The ‘Fiscal Compact’ Has Not Solved the Euro Crisis

Philip Arestis and Malcolm Sawyer

The Triple Crisis Blog is pleased to welcome Philip Arestis and Malcolm Sawyer as regular contributors. Philip Arestis is the Director of Research at the Cambridge Centre for Economic & Public Policy and Senior Fellow in the Department of Land Economy at the University of Cambridge, UK, and Professor of Economics at the University of the Basque Country, Spain. Malcolm Sawyer is Professor of Economics at the University of Leeds, UK.

In a recent post (19th December 2011) we argue that the recent ‘fiscal compact’ agreed upon by the European Union (EU)/European Monetary Union (EMU) at their meeting of 8th/9th December 2011 would not deliver. Now that further details have emerged, it is clear that the situation is even far worse than what appeared to be in the first instance. It is now clear that neither the governments of the EMU countries nor the European Central Bank (ECB) have committed themselves to doing enough let alone satisfactorily. The ECB is not prepared to perform the proper role of any central bank, namely the ‘lender of last resort’ function. EMU governments have not made progress on the ‘eurobond’ idea, whereby the EMU members would share the troubled economies burden of debt.

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Triple Crisis partners with INESC, blog posts now available in Portuguese

The Triple Crisis Blog is pleased to announce a new partnership with the Instituto de Estudos Socioeconômicos (INESC – Institute for Socioeconomic Studies) in Brazil. INESC is a non-profit research and advocacy organization covering a wide variety of topics, including fiscal and budget policy, human rights, international policy, food sovereignty, socio-environmental rights, and land reform.

As part of this partnership all original Triple Crisis posts will be available in Portuguese on the INESC Blog. (See Fander Falconi’s recent post in Portuguese.) We are also pleased to begin featuring contributions from INESC economists, translated into English. Triple Crisis posts will soon also appear in Spanish. Triple Crisis is able to translate posts thanks to our blog partners at the Heinrich Boell Foundation.

Spotlight Durban: Durban, Another Failure

Fander Falconí

In Durban, South Africa, world officials and diplomats decided to do nothing about climate change. Although China produces per capita emissions that are four times lower than those of the United States,  it should not ignore the fact that these emissions are already above the world average. Meanwhile, the US blames China for the rise in its aggregate emissions and refuses to make any commitments to reduce its own emissions. In Durban, rich countries pledged money, but also more carbon dioxide. Latin American countries took a variety of positions.

The Seventeenth International Climate Change Summit (Conference of Parties (COP-17)), which ended last month in Durban, should have forged a strong international agreement to replace the Kyoto Protocol, which will expire in 2012.

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China’s coming crises

Patrick Bond

With economic crashes and ecological calamities so prevalent in 2011, concluding with a do-little November G20 meeting in Cannes and a do-nothing December climate summit in Durban, January has opened with intense fear of eurozone deterioration. In this uncertain context loom the two most potent forces shaping the period ahead: China’s capital accumulation process and class struggle.

Because of the country’s uneven and combined development, within an extraordinary boom we can see the beginnings of a potentially world-scale bust, plus prodigious socioeconomic battles from below alongside brutal attacks on the environment such as coal-fired power and the Three Gorges Dam (notwithstanding exceptional ‘green economy’ advances).

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China on the verge?

Matías Vernengo

It has become increasingly common to suggest that on top of the European debacle and the sluggish recovery in the United States, China might be on the verge of a collapse, and with it the last bastion of economic growth in the world economy would also be gone. Not only the center is stagnant, but also the periphery of the global economy is very fragile. But the probability of a Chinese slowdown is greatly exaggerated.

Paul Krugman, who has been correct about the need for fiscal expansion in the United States, and about the European Central Bank (ECB) mismanagement of the Greek crisis, for example, has suggested that China is in the middle of a housing bubble that can burst at any time (see also Jayati Ghosh and C. P. Chandrasekhar here for a similar, but broader view of the dangers in 2012). This view insinuates that growth in China is fundamentally dependent on domestic demand, but that the sources of the expansion are fragile. It, further, suggests that China now looks very similar to the US before the Lehman Brothers crisis in September 2008.

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