the their hearts. But & #39;Everything But Coronabonds& #39; is a recipe for mutual destruction. // https://www.theguardian.com/world/commentisfree/2020/mar/31/solidarity-members-eurozone-coronavirus-dutch-coronabond">https://www.theguardian.com/world/com...
Solidarity is not charity; it is the recognition of mutual interest.
Maas & Scholz can bleed the their hearts. But & #39;Everything But Coronabonds& #39; is a recipe for mutual destruction. // https://www.theguardian.com/world/commentisfree/2020/mar/31/solidarity-members-eurozone-coronavirus-dutch-coronabond">https://www.theguardian.com/world/com...
