'The future of humanity will depend on mastering a balancing act'.

Planetary Boundaries and Human Prosperity

APR 28, 2015

STOCKHOLM – The future of humanity will depend on mastering a balancing act. The challenge will be to provide for the needs of more than ten billion people while safeguarding our planetary life-support systems. Recent scientific insights have made us better equipped than ever to strike that balance. Doing so will be our generation’s great task.

Ending poverty has become a realistic goal for the first time in human history. We have the ability to ensure that every person on the planet has the food, water, shelter, education, health care, and energy needed to lead a life of dignity and opportunity. But we will be able to do so only if we simultaneously protect the earth’s critical systems: its climate, ozone layer, soils, biodiversity, fresh water, oceans, forests, and air. And those systems are under unprecedented pressure.

For the last 10,000 years, the earth’s climate has been remarkably stable. Global temperatures rose and fell by no more than one degree Celsius (compared with swings of more than eight degrees Celsius during the last ice age), and resilient ecosystems met humanity’s needs. This period – known as the Holocene – provided the stability that enabled human civilization to rise and thrive. It is the only state of the planet of which we know that can sustain prosperous lives for ten billion people.

But humans have now become the single largest driver of ecosystem change on earth, marking the start of a new geological age that some call the Anthropocene. Scientists argue over the exact starting point of this epoch, but it can be dated to somewhere around 1945, when modern industry and agriculture began to expand briskly. In the future, geologists will see telltale markers like radioactive carbon – debris from nuclear blasts – and plastic waste scattered across the planet’s surface and embedded in rock.

More recently, human activity has undergone what is being called the Great Acceleration: the rapid intensification of resource consumption and ecological degradation. We risk disrupting the earth’s critical systems, and with them modern civilization itself.

The planet’s response to our pressures is likely to be unpredictable. Indeed, the surprises have already begun. As we overdraw on our planet’s accounts, it is starting to levy penalties on the global economy, in the form of extreme weather events, accelerated melting of ice sheets, rapid biodiversity loss, and the vast bleaching of coral reefs.

We face an urgent need to define a safety zone that prevents us from pushing our planet out of the unusually benevolent Holocene state. The Planetary Boundaries framework, which a group of scientists, including one of us (Johan), first published in 2009, does just that. It draws on the best science to identify the key planetary processes regulating the earth’s ability to sustain Holocene-like conditions. For each of those processes, it proposes a boundary – a quantitative ceiling – beyond which we risk inducing abrupt changes that could push our planet into a state that is more hostile to humanity. 

These nine boundaries include climate change, ozone depletion, ocean acidification, interference in the global nitrogen and phosphorus cycles, land-use change, global freshwater use, biosphere integrity, air pollution, and novel entities (such as organic pollutants, radioactive materials, nanomaterials, and micro-plastics). Worryingly, our most recent update in January, which confirms the nine boundaries and improves their quantifications further, indicates that humanity has already transgressed four: climate change, nitrogen and phosphorus use, biodiversity loss, and land-use change.

Our challenge is to bring the earth’s systems back within the safety zone, while simultaneously ensuring that every person has the resources he or she needs to lead a happy and fulfilling life. Between these planetary and social boundaries lies humanity’s safe and just operating space: the limits we must respect if we are to create a world that is ecologically resilient and free of poverty.

Meeting these goals will require a far more equitable distribution of the planet’s resources and far greater efficiency in how we use them. If we are to ensure that our planet remains one on which all of humanity can thrive, we will have to pursue a new paradigm of prosperity. 

Johan Rockström is Professor in Global Sustainability.

Kate Raworth is Senior Visiting Research Associate at Oxford University’s Environmental Change Institute, Senior Associate of the Cambridge Institute for Sustainability Leadership, and a member of the Club of Rome.

UCRANIA, Alarma nuclear en el XXIX aniversario de Chernobyl

Ukraine’s Other Chernobyls

APR 29, 2015

KYIV – In 1983, the Soviet Union inaugurated two nuclear reactors in what is now Ukraine. One of them, unit four at Chernobyl, experienced an explosion and fire three years later that released large quantities of radioactive particles into the atmosphere – a catastrophic accident whose effects are still being felt far beyond Ukraine’s borders. The other reactor, unit one at the South Ukraine Nuclear Power Station, remains in operation, though all indications suggest that it should be retired.

The prolonged operation of unit one and the country’s aging nuclear power plants probably would not have been possible without financial support from European taxpayers, delivered through the European Bank for Reconstruction and Development and the European Atomic Energy Community (Euratom) as part of a €600 million ($650 million) “safety upgrade” program. In defiance of both the Convention on Environmental Impact Assessment in a Transboundary Context (the Espoo convention) and the EBRD loan agreement, the program was undertaken in the absence of any consultation with Ukraine’s European neighbors.

