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There is an old maxim that in any bureaucracy people will always rise to the level of their incompetence. This certainly seems to be the case with the European Central Bank (ECB). After totally ignoring the build-up of dangerous housing bubbles in most euro zone countries, as well as the imbalances that supported these bubbles, the ECB now seems intent on punishing the people in many of these countries for its mistakes.
This is the likely result of the policies that it is now pursuing, whether or not this is the intention. The insistence that the heavily indebted countries in the euro zone – Greece, Ireland, Portugal, and Spain – pay off their debt in full will inevitably lead to years of high unemployment in these countries and trillions of dollars of lost output throughout the euro zone as a whole. The budget cuts demanded of these countries will force large reductions in pensions and other social supports at a time when macroeconomic policies ensure that few jobs are available.
It is difficult to see any plausible gain from this pain. If the purpose of the pain is increased respect for fiscal discipline then the guns are pointed in the wrong direction. Ireland, Portugal, and Spain had surpluses or relatively small deficits in the years preceding the crisis. The problems that sank these economies were bad loans in the private sector and the bubbles they fueled.
It is difficult to see what lessons are taught by strangling the public sector. The austerity policies being imposed on these countries are unlikely to put serious dents in the fortunes of those who profited from these speculative bubbles.
Even in the case of Greece, which clearly did have serious fiscal problems, the austerity agenda only deals with half of the problem. Every reckless borrower needs a reckless lender. In this case, the reckless lenders in Germany and France are being bailed out by new loans from the euro zone rescue fund and the International Monetary Fund (IMF). It's not clear what lessons the lenders are learning.
Remarkably, for its larger macroeconomic policy the ECB continues to maintain its fixation on its 2.0 percent inflation target, as though the economic collapse never occurred. This has caused it to already start raising interest rates at a time when more than 15 million people are unemployed throughout the euro zone. (It's worth noting that even at the peak of the crisis the ECB never lowered its overnight rate below 1.0 percent, compared to the near zero rate maintained by the Federal Reserve Board for the last two and a half years.)
The higher interest rate unnecessarily clamps down on badly needed growth throughout the euro zone but its impact on the heavily indebted countries will be especially pernicious. In addition to worsening the employment situation, it is also likely to increase their interest burden as the interest rates paid by these countries will likely rise in step with the ECB rate.
There is a real risk that the ECB's policy may soon make the situation of the governments in the heavily indebted countries untenable. The populations of these countries are clearly willing to endure economic hardship for a period of time, under the belief that this suffering will lead to a better future. However, this prospect is getting more questionable by the day, as the better future gets pushed out ever further in the distance.
The latest projections from the IMF show that Spain's GDP will not recover its pre-crisis peaks until 2013. It will take Ireland until 2015, and Portugal and Greece until 2016. Furthermore, given the consistent patterns of downgrading growth projections over the last few years, it is likely that it will take these countries even longer to regain their lost output on their current policy path.
This raises the possibility that governments of the heavily indebted countries will soon find it impossible to agree to the never-ending demands for austerity coming from the ECB and the IMF. The refusal to come to terms will inevitably lead to a financial crisis, as anyone with assets will seek to withdraw them from the banks of a country facing such a standoff.
In such circumstances, leaving the euro and re-introducing a domestic currency becomes a realistic prospect. No government would ever go this route unless it had no choice, because it is almost inconceivable that it could re-introduce a domestic currency without bringing on a financial crisis. However, if the crisis is already there, then the domestic currency route would suddenly look much more appealing.
Argentina provides the model for this situation. Its government had supposedly created an unbreakable peg between its currency and the dollar in the early '90s. When interest rates in the United States rose in the late '90s, and the value of the dollar rose as well, Argentina's situation became untenable.
After negotiating a series of austerity packages with the IMF, the resulting recession and cutbacks in public services created enough civil unrest that the country could go no further. With the situation spiraling out of control, the government had no choice but to break its unbreakable peg. The resulting financial crisis sent the economy spiraling downward. However, it stabilized after three months, and began leaping forward six months after the break. It continued to have strong growth for the next six years until the world economic crisis brought Argentina's economy to a standstill in 2009.
If the ECB and IMF do not ease up on their conditions, they may push the heavily indebted countries down a similar path. Greece is the most likely candidate, having experienced the sharpest fall in output to date and facing the highest burden of debt to GDP. While there is much about Greece's economy that is badly in need of reform, the current austerity policies are not helping them to accomplish this reform.
