Rehn ready to sacrifice part of the real economy

Press conference by Olli Rehn, Vice-President of the EC, on the winter economic forecasts for 2013-2014. (EC Audiovisual Services).

Last week, Ollie Rehn, the EU Commissioner responsible for the Economy, while presenting his “winter forecast 2012-14” for the Union, appeared not to bother with the prospects of the rising unemployment and the collapsing prospects for the young. Otherwise it cannot be explained why he said that, “The ongoing rebalancing of the European economy is continuing to weigh on growth in the short-term (however) we must stay the course of reform and avoid any loss of momentum, which could undermine the turnaround in confidence that is underway, delaying the needed upswing in growth and job creation.”

Speaking about the “momentum” obviously he is not referring to growth prospects. He means exactly the opposite that is the momentum of the dreadful austerity programmes, now covering the entire Southern part of our continent and infecting the rest of it. He actually says, without any remorse, that the slightest relaxation of all those draconian programmes imposed on many Eurozone countries, “could undermine the turnaround in confidence that is underway, delaying the needed upswing in growth and job creation”.

Rehn however does not limit himself to praising the utterly unpopular economic measures. He also tries to hide the facts. This is the ultimate refuge of the “long term” economists, who whenever faced with facts contradicting their ideology, take refuge to silence. In the text of the Press release with which the Commission presented to the world its “Winter forecast 2012-14”, there is nowhere mention of the fact, that in 2012 the Eurozone lost 0.6% of its Gross Domestic Product. One has to enlarge the huge tables with the small digits, in order to clearly see that. Nor is mentioned in this text, that this small looking decrease of GDP by 0.6% means a 100% loss for those who lost their job because of it, and also for those who couldn’t find one. Obviously this story was repeated hundreds of thousands of times last year but Rehn couldn’t care to underline that.

Unfortunately for us all the bad news doesn’t end there. Eurozone will also lose parts of its income this year too, estimated by Mr Rehn at -0.3%. He refers to that explicitly in the text of the Press release. Probably because he thinks that this is a small cost, compared to the ‘achievement’.  What achievement? Obviously he means the draconian cuts in almost all EU government budgets and also in EU’s proper budget. What else could he mean when he said that, “The decisive policy action undertaken recently is paving the way for a return to recovery”? We can understand which the “decisive policy action” was, but we cannot see the return to recovery. Unless he is happy with a predicted 1.4% increase of GDP in the year 2014. Unfortunately again for all of us, this is within the statistical error margin and even Rehn can be wrong.

The financial markets

Now what about the financial markets? In this domain Rehn feels at home. He is very happy with the good developments in the financial markets during the past six months. That is why the Press release commences exactly with such an observation. It goes like that, “While financial market conditions in the EU have improved substantially since last summer, economic activity was disappointing in the second half of 2012”. Presumably the markets that Rehn has in mind feel the same way about the real economy as the Commissioner. On this account we will just remind Mr Rehn that the Greek stock exchange gained more than 30% during 2012, a year when hundreds of thousands of people there lost not only their jobs but also their hope for the future. If this is a positive development then Rehn had better keep it for himself.

Last but not least one can easily distinguish the love of Mr Rehn for exports. Ollie observed happily, “The pick-up in growth will initially be driven by increasing external demand”. Again the “long term” minded economist is revealing himself, by choosing a postponement of a strengthening of internal demand. A higher internal demand could materialise by an increase of the current level of consumption and investment, signalling a betterment of the wellbeing of us all. But no, the Commissioner prefers the exports.

All in all, Mr Rehn despite being in charge of the economic realities affecting us all, he keeps praising the future against the present. This is not economic policy though, it’s pure ideology. Isn’t it true Mr Commissioner that we are all paying now the cost to save the Eurozone, the bankers came close at destroying? The same bankers you are taking care of to be recapitalised and their liquidity replenished.