Thanks to these efforts, the South Ukraine plant was granted a ten-year lifetime extension permit in 2013 by the State Nuclear Regulatory Inspectorate (SNRIU). But, according to a comprehensive study released last month by the National Ecological Centre of Ukraine (NECU), the assessment on which this decision was based was deeply flawed. In fact, the unit one reactor suffers dangerous vulnerabilities, with observed wear in some areas already exceeding tolerable levels by a factor of ten. Such vulnerabilities, the study warns, could result in a nuclear emergency, including a release of radioactive particles inside the unit – or even into the environment.

This is hardly an isolated case. Three of Ukraine’s nuclear power units are currently operating beyond their design lifetime, with nine others set to reach the end of their intended lifetime within the next five years. Most immediately, unit two in South Ukraine will reach that point in less than three weeks, meaning that the SNRIU must now decide whether to grant that unit a 20-year lifetime extension.

The SNRIU will make this critical decision without key information about the health and environmental risks that the reactor poses to Ukraine and its neighbors. Though this contravenes Ukraine’s responsibility, as a signatory to the Espoo convention, to carry out a cross-border environmental-impact assessment (not to mention missing the opportunity to consider potential alternatives to continuing the reactor’s operation), no such analysis is expected to take place.

Last month, campaign groups in neighboring countries wrote to their representatives at the EBRD, requesting that the bank suspend its support for revitalizing Ukraine’s nuclear power plants until a cross-border assessment is carried out. A similar letter, signed by CEE Bankwatch Network and 45 other environmental NGOs from across the region, had already been sent to the European Commission’s Directorate-General for the Environment and the European Union’s director at the EBRD.

But, even with such an analysis, Ukraine’s nuclear regulator would be in no position to guarantee the safe operation of aging nuclear units. Not only is its professional capacity dubious, as the NECU study highlighted; its independence has been dramatically curtailed by the government’s recent decision to reduce significantly regulatory obligations for businesses and state-owned companies (except with regard to taxation). As the EBRD acknowledged in February, the SNRIU is now prohibited from taking the lead in conducting safety inspections, which is in breach of the EBRD loan agreement conditionality.

This is to say nothing of the immediate threat posed by the ongoing military conflict with Russia-backed rebels in the Donbas region of eastern Ukraine. Beyond the obvious risks associated with instability, there is the fact that Ukraine depends on Russia not only for most of the fuel to run its aging reactors, but also for the treatment and storage of most of its spent fuel. In other words, Ukraine’s dependence on nuclear energy, which accounts for about half of its electricity generation, has increased its strategic vulnerability to Russia.

That alone should be enough to convince Ukraine’s government not to perpetuate their country’s reliance on this insecure and dangerous energy source. If it is not, the 29th anniversary of the Chernobyl disaster, commemorated this month, should serve as a stark reminder of how much damage a nuclear accident can cause.

Ukraine should take its reactors’ expiration dates as an opportunity to pursue a safer, more sustainable energy future. Given that this would also be in Europe’s interest, EU governments and citizens must do whatever it takes to support this effort. It is a long-term commitment, but one for which there may not be a lifetime extension. 

Iryna Holovko is a Ukraine campaigner at CEE Bankwatch Network and the National Ecological Centre of Ukraine.

Toda la economía mundial sufre de una débil demanda agregada, lo que además está generando presiones deflacionistas.

China’s Slowing New Normal

APR 28, 2015

MILAN – The world’s two largest economies, the United States and China, seem to be enduring secular slowdowns. But there remains considerable uncertainty about their growth trajectory, with significant implications for asset prices, risk, and economic policy.

The US seems to be settling into annual real (inflation-adjusted) growth rates of around 2%, though whether this is at or below the economy’s potential remains a source of heated debate. Meanwhile, China seems to be headed for the 6-7% growth rate that the government pinpointed last year as the economy’s “new normal.” Some observers agree that such a rate can be sustained for the next decade or so, provided that the government implements a comprehensive set of reforms in the coming few years. Others, however, expect China’s GDP growth to continue to trend downward, with the possibility of a hard landing.

There is certainly cause for concern. Slow and uncertain growth in Europe – a major trading partner for both the US and China – is creating headwinds for the US and China.

Moreover, the US and China – indeed, the entire global economy – are suffering from weak aggregate demand, which is creating deflationary pressures. As central banks attempt to combat these pressures by lowering interest rates, they are inadvertently causing releveraging (an unsustainable growth pattern), elevated asset prices (with some risk of a downward correction, given slow growth), and devaluations (which merely move demand around the global economy, without increasing it).

For China, which to some extent still depends on external markets to drive economic growth, this environment is particularly challenging – especially as currency depreciation in Europe and Japan erode export demand further. Even without the crisis in major external markets, however, a large and complex middle-income economy like China’s could not realistically expect growth rates above 6-7%.

Yet, in the aftermath of the global economic crisis, China insisted on maintaining extremely high growth rates of 9% for two years, by relying on fiscal stimulus, huge liquidity injections, and a temporary halt in the renminbi’s appreciation. Had the government signaled the “new normal” earlier, expectations would have been conditioned differently. This would have discouraged undue investment in some sectors, reduced non-performing loans, and contained excessive leverage in the corporate sector, while avoiding the mispricing of commodities. Growth would still have slowed, but with far less risk.