If Greece were to leave the euro, there would undoubtedly be considerable short-term pain, but with its own currency it would at least have a route to resume growth in a reasonable period of time. Greece's departure would also pave a path for other countries to follow. This may be the lesson that the ECB needs in order to develop more realistic policies for dealing with the enormous imbalances that it allowed to develop in the last decade. Maybe the ECB bureaucrats can still learn some basic economics before they take Europe's economy even deeper into a hole.
I often complain, with reason, about the state of economic discussion in the United States. And the irresponsibility of certain politicians — like those Republicans claiming that defaulting on U.S. debt would be no big deal — is scary.
But at least in America members of the pain caucus, those who claim that raising interest rates and slashing government spending in the face of mass unemployment will somehow make things better instead of worse, get some pushback from the Federal Reserve and the Obama administration.
In Europe, by contrast, the pain caucus has been in control for more than a year, insisting that sound money and balanced budgets are the answer to all problems. Underlying this insistence have been economic fantasies, in particular belief in the confidence fairy — that is, belief that slashing spending will actually create jobs, because fiscal austerity will improve private-sector confidence.
Unfortunately, the confidence fairy keeps refusing to make an appearance. And a dispute over how to handle inconvenient reality threatens to make Europe the flashpoint of a new financial crisis.
After the creation of the euro in 1999, European nations that had previously been considered risky, and that therefore faced limits on the amount they could borrow, began experiencing huge inflows of capital. After all, investors apparently thought, Greece/Portugal/Ireland/Spain were members of a European monetary union, so what could go wrong?
The answer to that question is now, of course, painfully apparent. Greece’s government, finding itself able to borrow at rates only slightly higher than those facing Germany, took on far too much debt. The governments of Ireland and Spain didn’t (Portugal is somewhere in between) — but their banks did, and when the bubble burst, taxpayers found themselves on the hook for bank debts. The problem was made worse by the fact that the 1999-2007 boom left prices and costs in the debtor nations far out of line with those of their neighbors.
What to do? European leaders offered emergency loans to nations in crisis, but only in exchange for promises to impose savage austerity programs, mainly consisting of huge spending cuts. Objections that these programs would be self-defeating — not only would they impose large direct pain, but they also would, by worsening the economic slump, reduce revenues — were waved away. Austerity would actually be expansionary, it was claimed, because it would improve confidence.
Nobody bought into the doctrine of expansionary austerity more thoroughly than Jean-Claude Trichet, the president of the European Central Bank, or E.C.B. Under his leadership the bank began preaching austerity as a universal economic elixir that should be imposed immediately everywhere, including in countries like Britain and the United States that still have high unemployment and aren’t facing any pressure from the financial markets.
But as I said, the confidence fairy hasn’t shown up. Europe’s troubled debtor nations are, as we should have expected, suffering further economic decline thanks to those austerity programs, and confidence is plunging instead of rising. It’s now clear that Greece, Ireland and Portugal can’t and won’t repay their debts in full, although Spain might manage to tough it out.
Realistically, then, Europe needs to prepare for some kind of debt reduction, involving a combination of aid from stronger economies and “haircuts” imposed on private creditors, who will have to accept less than full repayment. Realism, however, appears to be in short supply.
On one side, Germany is taking a hard line against anything resembling aid to its troubled neighbors, even though one important motivation for the current rescue program was an attempt to shield German banks from losses.
On the other side, the E.C.B. is acting as if it is determined to provoke a financial crisis. It has started to raise interest rates despite the terrible state of many European economies. And E.C.B. officials have been warning against any form of debt relief — in fact, last week one member of the governing council suggested that even a mild restructuring of Greek bonds would cause the E.C.B. to stop accepting those bonds as collateral for loans to Greek banks. This amounted to a declaration that if Greece seeks debt relief, the E.C.B. will pull the plug on the Greek banking system, which is crucially dependent on those loans.
If Greek banks collapse, that might well force Greece out of the euro area — and it’s all too easy to see how it could start financial dominoes falling across much of Europe. So what is the E.C.B. thinking?
My guess is that it’s just not willing to face up to the failure of its fantasies. And if this sounds incredibly foolish, well, who ever said that wisdom rules the world?Washington
SOMETIMES there is turmoil in the markets because a government threatens to do what is best for its citizens. This seemed to be the case in Europe last week, when the German magazine Der Spiegel reported that the Greek government was threatening to stop using the euro. The euro suffered its worst two-day plunge since December 2008.
