Large scale ECB intervention is necessary but insufficient

Given how important additional ECB support is to helping stem the panic in the Euro crisis at this stage, it is useful to look at how much it would actually help. An increasing number of shrill commentators have been implying that enhanced intervention from the ECB may be a 'silver bullet'. It will be no such thing. We at Re-Define have been calling for the ECB to do more since before this call became fashionable but we have no illusions about what such an intervention can achieve.

BRICS can not help a Eurozone intent on committing hara-kiri

Note: This is my Op-Ed response to Jeff Sach's suggestion that emerging markets should help the eurozone. It appeared in the FT's A-List.

The eurozone’s problems are entirely self-inflicted, and the solutions too must come from within.

However, the European Union may be ‘institutionally incapable’ of getting a handle on the crisis now. Its fragmented structure makes decision-making slow and difficult at the best of times. Petty parochial politics and procrastination has transformed a treatable birth-defect into a near-fatal malady.

The speed, scale and cross-border nature that characterise the crisis now, probably rule out solutions that come from the divided European Council, which is incapable of moving fast enough to restore confidence. The crisis that has already engulfed six of the seventeen euro member states limits their financial ability to act even if they could make quicker decisions. The European Commission, which can act faster, has no money to help.

Green Financial System: Funding the Green New Deal

As the Euro crisis intensifies, an even more serious crisis is brewing in the background, that of impending climate change that threatens not just Europe, but all of humanity. Recent figures on green house gas emissions that exceed the worst case scenario predicted by scientists have shocked the global community. 

At the same time, it has become clear that the biggest missing element from all of the European Union's proposals to stem the Euro crisis has been the absence of any growth strategy. Without growth in Europe, we are all doomed to a fate of debt and deflation.

The 99% and Occupy movements have stimulated a wide-ranging public debate about the lack of opportunities, for those at the bottom rungs of society, as well as about the rising levels of inequality accross the world. The EU now has receod unemployment. 

Our New Blue Print: Funding the Green New Deal: Building a Green Financial System, lays out a detailed plan for how to simultaneously attack these multiple crises.

For Europe, High Stakes in Greece

Note: This is the first part of my Essay \'For Europe, High Stakes in Greece\' that has just been published by the American Prospect this week. The recent decision on the Greek referendum adds a special relevance to this article.

The problems of the Euro turned critical when the Greek government nearly defaulted in May 2010 and the International Monetary Fund and European Union agreed to a bailout. In truth, the 17-nation Euro area had deep troubles long before that. Its oversized and undercapitalized banks, its common monetary policy but diverse and fragmented fiscal policies, the persistent economic imbalances among its members, and a cumbersome decision-making structure all made the Euro area economy vulnerable. The crisis, which still unmistakably bears the mark of the Greek tragedy that first set it off, has now spread far beyond Greece.

The Euro was created for normal times, but the EU had no good mechanisms for crisis management. At every step of the Greek drama, policymaker responses have remained behind the curve of economic deterioration. Slowly but surely, this erosion of confidence ensnared other countries, such as Ireland and Portugal, then spread to Spain and Italy, both  widely perceived to be fiscally vulnerable. If European leaders cannot resolve Greece’s problems, they can hardly save the much larger economies of Spain and Italy.

What's all this Financial Transaction Tax fuss about?

EU leaders are at it once again; putting Financial Transaction Taxes (FTTs or Tobin Taxes as they are also called) back on the agenda while they are forced on the back foot by the unresolved Euro crisis. At a time when citizens are losing faith in the ability of our leaders to solve the crisis, talking about FTTs, which remain heavily popular with the public, almost always earns political brownie points.

But what can FTTs really achieve? And is the current approach, presented by the European Commission, designed to succeed? If not, should be abandon the idea altogether or is there another tax design that will work better?

One thing is for sure FTTs will not change the world, nor democratize global finance. Nor will they raise the hundreds of billions of Euros of revenue that is sometimes attributed to them. But, approached sensibly, a well-designed and flexible regime for financial transaction taxes can deliver a lot of benefits.