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'The Euro Area Adjustment' - What it really means

The Tax Justice Network have been publicising a briefing document produced by JP Morgan Chase & Co, an American banking and allied services company, entitled The Euro Area Adjustment: About Halfway There

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Photo Credit: Lazio's World
Photo Credit: Lazio's World


The Tax Justice Network have been publicising a briefing document produced by JP Morgan Chase & Co, an American banking and allied services company, entitled The Euro Area Adjustment: About Halfway There. It reads like an Economist briefing, and punches like one too.

It seems beneath the ever so reasonable and slightly witty language beloved of financial analysts and journalists there lies a set of very worrying suggestions and assumptions which lay bear what our financial lieges consider to be the best future direction for a large section of the European population. Following their contribution to the 'narrative of crisis in the Euro area' JP Morgan's analysts devote a lot of attention to 'national legacy issues'. Of course every institution, every country, every culture has its history, its story of how it came to be what it is. Yet this is also true for financial services firms and political ideologies.

JP Morgan express particular concern about the 'legacy of anti-fascism' in southern Europe. They envisage a 'decade long period of economic and political reform'. The analysts consider the period of economic adjustment 'halfway there', which really refers to the steady erosion of living standards across southern Europe. This has left over 20% of Spaniards out of work, seen Italy's living standards inflated away and led to a situation where Greece's cities are depopulating as people head back to the land in search of food.

In the face of this misery the analysts have one solution: structural reform. This may be more detrimental than good with the removal of hard won labour and welfare rights, increased insecurity and doubtless further pay-cuts. Ultimately then the economies of southern Europe are forced into a state where they can 'compete' with economies in the global south on a 'cost basis'. This is to be expected, as living standards and thus production costs rise in the major developing countries like China and Brazil. Here the populations appear to be becoming increasingly assertive, and so it will be increasingly necessary from a profitability point of view for firms to forge new low wage markets for manufacturing and resource extraction purposes.

Obviously in democratic states with educated, reasonably well informed populations, it is a certainty that the people will not let this go unchallenged. Spain, Portugal and Greece were governed by military dictatorships until 1975 and all 4 countries had miserable 20th Centuries marred by civil strife and civil war. Resistance to impositions by the powerful is still very much a part of their historical memory and living culture. How this is to be circumvented and broken down in the interests of returns on capital as set out in final part of JP Morgan's report?

Moving swiftly from 'structural reform' the Report's authors conclude with a section on political reform. Here the 'short comings' of southern Europe's 'political legacy' are laid bare: 'weak executives', 'decentralised states', 'constitutional protection for labour rights' and 'the right to protest changes' are presented as sacred cows fit for the abattoir. They're suggesting as policy recommendations that southern Europe governments, with encouragement from their northern neighbours and European institutions, reduce the power of their parliaments and the courts. This would ultimately smash local decision making and consequently is likely to muzzle their right to protest any changes. Indeed these policies seem very strange coming from writers who claim to support freedom and flexibility.

So will southern Europe suffer for their sins of 'seeking consensus'? Will we in less sunny climes also suffer? Maybe we have already? Where they weren't in place already we applied JP Morgan's remedies long ago, replacing politics with polite but very firmly worded analyst's charts.

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