In the current situation, however, China faces serious challenges. Given weak growth in external demand and an already-large market share for many goods, China cannot count on export growth to sustain economic performance in the short run. And, though support for infrastructure investment by China’s trading partners – especially through the “one belt, one road” policy – may help to strengthen external markets in the longer term, this is no substitute for domestic aggregate demand.

Investment can sustainably drive growth only up to the point when returns decline dramatically. In the case of public-sector investment, that means that the present value of the increment to the future GDP path (using a social discount rate) is greater than the investment itself.

The good news is that growing discipline seems to be pushing out low-return investment. And there is every reason to believe that investment will remain high as the economy’s capital base expands.

But, in order to boost demand, China will also need increased household consumption and improved delivery of higher-value services. Recent data suggest that, notwithstanding recent wage increases, consumption amounts to only about 35% of GDP. With a high household savings rate of around 30% of disposable income, per capita disposable income amounts to roughly half of per capita GDP. Expanded social-security programs and a richer menu of saving and investment options could go a long way toward reducing precautionary saving and boosting consumption. But what is really needed is a shift in the distribution of income toward households.

Without a concerted effort to increase households’ share of total income and raise consumption’s share of aggregate demand, growth of consumer products and services on the supply side will remain inadequate. Given that services are a significant source of incremental employment, their expansion, in particular, would help to sustain inclusive growth.

Another key challenge concerns China’s slumping property sector, in which construction and prices dropped rapidly last year. If highly leveraged developers are under stress, they could produce non-performing loans – and thus considerable risk – in both the traditional and shadow banking sectors.

Fortunately, Chinese households’ relatively low leverage means that the kind of balance-sheet damage that occurred in some advanced countries during the crisis, leading to a huge drop in demand, is unlikely, even if real-estate prices continue to decline. It also means 

that there remains some space for expanding consumer credit to boost demand.

That is not the only source of hope. Wages are rising, deposit insurance will be introduced, and deposit rates are being liberalized. Internet investment vehicles are growing. New businesses in the services sector – 3.6 million of which were started just last year – are generating incremental employment, thanks partly to a new streamlined licensing framework. And online platforms are facilitating increased consumption, while expanding market access and financing for smaller businesses.

China’s leaders should aim to accelerate and build upon these trends, rather than pursuing additional fiscal and monetary stimulus. Public investment is high enough; expanding it now would shift the composition of aggregate demand in the wrong direction. And, with the corporate sector already overleveraged, a broad-based expansion of credit is not safe.

Any fiscal stimulus now should focus on improving public services, encouraging consumption, and increasing household income. Accelerating the expansion of state-funded social security could bring down household savings over time. More generally, China must deploy its large balance sheet to deliver income or benefits that expand what households view as safely consumable income. Given that private investment responds mainly to demand, such measures would likely reverse its current downward path.

A further slowdown in China is a distinct possibility. China’s leaders must do what it takes to ensure that such a slowdown is not viewed as secular trend – a perception that could undermine the consumption and investment that the economy so badly needs.

Michael Spence, a Nobel laureate in economics

Mal barruntan las ovejas (II)

America’s Risky Recovery

APR 28, 2015

 

CAMBRIDGE – The United States’ economy is approaching full employment and may already be there. But America’s favorable employment trend is accompanied by a substantial increase in financial-sector risks, owing to the excessively easy monetary policy that was used to achieve the current economic recovery.

The overall unemployment rate is down to just 5.5%, and the unemployment rate among college graduates is just 2.5%. The increase in inflation that usually occurs when the economy reaches such employment levels has been temporarily postponed by the decline in the price of oil and by the 20% rise in the value of the dollar. The stronger dollar not only lowers the cost of imports, but also puts downward pressure on the prices of domestic products that compete with imports. Inflation is likely to begin rising in the year ahead.

The return to full employment reflects the Federal Reserve’s strategy of “unconventional monetary policy” – the combination of massive purchases of long-term assets known as quantitative easing and its promise to keep short-term interest rates close to zero. The low level of all interest rates that resulted from this policy drove investors to buy equities and to increase the prices of owner-occupied homes. As a result, the net worth of American households rose by $10 trillion in 2013, leading to increases in consumer spending and business investment.

After a very slow initial recovery, real GDP began growing at annual rates of more than 4% in the second half of 2013. Consumer spending and business investment continued at that rate in 2014 (except for the first quarter, owing to the weather-related effects of an exceptionally harsh winter). That strong growth raised employment and brought the economy to full employment.

But the Fed’s unconventional monetary policies have also created dangerous risks to the financial sector and the economy as a whole. The very low interest rates that now prevail have driven investors to take excessive risks in order to achieve a higher current yield on their portfolios, often to meet return obligations set by pension and insurance contracts.