Greek and European Union officials denied the report, but a threat by Greece to jettison the euro is long overdue, and it should be prepared to carry it out. As much as the move might cost Greece in the short term, it is very unlikely that such costs would be greater than the many years of recession, stagnation and high unemployment that the European authorities are offering.
The experience of Argentina at the end of 2001 is instructive. For more than three and a half years Argentina had suffered through one of the deepest recessions of the 20th century. Its peso was pegged to the dollar, which is similar to Greece having the euro as its national currency. The Argentines took loans from the International Monetary Fund, and cut spending as poverty and unemployment soared. It was all in vain as the recession deepened.
Then Argentina defaulted on its foreign debt and cut loose from the dollar. Most economists and the business press predicted that years of disaster would ensue. But the economy shrank for just one more quarter after the devaluation and default; it then grew 63 percent over the next six years. More than 11 million people, in a nation of 39 million, were pulled out of poverty.
Within three years Argentina was back to its pre-recession level of output, despite losing more than twice as much of its gross domestic product as Greece has lost in its current recession. By contrast, in Greece, even if things go well, the I.M.F. projects that the economy will take eight years to reach its pre-crisis G.D.P. But this is likely optimistic — the I.M.F. has repeatedly lowered its near-term growth projections for Greece since the crisis began.
The main reason for Argentina’s rapid recovery was that it was finally freed from adhering to fiscal and monetary policies that stifled growth. The same would be true for Greece if it were to drop the euro. Greece would also get a boost from the devaluation’s effect on the trade balance (as Argentina did for the first six months of recovery), since its exports would be more competitive, and imports would be more expensive.
Press reports have also warned of a sharp increase in Greek debt from devaluation if it were to leave the euro zone. But the fact is that Greece would not pay this debt, as Argentina did not pay two-thirds of its foreign debt after its devaluation and default.
Portugal just concluded an agreement with the I.M.F. that projects two more years of recession. No government should accept this kind of punishment. A responsible leader would point out to the European authorities that they have the money to support Greece with countercyclical policies (like fiscal stimulus), though they are choosing not to.
From a creditors’ point of view, which the European Union authorities have apparently adopted, a country that has accumulated too much debt must be punished, so as not to encourage “bad behavior.” But punishing an entire country for the past mistakes of some of its leaders, while morally satisfying to some, is hardly the basis for sound policy.
There is also the idea that Greece — as well as Ireland, Spain and Portugal — can recover by means of an “internal devaluation.” This means increasing unemployment so much that wages fall enough to make the country more internationally competitive. The social costs of such a move, however, are extremely high and it rarely if ever works. Unemployment has doubled in Greece (to 14.7 percent), more than doubled in Spain (to 20.7 percent) and more than tripled in Ireland (to 14.7 percent). But recovery is still elusive.
You can be sure that the European authorities would offer Greece a better deal under a credible threat of leaving the euro zone. In fact, there are indications that they may have already moved in response to last week’s threat.
But the bottom line is that Greece cannot afford to settle for any deal that does not allow it to grow and make its way out of the recession. Loans that require what economists call “pro-cyclical” policies — cutting spending and raising taxes in the face of recession — should be off the table. The attempt to shrink Greece’s way out has failed. If that’s all that the European authorities have to offer, then it is time for Greece, and perhaps others, to say goodbye to the euro.
The past three years have been a disaster for most Western economies. The United States has mass long-term unemployment for the first time since the 1930s. Meanwhile, Europe’s single currency is coming apart at the seams. How did it all go so wrong?
Well, what I’ve been hearing with growing frequency from members of the policy elite — self-appointed wise men, officials, and pundits in good standing — is the claim that it’s mostly the public’s fault [μαζί τα φάγαμε] . The idea is that we got into this mess because voters wanted something for nothing, and weak-minded politicians catered to the electorate’s foolishness.
So this seems like a good time to point out that this blame-the-public view isn’t just self-serving, it’s dead wrong.
The fact is that what we’re experiencing right now is a top-down disaster. The policies that got us into this mess weren’t responses to public demand. They were, with few exceptions, policies championed by small groups of influential people — in many cases, the same people now lecturing the rest of us on the need to get serious. And by trying to shift the blame to the general populace, elites are ducking some much-needed reflection on their own catastrophic mistakes.
