German austerity: will the euro zone break up?

Anyone familiar with MMT would see the misery Germany is heading towards.  Even worse it will take with it the rest of Europe.  Excerpts below from an article that appeared in the Livemint today (25 October 2014) (http://uk.reuters.com/article/2014/10/24/uk-eu-summit-idUKKCN0ID0VF20141024) clearly highlights the fears that many modern money theorists have been warning us about.  What is surprising is that there is no popular political voices coming from Germany that make an MMT argument against German austerity.

Stagnating euro zone seeks German shift

BY FRANCESCO GUARASCIO AND ROBIN EMMOTT

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After the bloc's revival came to a halt in the second quarter, France and Italy want to shift course away from the spending cuts that marked the bloc's response to the 2009-2012 crisis Germany says debt discipline must continue.

Seated around a large oval table in the EU summit's red marble building, Merkel said no country with a national debt greater than its economic output should be borrowing more, diplomats said.

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According to people in the room, Merkel said record low interest rates gave the euro zone "room to breathe" and that a mix of private investment, fiscal discipline and openness to fast-growing Asian economies was the way forward.

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The debate is complicated by EU rules that seek to keep country's public finances in order and Germany's promise to balance its books next year for the first time since 1969.

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How mainstream macroeconomics thinking finds its way into popular discourse.

Two excerpts from articles that appeared in the Livemint of 20 October 2014 show how the need to achieve a fiscal deficit target is becoming an end in itself.  More than the fiscal deficit number per se the debate needs to focus on the real effects of subsidies in distorting resource allocation (if that is so) and the unproductive expenditure of the government that fails to ease supply side constraints and raise productivity.  There is surely space for an MMT perspective on these issues.

Is the centre finally cracking down on subsidies?

Decisions on diesel prices and cooking gas subsidy will help meet centre’s fiscal deficit target of 4.1% of GDP

Remya Nair

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The move will also enable the government to meet its fiscal deficit target of 4.1% of gross domestic product (GDP), even after taking into account the expected shortfall in revenue collections.
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A Union cabinet minister, who did not wish to be identified, pointed out that the government cannot afford to continue with the current subsidy regime. “There are no freebies. We cannot afford to bankrupt the state exchequer,” the minister said, signalling the central government’s intent to overhaul the subsidy regime.
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Read more at: http://www.livemint.com/Politics/h9P8fnfqgoehC9iRbAHzuL/Is-the-centre-finally-cracking-down-on-subsidies.html?utm_source=copy

What it takes to make in India

The first and most important condition for manufacturing success in India is to have a low inflation regime

Narayan Ramachandran 
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The first task in ensuring a low inflation environment is to eliminate the primary deficit. This deficit is the difference between the total revenue and total expenditure of the government with debt payments netted out of the calculation. India must begin to deliver upon both a primary and fiscal deficit target as measures of fiscal consolidation in its annual budget. The elimination of the primary deficit and a reduction in the fiscal deficit (to say 2.5% of GDP) will ensure that we live within our means each year, do not increase the stock of debt and crowd out less capital from the productive economy.

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Read more at: http://www.livemint.com/Opinion/ZNh0XaD02lIvreFus5PHlL/What-it-takes-to-make-in-India.html?utm_source=copy