This reaching for yield has driven up the prices of all long-term bonds to unsustainable levels, narrowed credit spreads on corporate bonds and emerging-market debt, raised the relative prices of commercial real estate, and pushed up the stock market’s price-earnings ratio to more than 25% higher than its historic average.

The low-interest-rate environment has also caused lenders to take extra risks in order to sustain profits. Banks and other lenders are extending credit to lower-quality borrowers, to borrowers with large quantities of existing debt, and as loans with fewer conditions on borrowers (so-called “covenant-lite loans”).

Moreover, low interest rates have created a new problem: liquidity mismatch. Favorable borrowing costs have fueled an enormous increase in the issuance of corporate bonds, many of which are held in bond mutual funds or Exchange-Traded Funds (ETFs). These funds’ investors believe – correctly – that they have complete liquidity. They can demand cash on a day’s notice. But, in that case, the mutual funds and ETFs have to sell those corporate bonds. It is not clear who the buyers will be, especially since the 2010 Dodd-Frank financial-reform legislation restricted what banks can do and increased their capital requirements, which has raised the cost of holding bonds.

Although there is talk about offsetting these risks with macroprudential policies, no such policies exist in the US, except for the increased capital requirements that have been imposed on commercial banks. There are no policies to reduce risks in shadow banks, insurance companies, or mutual funds.

So that is the situation that the Fed now faces as it considers “normalizing” monetary policy. Some members of the Federal Open Market Committee (FOMC, the Fed’s policymaking body) therefore fear that raising the short-term federal funds rate will trigger a substantial rise in longer-term rates, creating losses for investors and lenders, with adverse effects on the economy. Others fear that, even without such financial shocks, the economy’s current strong performance will not continue when interest rates are raised. And still other FOMC members want to hold down interest rates in order to drive the unemployment rate even lower, despite the prospects of accelerating inflation and further financial-sector risks.

But, in the end, the FOMC members must recognize that they cannot postpone the increase in interest rates indefinitely, and that once they begin to raise the rates, they must get the real (inflation-adjusted) federal funds rate to 2% relatively quickly. My own best guess is that they will start to raise rates in September, and that the federal funds rate will reach 3% by some point in 2017. 

Martin Feldstein, Professor of Economics at Harvard University

Mal barruntan las ovejas (I)

The Old New Financial Risk

APR 28, 2015

WASHINGTON, DC – The main financial risk facing the United States today looks very similar to what caused so much trouble in 2007-2008: big banks with too much debt and too little equity capital on their balance sheets. Uneven global regulations, not to mention regulators who fall asleep at the wheel, compound this structural vulnerability.

We already saw this movie, and it ended badly. Next time could be an even worse horror show.

All booms are different, but every major financial crisis has at its heart the same issue: major banks get into trouble and teeter on the brink of collapse. Disruption at the core of any banking system leads to tight credit, with major negative effects on the real economy. In our modern world, in which finance is interwoven throughout the economy, the consequences can be particularly severe – as we saw in 2008 and 2009.

The most important question to ask of any financial system is how much loss-absorbing equity major banks have on their balance sheets. When a company suffers losses, its shareholder equity falls in value, and less equity means that the company is more likely to default on its debts.

The capital ratios most frequently highlighted by banks and officials are misleading, because they include items – such as goodwill and deferred tax assets – that are incapable of absorbing losses. We need to look instead at tangible equity relative to tangible assets. And we should also be very careful about the accounting used for derivatives. On this technical but crucial point, US generally accepted accounting principles (GAAP) are considerably more generous (because they understate potential losses) than International Financial Reporting Standards (IFRS).

Thomas Hoenig, vice chairman of the Federal Deposit Insurance Corporation, publishes his own calculation of capital levels at the world’s largest banks, and these data are now available through the end of 2014. The most leveraged big US bank, Morgan Stanley, has less than 4% equity, meaning that 96% of its balance sheet is some form of debt. The average for big US banks is just under 5% equity.

This is more – but not much more – capital than some troubled banks had in the run-up to the financial crisis in 2008. Citigroup, for example, had no more than 4.3% equity, according to Hoenig’s calculation, in November 2008. At the end of 2012, when Hoenig started to publish his US GAAP-IFRS adjustment, the average for the largest US banks was roughly 4% equity. It is possible to argue that this key measure is moving in the right direction, but the pace of improvement is glacial at best.

More important, 5% equity is unlikely to be enough to absorb the kinds of losses that a highly volatile world will throw up. Some major shocks could come from unexpected quarters. For example, assets may prove less liquid than investors suppose, as happened with money market funds in 2008; today, skeptics worry about exchange-traded funds (ETFs). Or overly complex securities could become hard to price. It is a red flag when people selling collateralized loan obligations today cannot fully explain the risks involved.

Or perhaps the shock will affect sovereign-debt values in faraway places, as happened in 1982. It is striking that no experts – public or private – really have a firm grip on what could happen if there is another round of difficulties with Greek government debt.