Let me focus mainly on what happened in the United States, then say a few words about Europe.
These days Americans get constant lectures about the need to reduce the budget deficit. That focus in itself represents distorted priorities, since our immediate concern should be job creation. But suppose we restrict ourselves to talking about the deficit, and ask: What happened to the budget surplus the federal government had in 2000?
The answer is, three main things. First, there were the Bush tax cuts, which added roughly $2 trillion to the national debt over the last decade. Second, there were the wars in Iraq and Afghanistan, which added an additional $1.1 trillion or so. And third was the Great Recession, which led both to a collapse in revenue and to a sharp rise in spending on unemployment insurance and other safety-net programs.
So who was responsible for these budget busters? It wasn’t the man in the street.
President George W. Bush cut taxes in the service of his party’s ideology, not in response to a groundswell of popular demand — and the bulk of the cuts went to a small, affluent minority.
Similarly, Mr. Bush chose to invade Iraq because that was something he and his advisers wanted to do, not because Americans were clamoring for war against a regime that had nothing to do with 9/11. In fact, it took a highly deceptive sales campaign to get Americans to support the invasion, and even so, voters were never as solidly behind the war as America’s political and pundit elite.
Finally, the Great Recession was brought on by a runaway financial sector, empowered by reckless deregulation. And who was responsible for that deregulation? Powerful people in Washington with close ties to the financial industry, that’s who. Let me give a particular shout-out to Alan Greenspan, who played a crucial role both in financial deregulation and in the passage of the Bush tax cuts — and who is now, of course, among those hectoring us about the deficit.
So it was the bad judgment of the elite, not the greediness of the common man, that caused America’s deficit. And much the same is true of the European crisis.
Needless to say, that’s not what you hear from European policy makers. The official story in Europe these days is that governments of troubled nations catered too much to the masses, promising too much to voters while collecting too little in taxes. And that is, to be fair, a reasonably accurate story for Greece. But it’s not at all what happened in Ireland and Spain, both of which had low debt and budget surpluses on the eve of the crisis.
The real story of Europe’s crisis is that leaders created a single currency, the euro, without creating the institutions that were needed to cope with booms and busts within the euro zone. And the drive for a single European currency was the ultimate top-down project, an elite vision imposed on highly reluctant voters.
Does any of this matter? Why should we be concerned about the effort to shift the blame for bad policies onto the general public?
One answer is simple accountability. People who advocated budget-busting policies during the Bush years shouldn’t be allowed to pass themselves off as deficit hawks; people who praised Ireland as a role model shouldn’t be giving lectures on responsible government.
But the larger answer, I’d argue, is that by making up stories about our current predicament that absolve the people who put us here there, we cut off any chance to learn from the crisis. We need to place the blame where it belongs, to chasten our policy elites. Otherwise, they’ll do even more damage in the years ahead.

By MICHAEL HUDSON
A landmark fight is occurring this Saturday, April 9. Icelanders will vote on whether to subject their economy to decades of poverty, bankruptcy and emigration of their work force. At least, that is the program supported by the existing Social Democratic-Green coalition government in urging a “Yes” vote on the Icesave bailout. Their financial surrender policy endorses the European Central Bank’s lobbying for the neoliberal deregulation that led to the real estate bubble and debt leveraging, as if it were a success story rather than the road to national debt peonage. The reality was an enormous banking fraud, an orgy of insider dealing as bank managers lent the money to themselves, leaving an empty shell – and then saying that this was all how “free markets” operate. Running into debt was commended as the way to get rich. But the price to Iceland was for housing prices to plunge 70 per cent (in a country where mortgage debtors are personally liable for their negative equity), a falling GDP, rising unemployment, defaults and foreclosures.
Μαθήτριες που τις βιάζουν θαλάσσια τέρατα τα οποία μοιάζουν λες και βγήκαν από τα βάθη του ωκεανού μετά την καταστροφή της Φουκουσίμα. Νεαρά κορίτσια που κάνουν χαρακίρι με σπαθιά σαμουράι, γιαπωνέζικα βομβαρδιστικά που εφορμούν για να τυλίξουν το Μανχάταν στις φλόγες, σαρδώνια κοινωνικά σχόλια, μηδενιστικά μηνύματα και ένας υφέρπων θυμός που είναι έτοιμος να χτυπήσει σαν τσουνάμι τις αισθήσεις του θεατή είναι μερικά μόνο από τα στοιχεία που κυριαρχούν στον εφιαλτικό κόσμο του Μακότο Αίντα (Makoto Aida).

