The Modest Proposal introduces no new EU institutions and violates no existing treaty. Instead, we propose that existing institutions be used in ways that remain within the letter of European legislation but allow for new functions and policies.
These institutions are:
· The European Central Bank – ECB
· The European Investment Bank – EIB
· The European Investment Fund – EIF
· The European Stability Mechanism – ESM
Here are the four policies that will re-deploy the above institutions in a manner that deals a decisive blow at, respectively, (1) the banking crisis, (2) the public debt crisis, (3) the under-investment and internal imbalances crisis, and (4) the social emergency crisis afflicting countries were absolute poverty is becoming a major issue:
Policy 1 – Case-by-Case Bank Programme (CCBP)
Policy 2 – Limited Debt Conversion Programme (LDCP)
Policy 3 – An Investment-led Recovery and Convergence Programme (IRCP)
Policy 4 – An Emergency Social Solidarity Programme (ESSP)
Read Section 5: Conclusion – Four realistic policies to replace five false choices
I think other modest measures should be in te equation, some other measures that go in the same direction of professor Varoufakis proposal.
First and foremost the need to somehow consolidate the ECB on the country institutions. ECB doesn’t consolidate with an European treasure, which compounds the debt problem, since debt held by the ECB shouldn’t be accounted for the determination of national debt levels.
Second would be to have the sovereign debt held by the ECB accounted by the purchase value of the debt, and not by its nominal value. ECB bought large quantities of sovereign debt from the periphery countries at a great discount which should be transmitted back to the sovereign countries and not stay in the ECB balance sheet. It’s also a case of fairness and not having the periphery countries pay to the QE measures in central Europe. No haircut needed, just the transfer of the gains on sovereign debt by the reduction of coupons.
Third and probably the most important and controversial is a transitory period where countries with problems could increase the VAT on imports, EU and non EU. Balancing the trade balance via reduction of the product is like losing weight by amputating a limb, makes no sense at all. Import taxes should be allowed for countries in difficult competitive conditions (transitory). If this VAT differentiation on imports (cars have different taxes throughout Europe, by the way) is too much for the EU to handle, then the countries should lower the VAT on services or allow a VAT deduction for wages.
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Ever thought about translating those proposals? After all, the UK does not need saving.
But politics in, for instance, Spain and Italy have run into a dead-end, with major parties supporting a national hara-kiri and fringe parties calling for dramatic actions.
Even the German debate started by AFD could benefit from a reasonable plan to actually get the damn thing working, instead of dropping it altogether.
Maybe some smallish party in the periphery could champion the proposals and push the larger parties to adopt them.
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The premise of these no doubt elegantly formulated proposals is that the Euro project is worth saving, and can yield a convergent economic whole.
The evidence to date does not support that position, and the reasons for that are far more fundamental than poor policy implementation.