But the most dangerous shocks may be those that originate with the big banks themselves. The latest significant development to surface is what Better Markets, a pro-reform group that has put out a helpful fact sheet, calls “de facto guaranteed foreign subsidiaries” that trade derivatives – a murky phenomenon that likely involves all the big players. The trick here is that a de jure guaranteed foreign subsidiary of a US bank would have to comply with many US rules, including those governing conduct, transparency, and clearing (how the derivatives are actually traded). A foreign subsidiary that is supposedly independent is exempt from those rules.

But, as Dennis Kelleher of Better Markets points out, when pressure mounts and a crisis seems around the corner, banks will face great pressure to bring such subsidiaries back onto their balance sheet. This is exactly what happened in the last crisis, with Citigroup being a leading example.

The main reason why such loopholes are left open is that regulators choose not to close them. Sometimes this may be due to lack of information or awareness. But, in many cases, the regulators actually believe that there is nothing wrong with the behavior in question – either because they have been persuaded by lobbyists or because they themselves used to work in the industry (or could go work there soon.)

Sound familiar? 

Simon Johnson, a former chief economist of the IMF, is a professor at MIT Sloan, a senior fellow at the Peterson Institute for International Economics

Indice de Percepción de la Corrupción 2014 (CPI)

Corruption is threatening economic growth for all

Indice de percepción de la Corrupción

  

Poorly equipped schools, counterfeit medicine and elections decided by money are just some of the consequences of public sector corruption. Bribes and backroom deals don’t just steal resources from the most vulnerable – they undermine justice and economic development, and destroy public trust in government and leaders.

Based on expert opinion from around the world, the Corruption Perceptions Index measures the perceived levels of public sector corruption worldwide, and it paints an alarming picture. Not one single country gets a perfect score and more than two-thirds score below 50, on a scale from 0 (highly corrupt) to 100 (very clean).

Corruption is a problem for all countries. A poor score is likely a sign of widespread bribery, lack of punishment for corruption and public institutions that don’t respond to citizens’ needs. Countries at the top of the index also need to act. Leading financial centres in the EU and US need to join with fast-growing economies to stop the corrupt from getting away with it. The G20 needs to prove its global leadership role and prevent money laundering and stop secret companies from masking corruption.

  Rank         Rank                 PAIS                Puntos
Mundial     Europa

1	1	Denmark	92
3	2	Finland	89
4	3	Sweden	87
5	4	Norway	86
5	4	Switzerland	86
8	6	Netherlands	83
9	7	Luxembourg	82
12	8	Germany	79
12	8	Iceland	79
14	10	U. Kingdom	78
15	11	Belgium	76
17	12	Ireland	74
23	13	Austria	72
26	14	Estonia	69
26	14	France	69
31	16	Cyprus	63
31	16	Portugal	63
35	18	Poland	61
37	19	Spain	60
39	20	Lithuania	58
39	20	Slovenia	58
43	22	Latvia	55
43	22	Malta	55
47	24	Hungary	54
53	25	Czech Rep	51
54	26	Slovakia	50
61	27	Croatia	48
69	28	Bulgaria	43
69	28	Greece	43
69	28	Italy	43
69	28	Romania	43

Grecia, ¿qué quiere Alemania?

Ireland’s Lessons for Greece

APR 23, 2015

MUNICH – Greece’s government, led by the left-wing Syriza party, is demanding a new deal from its European creditors, claiming that the bailout program provided by the “troika” (the International Monetary Fund, the European Central Bank, and the European Commission) has plunged their country into a spiral of deflation and austerity. But, while no one disputes that things have gone wrong in Greece, the argument that fiscal consolidation necessarily leads to never-ending recession is not borne out by the facts.

Consider Ireland, which was among the countries hardest hit by the global economic crisis. Having become exceptionally bloated during the pre-2008 boom years, Ireland’s banks buckled under huge losses when the property bubble burst. To avert a devastating bank run, the government guaranteed the entire outstanding stock of deposits and liabilities.

As a result, government debt soared from 25% of GDP in 2007 to more than 120% in 2013. Add private debt, and the Irish sit on a debt mountain worth nearly 400% of GDP. In Greece, where private debt is much lower, total debt amounts to around 300% of GDP.

Nonetheless, Ireland regained access to capital markets in early 2013, and investors have few qualms about the country’s prospects. Indeed, the economy is growing briskly, unemployment is below the eurozone average, and the government’s borrowing cost is one percentage point lower than the US Treasury’s.

Ireland has proven that even in a severe crisis, resolute consolidation and reform can quickly stabilize the economy and prepare the ground for a return to growth. At the height of the crisis, Ireland’s government cut public-sector salaries and pensions, raised the retirement age (to 68 by 2028), slashed welfare benefits, and increased the value-added tax.

