189 German academics support EU Sovereign default plan
by Mike “Mish” Shedlock
Originally posted 26 Feb 2011
Unlike the Keynesian and Monetarist academic clowns that rule US academia, German academics push for EU sovereign default plan
ALMOST 200 GERMAN ECONOMICS PROFESSORS have signed a declaration rejecting current proposals to resolve the eurozone debt crisis, instead calling for a way for distressed countries to declare bankruptcy.
More than 200 professors were invited to sign the document, and 189 did so, including prominent figures such as Manfred Neumann of the University of Bonn and Justus Haucap of the University of Duesseldorf, both in western Germany.
Instead of the collective support mechanism set up last year that could be made permanent in a modified form from 2013, the economists argued it would be better to let countries restructure their debts.
“Restructuring allows the countries concerned to reduce their debt and start over,” said the economists. The solution being mulled at present and likely to be approved by European leaders next month would amount to “a permanent guarantee” of some countries’ debt, with “very serious consequences,” they added.
The signatories also doubted the effectiveness of measures to reinforce the competitiveness of weaker eurozone countries and control members’ public finances owing to the European Union’s “limited firepower.”
The document was published as lawmakers from Chancellor Angela Merkel’s ruling coalition sent her a clear message ahead of negotiations on a permanent EU rescue plan to take place in Brussels.
The German deputies said the future European Stability Mechanism should not be allowed to buy eurozone government debt, as the European Commission and European Central Bank would like.
Those 189 academics simply want the ECB to admit that the debt owed by Greece, Ireland, Spain, Portugal, cannot possibly be paid back. What cannot be paid back, won’t, and pretending that it will just makes problems worse. It is refreshing to see a large group of academics on the right side of an economic issue.
Axel Weber, once heir apparent to ECB presidency to replace Jean-Claude Trichet, resigned as president of the German central bank over the issue of the ECB buying sovereign debt. He did not want the ECB to buy debt, most of the rest of the ECB did.
Academics in Germany are disregarded even though they make economic sense. Keynesian and Monetarist academics in the US make no sense but are revered.