Πρόκειται για έναν μεγάλο καλλιτέχνη που προκαλεί τον θεατή να τον μισήσει, ενώ ταυτόχρονα μαγνητίζει το βλέμμα και το υποσυνείδητό του. Μετά τον 2ο Παγκόσμιο Πόλεμο οι ιάπωνες βλέποντας με τρόμο την ταπεινωτική ήττα του στρατού τους να οδηγεί στην τραγωδία της Χιροσίμα, αποφάσισαν να κάνουν μια σημαντική στροφή και από μια μιλιταριστική κοινωνία να στραφούν προς μια κοινωνία καταναλωτική, όπου οι ρυθμοί ανάπτυξης ήταν το νέο εθνικό σύμβολο.
Το μοντέλο αυτό όχι μόνο απέτυχε να κάνει τους ιάπωνες ευτυχισμένους - γεγονός που αποδεικνύεται από την κατάρρευση των γάμων και της γονιμότητας και τα συνεχώς αυξανόμενα ποσοστά αυτοκτονιών-, αλλά κατέληξε και σε έναν εφιάλτη σκεπασμένο από ραδιενεργό νέφος, σχεδόν πανομοιότυπο με εκείνο του Ναγκασάκι.

Την αποτυχία αυτή εκφράζει ο Αίντα μέσα από τις ζοφερές εικόνες τους που θυμίζουν Ιερώνυμο Μπος με σχιστά μάτια. Την ίδια στιγμή, όπως όλοι οι μεγάλοι καλλιτέχνες κάνει αναφορές στους μαέστρους του παρελθόντος. Το έργο του «No More War. Save Water. Don’t Pollute The Sea», όπου ένα θαλάσσιο τέρας συνουσιάζεται με μια νεαρή μαθήτρια, είναι σαφής αναφορά στο διάσημο έργο του Hokusai «Το όνειρο της γυναίκας του ψαρά» όπου μια γυναίκα φαίνεται να βρίσκει την ηδονή με δύο χταπόδια.

Ο Ιωάννης Αλταμούρας μπορεί να γεννήθηκε στη Φλωρεντία ή τη Νάπολη της Ιταλίας το 1852 και πέθανε στις Σπέτσες τον Μάιο του 1878. Ήταν γιος του ιταλού ζωγράφου και επαναστάστη Φραντσέσκο Σαβέριο Αλταμούρα (Francesco Saverio Altamura) και της Ελένης Μπούκουρα – Αλταμούρα, που καταγόταν από αρχοντική οικογένεια των Σπετσών. Η μητέρα του ήταν η πρώτη ελληνίδα ζωγράφος και δίδαξε την τέχνη του σχεδίου στον Ιωάννη, που από μικρός έδειξε την έμφυτη κλίση του προς την ζωγραφική. Έγινε δεκτός στην Σχολή των Τεχνών (την μετέπειτα «Ανωτάτη Σχολή Καλών Τεχνών» της Αθήνας), όπου μελέτησε ζωγραφική κοντά στον Νικηφόρο Λύτρα κατά την διετία 1871 - 1872. Με υποτροφία του Βασιλιά Γεωργίου Α΄, συνέχισε τις σπουδές του στην Κοπεγχάγη κατά την περίοδο 1873 -1876 κοντά στον Καρλ Φρέντερικ Σόρενσεν (Carl Frederik Sørensen). Το 1875, και ενώ βρίσκονταν ακόμα στην Κοπεγχάγη, έστειλε στην έκθεση των Ολυμπίων στην Αθήνα το έργο του «Το λιμάνι της Κοπεγχάγης», για το οποίο τιμήθηκε με αργυρό μετάλλιο Β΄ τάξεως. Όταν επέστρεψε στην Ελλάδα, άνοιξε εργαστήριο ζωγραφικής στην Αθήνα, ενώ η φήμη του άρχισε να αυξάνεται. Δυστυχώς, προσβλήθηκε από φυματίωση και πέθανε το 1878, σε ηλικία μόνον 26 ετών. Ο θάνατός του και ο θάνατος της αδελφής του, που είχε συμβεί λίγα χρόνια πριν — επίσης από φυματίωση — οδήγησε την μητέρα του στον νευρικό κλονισμό και την τρέλα. 