Of course, there are important differences between Ireland and Greece. Austerity was bound to hurt Greece’s rigid economy – one of the least flexible in Europe – much more than Ireland’s, where flexible labor and product markets allowed massive job losses in the housing, construction, and banking sectors to be offset gradually by job gains in other sectors. The Irish economy also benefited from its strong emphasis on exports and close ties with the relatively thriving economies of the United Kingdom and the United States.

But Ireland still holds important lessons for Greece – beginning with the need to regain the confidence of financial markets. An unwavering focus on putting its public finances in order and cleaning up the banking sector enabled Ireland to exit its €67.5 billion ($73.7 billion) bailout program as planned at the end of 2013.

Moreover, the yield on ten-year Irish government bonds, which peaked at almost 15% in mid-2011, now stands at an all-time low of less than 1%. Though the ECB’s large-scale bond-buying program helped to lower bond yields, the Irish government’s success in returning to the capital market without the safety net of a precautionary credit line from its international creditors – an example that Portugal later followed – should not be overlooked.

Once investor confidence returned, a virtuous cycle took hold. For example, Ireland was able to repay the €12.5 billion it owed to the IMF early, once it was able to refinance itself more cheaply in the markets, helping it to reduce its interest-rate bill further.

And, for Ireland, confidence and growth have gone hand in hand. Having shrunk by as much as 6% in 2009, the Irish economy was outperforming the other bailout countries by 2011. Last year, Ireland recorded a 4.8% growth rate – by far the highest in the eurozone. And it is on course to grow by 3% this year, double the eurozone average.

This growth has been driven by a variety of factors. Wage restraint and productivity gains have improved competitiveness, thereby boosting exports. And now that lower oil prices and a five-percentage-point drop in unemployment are bolstering consumption, the recovery is expanding to other sectors.

In short, the credibility that Ireland gained through resolute fiscal policy and reforms helped to restore confidence, facilitating a return to growth and thus fiscal consolidation. Of course, the precise policy approach taken in one country cannot be imitated elsewhere. But Ireland’s can-do attitude and steadfast approach can serve as an inspiration for Greece and other struggling eurozone countries. 

Michael Heise is Chief Economist of Allianz SE

Yanis Varoufakis y la Nueva Grecia

A New Deal for Greece

APR 23, 2015
 

ATHENS – Three months of negotiations between the Greek government and our European and international partners have brought about much convergence on the steps needed to overcome years of economic crisis and to bring about sustained recovery in Greece. But they have not yet produced a deal. Why? What steps are needed to produce a viable, mutually agreed reform agenda?

We and our partners already agree on much. Greece’s tax system needs to be revamped, and the revenue authorities must be freed from political and corporate influence. The pension system is ailing. The economy’s credit circuits are broken. The labor market has been devastated by the crisis and is deeply segmented, with productivity growth stalled. Public administration is in urgent need of modernization, and public resources must be used more efficiently. Overwhelming obstacles block the formation of new companies. Competition in product markets is far too circumscribed. And inequality has reached outrageous levels, preventing society from uniting behind essential reforms.

This consensus aside, agreement on a new development model for Greece requires overcoming two hurdles. First, we must concur on how to approach Greece’s fiscal consolidation. Second, we need a comprehensive, commonly agreed reform agenda that will underpin that consolidation path and inspire the confidence of Greek society.

Beginning with fiscal consolidation, the issue at hand concerns the method. The “troika” institutions (the European Commission, the European Central Bank, and the International Monetary Fund) have, over the years, relied on a process of backward induction: They set a date (say, the year 2020) and a target for the ratio of nominal debt to national income (say, 120%) that must be achieved before money markets are deemed ready to lend to Greece at reasonable rates. Then, under arbitrary assumptions regarding growth rates, inflation, privatization receipts, and so forth, they compute what primary surpluses are necessary in every year, working backward to the present.

The result of this method, in our government’s opinion, is an “austerity trap.” When fiscal consolidation turns on a predetermined debt ratio to be achieved at a predetermined point in the future, the primary surpluses needed to hit those targets are such that the effect on the private sector undermines the assumed growth rates and thus derails the planned fiscal path. Indeed, this is precisely why previous fiscal-consolidation plans for Greece missed their targets so spectacularly.

Our government’s position is that backward induction should be ditched. Instead, we should map out a forward-looking plan based on reasonable assumptions about the primary surpluses consistent with the rates of output growth, net investment, and export expansion that can stabilize Greece’s economy and debt ratio. If this means that the debt-to-GDP ratio will be higher than 120% in 2020, we devise smart ways to rationalize, re-profile, or restructure the debt – keeping in mind the aim of maximizing the effective present value that will be returned to Greece’s creditors.

Besides convincing the troika that our debt sustainability analysis should avoid the austerity trap, we must overcome the second hurdle: the “reform trap.” The previous reform program, which our partners are so adamant should not be “rolled back” by our government, was founded on internal devaluation, wage and pension cuts, loss of labor protections, and price-maximizing privatization of public assets.

