Milios, John; Lapatsioras, Spyros; Sotiropoulos, Dimitris P. (2014): An Outline of a Progressive Resolution to the Euro-area Sovereign Debt Overhang. How a Five-year Suspension of the Debt Burden Could Overthrow Austerity. November 2014. Annandale-on-Hudson, NY: Levy Economics Institute (Working Paper (LEI), 819). http://www.levyinstitute.org/pubs/wp_819.pdf.
Abstract The present study puts forward a plan for solving the sovereign debt crisis in the euro area (EA) in line with the interests of the working classes and the social majority. Our main strategy is for the European Central Bank (ECB) to acquire a significant part of the outstanding sovereign debt (at market prices) of the countries in the EA and convert it to zero-coupon bonds. No transfers will take place between individual states; taxpayers in any EA country will not be involved in the debt restructuring of any foreign eurozone country. Debt will not be forgiven: individual states will agree to buy it back from the ECB in the future when the ratio of sovereign debt to GDP has fallen to 20 percent. The sterilization costs for the ECB are manageable. This model of an unconventional monetary intervention would give progressive governments in the EA the necessary basis for developing social and welfare policies to the benefit of the working classes. It would reverse present-day policy priorities and replace the neoliberal agenda with a program of social and economic reconstruction, with the elites paying for the crisis. The perspective taken here favors social justice and coherence, having as its priority the social needs and the interests of the working majority. […] 8. CONCLUSIONS This paper aims to contribute to the discussion in the European left about the ongoing sovereign debt overhang in a number of EA economies. Although we have presented several alternative scenarios in sections 6 and 7, which have as a main target the annihilation of austerity in the EA, our final proposal can be summarized by the following phrase: suspend the debt burden for five years, overthrow austerity forever. At a technical level, it can take many alternative versions but it is based on the economic firepower of the ECB to curtail the workings of financial markets, thus securing a vital fiscal space for the development of alternative welfare policies. The ECB undertakes the long-term management of a significant part of the EA sovereign debt, without direct fiscal transfers and without any actual upfront haircut. Beyond its technical details, our argument is primarily of a political nature. It aims at writing off austerity, which is a strategic target of capital and a critical condition for the promotion of the neoliberal agenda against the interests and anticipations of labor. We believe that this study comes at the right time. The ongoing sovereign indebtedness and related fiscal predicament for the majority of EA economies has made it clear that austerity-led fiscal adjustments and privatizations can by no means tackle the problem. Our proposal buries austerity forever at an overall cost which is much lower than the private sector quantitative easing already undertaken by the ECB. It thus offers a powerful economic argument to the left and puts forward a slogan for the forthcoming political confrontation: We will not sacrifice the welfare state to debt. The European social model must be re-founded! _______________________________________________ pen-l mailing list [email protected] https://lists.csuchico.edu/mailman/listinfo/pen-l
