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Dr. Draghi Prescribes a Dose of Deflation for Spain as his latest Quack Cure

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The French economy stagnated and France went cap in hand to Brussels to extend the deadlines for getting the deficit within 3% of economic output to 2015 from 2013. France's request was accepted."

The French voters (unlike the WSJ) had no difficulty seeing through Hollande's faux "success."  They just punished Hollande's party in a series of municipal elections.  "Curbing spending and raising taxes" when a nation is trying to recover from a second, gratuitous recession caused by the troika's austerity demands is an anti-growth pact, not a "so-called growth pact."  Calling austerity a "growth pact" represents an act of cynical propaganda, not "chalk[ing] up some success."  Austerity caused the gratuitous second Great Recession in France and austerity "stagnated" France's recovery.

Hollande responded to the election disaster by dumping his Prime Minister and declared that the troika must allow France to use fiscal stimulus.  The troika immediately pushed back, demanding greater austerity.  The same WSJ article quotes Olli Rehn.

"It is essential that France acts decisively to ensure the sustainability of its public finances," EU economics chief Olli Rehn said at a meeting of euro-zone finance ministers in Athens. "The correction deadline for France's excessive deficit has already been extended twice in recent years."

Rehn is the troika-trolls' enforcer.  He breaks economies (rather than legs), forces elected government leaders to resign, and blocks democratic votes on austerity.  He replaces the leaders he deposes with unelected troika-trolls.  He is the envy of the modern CIA, once the master in arranging similar coups.

France's "deficit" is vastly too small to fill the gap in inadequate private sector demand that has caused France's continuing economic and social failures.  What's "excessive" in France is unemployment.  There is nothing remotely "[un]sustainabl[e]" about France's "public finances."  The policies that the troika inflicts on the eurozone have harmed, not "correct[ed]," France's economy and people.

Italy's Bipolar Approach to Austerity

Meanwhile, Italy is acting in its own crazed fashion.  The WSJ article about Hollande claims that Italy's new prime minister in as ally of Hollande's anti-austerity efforts.

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"The French president can count on Italy's recently elected premier as a key ally. Fellow socialist Matteo Renzi has presented similar tax-cutting plans to those of Mr. Hollande, and also called for Brussels to let his country rely on increased debt.

When Mr. Renzi visited his French counterpart in Paris last month, the two leaders vowed to make Europe more focused on supporting economic growth."

A preliminary note is in order.  The WSJ uses the word "socialist" as a swear word indicating depravity.  The article I am quoting makes it sound like Hollande and Renzi are wild extremists.  They are, in fact, their country's equivalents of Tony Blair and Bill Clinton.  Hollande tried a stint of criticizing the banks, but overall these leaders of the "left" often out-compete the conservative parties in their slavishness to championing the interests of the CEOs who run the largest banks, the systemically dangerous institutions (SDIs).

The reality in Italy is far different from how the WSJ article quoted above pictures the situation.  Notice the vague statements Hollande and Renzi made: "more focused" and "supporting economic growth."  Recall that Hollande tried to sell the eurozone on the propaganda that his anti-growth austerity policies of "curbing spending and raising taxes" were part of a pro-growth pact.  So, is Italy actually seeking to use fiscal stimulus, the real growth plan that actually works?  A contemporaneous WSJ article ("Italian Premier Renzi Turns to IMF Veteran to Wrangle Public Finances") reveals how confused the answer must be.  The "socialist" Renzi just appointed an IMF troika-troll to a top position in his government and gave him the mission of "curbing spending" by " 34 billion ($46.8 billion) in state savings, or 2% of Italy's economic output."

According to this article, Renzi plans no increase in spending for the three categories that best drive economic growth and the well-being of the citizenry -- education, health, and infrastructure.  Instead, he plans to use the reductions in government spending to make up for the reduced government revenue he wants to produce through tax cuts, largely on businesses. 

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What do all three of these major articles in the top two U.S. financial papers have in common?  They never mention the word "demand."  "Demand" is the single most important word and concept in the subjects they purport to discuss.

They also never bring up the alternative of a true fiscal stimulus.  (Both WSJ articles use the word "fiscal," but neither of them even mentions the alternative of a fiscal stimulus involving spending on the eurozone's tremendous unmet needs and a jobs guarantee program.)  The NYT article is so disgraceful that it does not even mention the unemployment (that exceeds Great Depression levels in Spain, Italy, and Greece or any of the resultant human suffering).  We know why the troika-trolls want human suffering to disappear from the narrative, but since it should be the overwhelming focus of any article about these topics we have to ask why journalists continue to display such malign malpractice no matter how many times we spell out in detail the errors.

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William K Black , J.D., Ph.D. is Associate Professor of Law and Economics at the University of Missouri-Kansas City. Bill Black has testified before the Senate Agricultural Committee on the regulation of financial derivatives and House (more...)

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