Our partners believe that, given time, this agenda will work. If wages fall further, employment will rise. The way to cure an ailing pension system is to cut pensions. And privatizations should aim at higher sale prices to pay off debt that many (privately) agree is unsustainable.

By contrast, our government believes that this program has failed, leaving the population weary of reform. The best evidence of this failure is that, despite a huge drop in wages and costs, export growth has been flat (the elimination of the current-account deficit being due exclusively to the collapse of imports).

Additional wage cuts will not help export-oriented companies, which are mired in a credit crunch. And further cuts in pensions will not address the true causes of the pension system’s troubles (low employment and vast undeclared labor). Such measures will merely cause further damage to Greece’s already-stressed social fabric, rendering it incapable of providing the support that our reform agenda desperately needs.

The current disagreements with our partners are not unbridgeable. Our government is eager to rationalize the pension system (for example, by limiting early retirement), proceed with partial privatization of public assets, address the non-performing loans that are clogging the economy’s credit circuits, create a fully independent tax commission, and boost entrepreneurship. The differences that remain concern how we understand the relationships between the various reforms and the macro environment.

None of this means that common ground cannot be achieved immediately. The Greek government wants a fiscal-consolidation path that makes sense, and we want reforms that all sides believe are important. Our task is to convince our partners that our undertakings are strategic, rather than tactical, and that our logic is sound. Their task is to let go of an approach that has failed. 

Yanis Varoufakis is Greece's finance minister.

Los contaminados por nuestro primer escritor -- D. Miguel de Cervantes Saavedra-- no nos resignamos a la injusticia.

Discurso de Juan Goytisolo

Ceremonia de entrega del Premio Cervantes 2014

A la llana, sin rodeos

En Alcalá de Henares,

a 23 de Abril,

de 2015

En términos generales, los escritores se dividen en dos esferas o clases: la de quienes conciben su tarea como una carrera y la de quienes la viven como una adicción. El encasillado en las primeras cuida de su promoción y visibilidad mediática, aspira a triunfar. El de las segundas, no. El cumplir consigo mismo le basta y si, como sucede a veces, la adicción le procura beneficios materiales, pasa de la categoría de adicto a la de camello o revendedor. Llamaré a los del primer apartado, literatos y a los del segundo, escritores a secas o más modestamente incurables aprendices de escribidor.

A comienzos de mi larga trayectoria, primero de literato, luego de aprendiz de escribidor, incurrí en la vanagloria de la búsqueda del éxito -atraer la luz de los focos, “ser noticia”, como dicen obscenamente los parásitos de la literatura- sin parar mientes en que, como vio muy bien Manuel Azaña, una cosa es la actualidad efímera y otra muy distinta la modernidad atemporal de las obras destinadas a perdurar pese al ostracismo que a menudo sufrieron cuando fueron escritas. La vejez de lo nuevo se reitera a lo largo del tiempo con su ilusión de frescura marchita. El dulce señuelo de la fama sería patético si no fuera simplemente absurdo. Ajena a toda manipulación y teatro de títeres, la verdadera obra de arte no tiene prisas: puede dormir durante décadas como La Regenta o durante siglos como La Lozana Andaluza. Quienes adensaron el silencio en torno a nuestro primer escritor y lo condenaron al anonimato en el que vivía hasta la publicación del Quijote no podían imaginar siquiera que la fuerza genésica de su novela les sobreviviría y alcanzaría una dimensión sin fronteras ni épocas.

“Llevo en mí la conciencia de la derrota como un pendón de victoria”, escribe Fernando Pessoa, y coincido enteramente con él. Ser objeto de halagos por la institución literaria me lleva a dudar de mí mismo, ser persona non grata a ojos de ella me reconforta en mi conducta y labor. Desde la altura de la edad, siento la aceptación del reconocimiento como un golpe de espada en el agua, como una inútil celebración.

Mi condición de hombre libre conquistada a duras penas invita a la modestia. La mirada desde la periferia al centro es más lúcida que a la inversa y al evocar la lista de mis maestros condenados al exilio y silencio por los centinelas del canon nacional-católico no puedo menos que rememorar con melancolía la verdad de sus críticas y ejemplar honradez. La luz brota del subsuelo cuando menos se la espera. Como dijo con ironía Dámaso Alonso tras el logro de su laborioso rescate del hasta entonces ninguneado Góngora, ¡quién pudiera estar aún en la oposición!

Mi instintiva reserva a los nacionalismos de toda índole y sus identidades totémicas, incapaces de abarcar la riqueza y diversidad de su propio contenido, me ha llevado a abrazar como un salvavidas la reivindicada por Carlos Fuentes nacionalidad cervantina. Me reconozco plenamente en ella. Cervantear es aventurarse en el territorio incierto de lo desconocido con la cabeza cubierta con un frágil yelmo bacía. Dudar de los dogmas y supuestas verdades como puños nos ayuda a eludir el dilema que nos acecha entre la uniformidad impuesta por el fundamentalismo de la tecnociencia en el mundo globalizado de hoy y la previsible reacción violenta de las identidades religiosas o ideológicas que sienten amenazados sus credos y esencias.

