Bill Mitchell — Eurozone has failed – a major shift in direction is needed

Summary analysis from Bill: It's the (neoliberal) design, stupid.

Conclusion As it stands, the Eurozone is a failed system. It has been for 14 years. Unless there is a major shift in thinking it will continue to be.

The fix —

What is required immediately is: 

1. Overlook the SGP rules – allow nations to exceed the deficit and debt thresholds (encourage them to do so) – they can invoke the emergency let outs in the Treaty. 

2. Announce that the ECB will buy any government debt. This can be done within the Treaty via the secondary markets. That will eliminate any problems with bond markets and higher yields. The ECB can guarantee solvency implicitly in this way and still stick within the legal constraints. 

3. Announce a massive public employment and public infrastructure program throughout Europe. That would eliminate unemployment and spur growth in private spending. 

4. Do not waste time introducing a quantitative easing program. All bond purchases should be tied to increasing fiscal deficits. 

5. Provide a demogrant of some euro amount to all people in the bottom 3 quintiles of the income distribution funded by the ECB. That would flow straight into the expenditure stream. There is nothing in the Treaty rules that say the ECB cannot do this. They just cannot bail out governments or allow overdrafts to them.

Bill Mitchell – billy blog Eurozone has failed – a major shift in direction is neededBill Mitchell | Professor in Economics and Director of the Centre of Full Employment and Equity (CofFEE), at the Charles Darwin University, Northern Territory, Australia