IN his speech in Dublin on Wednesday, Bank of England Governor Carney delivered a warning to the EU – as Greek shares collapsed on the news that the Syriza left government intends to halt the privatisation programme and re-employ all sacked public sector workers.
Referring to the European Central Bank’s 1.1 trillion euros of quantitative easing, he said: ‘Although there was monetary boldness last week, the currency union has been relatively timid in putting in place the other policies and, crucially, the institutions necessary to deliver sustainable prosperity for its citizens.
‘Now is not the time for half measures. In all advanced economies, private investment is still being held back by a combination of modest demand prospects and lingering concerns of another major adverse shock.’ An ‘adverse shock’ is a crash by any other name.
He continued: ‘Since the financial crisis, all major advanced economies have been in a debt trap where low growth deepens the burden of debt, prompting the private sector to cut spending further.
‘Persistent economic weakness damages the extent to which economies can recover. Workers become discouraged and leave the labour force. Prospects decline and the noose tightens.’
He continued: ‘The debt tail is wagging the market dog. These realities continue to weigh on the European financial system.’
He added: ‘The result is demand compression … sustaining fears that another major adverse shock is possible … This all suggests that investors may be attaching some probability to very bad outcomes, possibly the tail risk of economies becoming stranded in a debt trap.’
It turns out that the UK is an example to the planet! He declares that the ‘UK is escaping its debt trap’, while: ‘There are few clearer illustrations of the benefits of sound fiscal arrangements than in a currency union.’
Carney declared: ‘A powerful demonstration of this comes with the recent sharp fall in global oil prices. Because this risk is shared across the entire UK (which on the whole is a net beneficiary of lower oil prices), the net impact on the Scottish public finances is a mere one tenth of what it would have been if there were no risk sharing.’
He adds: ‘The UK labour market is also highly flexible. The fall in real incomes caused by the depreciation of sterling was absorbed by employees, effectively purchasing faster job creation.’
He also puts in a good word for the Irish!
‘Irish workers and citizens deserve great credit for the flexibility they have shown. Wages in Ireland fell by almost 9%. In Spain they rose by 3%.’
His conclusion: ‘Europe needs a comprehensive, coherent plan to anchor expectations, build confidence and escape its debt trap.
‘That plan begins but does not end with the monetary policy boldness of the ECB.
‘That plan includes difficult structural reforms, but cannot be wholly reliant on them.
‘That plan requires greater private risk sharing via banking and capital markets unions.
‘But that plan also needs to recognise that private risk sharing will never fully replace public risk sharing so that plan should include what every other successful currency union has at its heart: mechanisms to share fiscal sovereignty.’
Carney wants an EU political union that will wage war on the working class as well as transferring wealth from the richer to the poorer sections of the bourgeoisie, as he claims is being done in the USA and Canada.
However, the big bourgeoise of Germany and the UK are only interested in dominating Europe and crushing the weaker sections of capital, as well as the working class.
Carney’s risk-share regime plan for the EU is a reactionary utopia. He has forgotten that capitalism is a jungle and that its law is the survival of the fittest.
The only way out of the crisis for the workers of the EU is to bring down the union with socialist revolutions and to go forward to the Socialist United States of Europe, and planned production to satisfy people’s needs across the whole continent.