En vez de empecinarse en desenterrar los pobres huesos de Cervantes y comercializarlos tal vez de cara al turismo como santas reliquias fabricadas probablemente en China, ¿no sería mejor sacar a la luz los episodios oscuros de su vida tras su rescate laborioso de Argel? ¿Cuántos lectores del Quijote conocen las estrecheces y miseria que padeció, su denegada solicitud de emigrar a América, sus negocios fracasados, estancia en la cárcel sevillana por deudas, difícil acomodo en el barrio malfamado del Rastro de Valladolid con su esposa, hija, hermana y sobrina en 1605, año de la Primera Parte de su novela, en los márgenes más promiscuos y bajos de la sociedad?

Hace ya algún tiempo, dedique unas páginas a los titulados Documentos Cervantinos hasta ahora inéditos del presbítero Cristóbal Pérez Pastor, impresos en 1902 con el propósito, dice, de que “reine la verdad y desaparezcan las sombras”, obra cuya lectura me impresionó en la medida en que, pese a sus pruebas fehacientes y a otras indagaciones posteriores, la verdad no se ha impuesto fuera de un puñado de eruditos, y más de un siglo después las sombras permanecen. Sí, mientras se suceden las conferencias, homenajes, celebraciones y otros actos oficiales que engordan a la burocracia oficial y sus vientres sentados, (la expresión es de Luis Cernuda) pocos, muy pocos se esfuerzan en evocar sin anteojeras su carrera teatral frustrada, los tantos años en los que, dice en el prólogo del Quijote, “duermo en el silencio del olvido”: ese “poetón ya viejo” (más versado en desdichas que en versos) que aguarda en silencio el referendo del falible legislador que es el vulgo.

Alcanzar la vejez es comprobar la vacuidad y lo ilusorio de nuestras vidas, esa “exquisita mierda de la gloria” de la que habla Gabriel García Márquez al referirse a las hazañas inútiles del coronel Aureliano Buendía y de los sufridos luchadores de Macondo. El ameno jardín en el que transcurre la existencia de los menos, no debe distraernos de la suerte de los más en un mundo en el que el portentoso progreso de las nuevas tecnologías corre parejo a la proliferación de las guerras y luchas mortíferas, el radio infinito de la injusticia, la pobreza y el hambre.

Es empresa de los caballeros andantes, decía don Quijote, “deshacer tuertos y socorrer y acudir a los miserables” e imagino al hidalgo manchego montado a lomos de Rocinante acometiendo lanza en ristre contra los esbirros de la Santa Hermandad que proceden al desalojo de los desahuciados, contra los corruptos de la ingeniería financiera o, a Estrecho traviesa, al pie de las verjas de Ceuta y Melilla que él toma por encantados castillos con puentes levadizos y torres almenadas socorriendo a unos inmigrantes cuyo único crimen es su instinto de vida y el ansia de libertad.

Sí, al héroe de Cervantes y a los lectores tocados por la gracia de su novela nos resulta difícil resignarnos a la existencia de un mundo aquejado de paro, corrupción, precariedad, crecientes desigualdades sociales y exilio profesional de los jóvenes como en el que actualmente vivimos. Si ello es locura, aceptémosla. El buen Sancho encontrará siempre un refrán para defenderla.

El panorama a nuestro alcance es sombrío: crisis económica, crisis política, crisis social. Según las estadísticas que tengo a mano, más del 20% de los niños de nuestra Marca España vive hoy bajo el umbral de la pobreza, una cifra con todo inferior a la del nivel del paro. Las razones para indignarse son múltiples y el escritor no puede ignorarlas sin traicionarse a sí mismo. No se trata de poner la pluma al servicio de una causa, por justa que sea, sino de introducir el fermento contestatario de esta en el ámbito de la escritura. Encajar la trama novelesca en el molde de unas formas reiteradas hasta la saciedad condena la obra a la irrelevancia y una vez más, en la encrucijada, Cervantes nos muestra el camino. Su conciencia del tiempo “devorador y consumidor de las cosas” del que habla en el magistral capítulo IX de la Primera Parte del libro le indujo a adelantarse a él y a servirse de los géneros literarios en boga como material de derribo para construir un portentoso relato de relatos que se despliega hasta el infinito. Como dije hace ya bastantes años, la locura de Alonso Quijano trastornado por sus lecturas se contagia a su creador enloquecido por los poderes de la literatura. Volver a Cervantes y asumir la locura de su personaje como una forma superior de cordura, tal es la lección del Quijote. Al hacerlo no nos evadimos de la realidad inicua que nos rodea. Asentamos al revés los pies en ella. Digamos bien alto que podemos. Los contaminados por nuestro primer escritor no nos resignamos a la injusticia.
  
Video del discurso íntegro de Juan Goytisolo, Premio Cervantes 2014