International

01-07-2012 • PvdA (Labour Party) leader Diederik Samson yesterday expressed sharp criticism of the SP plan to combat the crisis not through the current disastrous spending cuts, but via the ECB adopting a more intelligent monetary policy. Setting the money-presses going would not help, argues Samsom. He should read the leading American economist Paul Krugman, who finds the current demolition policy so irresponsible that a few days ago he launched the ‘Manifesto for Economic Sense’. In the space of two days hundreds of economists have signed up to this manifesto, which advocates an active government which will ensure that in time budgetary balance will be achieved, but that the race to the bottom which is the current spiral of austerity must be stopped. A monetary policy in which cash was pumped into the economy would in their view as things stand be completely responsible. A lesson for the PvdA.

The SP’s view of the eurocrisis is clear. What we need to do is take a much harder line with the speculators than is now the case. The government leaders were last week, for the umpteenth time, held hostage by their fear of the ‘financial markets’. So they decided to immediately go to the aid of the banks, using the emergency fund, and moreover along with this to agree that if things went awry for any bank despite this aid, the emergency fund could allow them to rejoin the queue. What this means is that our tax euros will be exposed to ever greater risk. No wonder that SP leader Emile Roemer yesterday, during the party’s pre-electoral congress, accused Dutch Prime Minister Mark Rutte of giving Brussels his pin-code. His pin-code? More like that of the whole country, of all Dutch taxpayers.

It could be done differently. On the national level eurozone member states cannot conduct their own monetary policy. National central banks cannot print money. The power to do so now lies with the European Central Bank. This makes little use of this power, because Merkel and Rutte are of the opinion that this would make things far too easy for the southern European countries. How would it work exactly? If the ECB made it clear to the speculators that it would buy up bonds from economically weaker countries itself as soon as the interest rates on them exceeded a certain ceiling, the speculators’ feeding frenzy would be brought to an end and their attacks on these weaker eurozone countries would be halted. The chances of the ECB actually having to use this instrument are small. A simple threat to do so would scare the speculators off. The southern European countries would then know that they never need to fear ludicrously high interest rates and according to Merkel and Rutte this would make them lazy. That is certainly a risk and that’s why such a policy would have to be complemented by a well-thought out plan for the region: writing off of debt, better administration and an effective tax collection system, application of the European Union structural funds to promote innovation - these are all important elements of such a plan. That’s not happening as things stand: the ECB offers help in dribs and drabs and the countries in question gain no space to revive their economies.

The SP is not alone in this analysis. Paul Krugman has been calling for years for a policy of stimulation rather than demolition. He also recognises that you cannot do this in boom times, but that unfortunately it will be a very long time before we can return to such a favourable economic condition. Until then a policy of stimulation coupled with a concrete plan to restore southern European economies is responsible and absolutely necessary. That is simply ‘Economic Sense’. The revolt of the economists that Krugman unleashes with his manifesto has not yet reached the ears of the PvdA, but its leader Samson is intelligent enough to be able to effect a U-turn when necessary. Instead of attacking the SP, he would be doing his own party a greater service if he were to line it up behind Krugman’s manifesto. That would show ‘economic sense’.