At their meeting in Rome last Thursday, the leaders of the eurozone’s four largest economies agreed on steps towards a banking union and a modest stimulus package to complement the European Union’s new “fiscal compact.” Those steps are not enough. German Chancellor Angela Merkel resisted all proposals to provide relief to Spain and Italy from the excessive risk premiums that both countries are now confronting. As a result, the EU’s upcoming summit could turn into a fiasco, which may well prove lethal, because it would leave the rest of the eurozone without a strong enough financial firewall to protect it from the possibility of a Greek exit.

Even if a fatal calamity can be avoided, the division between creditor and debtor countries will be reinforced, and the “periphery” countries will have no chance to regain competitiveness, because the playing field is tilted against them. This may serve Germany’s narrow self-interest, but it will create a very different Europe from the open society that fired people’s imagination and propelled European integration for decades. It will make Germany the center of an empire and permanently subordinate the “periphery.” That is not what Merkel or the overwhelming majority of Germans stand for.

Follow Project Syndicate on Facebook or Twitter. For more from George Soros, click here.

Merkel argues that it is against the rules to use the European Central Bank to solve eurozone countries’ fiscal problems – and she is right. ECB President Mario Draghi has said much the same. Indeed, the upcoming ...

Consider the following scenario. After a victory by the left-wing Syriza party, Greece’s new government announces that it wants to renegotiate the terms of its agreement with the International Monetary Fund and the European Union. German Chancellor Angela Merkel sticks to her guns and says that Greece must abide by the existing conditions.

Fearing that a financial collapse is imminent, Greek depositors rush for the exit. This time, the European Central Bank refuses to come to the rescue and Greek banks are starved of cash. The Greek government institutes capital controls and is ultimately forced to issue drachmas in order to supply domestic liquidity.

With Greece out of the eurozone, all eyes turn to Spain. Germany and others are at first adamant that they will do whatever it takes to prevent a similar bank run there. The Spanish government announces additional fiscal cuts and structural reforms. Bolstered by funds from the European Stability Mechanism, Spain remains financially afloat for several months.

"Follow Project Syndicate on Facebook or Twitter. For more from Dani Rodrik, click here."

But the Spanish economy continues to deteriorate and unemployment heads towards 30%.  Violent protests against Prime Minister Mariano Rajoy’s austerity measures lead him to call for a referendum. His government fails to get the necessary support from voters and resigns, throwing the country into full-blown political chaos. Merkel cuts off further support for Spain, saying that hard-working ...

Okay folks, today we are going to learn why the national debt tells us nothing about the burdens or benefits that we are bequeathing to future generations. This will require a few minutes of clear thinking, so for the moment put out of your head whatever nonsense you just heard from a politician or economic commentator about the debt or deficit.

Suppose that we have two economies at the same level of per capita income, both growing at the rate of 2.0 percent a year. Let’s call them Germany and the United States. For simplicity we will say that both have zero growth in the labor force so that the growth is all due to productivity growth, meaning that each worker is producing 2.0 percent more for every hour that she works.

After 10 years, both economies will be roughly 20 percent richer. Now suppose that Germany reaches 2022 with zero public debt. It managed to run surpluses and still maintain healthy growth. By contrast, the United States had to run budget deficits to keep its economy moving. By 2022 its ratio of debt to GDP is 200 percent. That’s not quite up there with Japan, but substantially larger than anything the United States will see anytime soon under almost any circumstances.

The next question is which country is richer? If you answered Germany, then you get an op-ed column in the Washington Post and an “F” in economics. You were just told that the countries started with economies of the same size and that they grew at the same rate, how could Germany be richer?

If your inner deficit hawk is screaming that the people in the United States will have to pay interest on this massive debt, whereas the people in Germany will have no comparable burden, then remember the interest on the debt is also paid out to people in the United States. This is a distributional question, not a question about the wealth of the country as a whole.

It’s true that we can have foreign ownership of ...

Germany, the world’s most aggressive adopter of renewable energy, is taking a bold leap toward a future free from nuclear energy. In March, the German government announced a program to invest 200 billion euros, or approximately $270 billion, in renewables. That’s 8 percent of the country’s GDP, according to the DIW Economic Institute in Berlin.

Last year, in response to the disaster at the Fukushima Daiichi Nuclear Power Plant, Chancellor Angela Merkel announced a plan to close down all 17 of Germany’s nuclear reactors and replace them with renewable energy, mostly solar and wind power. 

Germany has already closed eight nuclear reactors, and the rest will be shut down by 2022. For now, natural gas is filling the void left by nuclear power, which formerly produced 20 percent of the country’s electricity. Under Merkel’s plan, 80 percent of Germany’s energy will come from renewables by 2050, according to the German Advisory Council on the Environment. Studies by the council show that 100 percent renewable power is a realistic goal for Germany. 

In contrast, the United States has been much less ambitious. The president’s “New Energy for America” plan aims to supply the country with 25 percent renewable energy by 2025.

Eighty percent of German residents want to see their country abandon nuclear power, but some Germans have also opposed new energy projects in their backyards. The website for “Wind Power Opponents,” Windkraftgegner.de, lists more than 70 protest campaigns, most of which are regional, grassroots groups organized to stop specific projects.

Germany’s renewables plan will be expensive, but so was the Fukushima meltdown—it did $50 billion in damage to Japan’s economy by some estimates. Dealing with the effects of climate change won’t be cheap either. Even German nuclear power companies are investing in the ...

What if Europe and the US converged on a set of economic policies that brought out the worst in both – European fiscal austerity combined with a declining share of total income going to workers? Given political realities on both sides of the Atlantic, it is entirely possible.

So far, the US has avoided the kind of budget cuts that have pushed much of Europe into recession. Growth on this side of the pond is expected to be around 2.4 per cent this year. And jobs are recovering, albeit painfully slowly.

But a tough bout of fiscal austerity could be coming in six months. The non-partisan Congressional Budget Office warned last week that if the Bush tax cuts expire on schedule at the start of 2013, just as $100bn of budget cuts automatically take effect under the deal to raise the debt ceiling that Democrats and Republicans agreed to last August, the US will fall into recession in the first half of next year.

Even if these measures were to reduce the cumulative public debt, a recession would increase the debt as a proportion of gross domestic product – making a bad situation worse. That is the austerity trap much of Europe now finds itself in.

Meanwhile, real wages in the US continue to fall. A new “World Outlook” released by the International Monetary Fund last Friday showed that in the three years since the depths of the downturn in 2009, total national income has rebounded in most of Europe and in the US. But the share of national income going to workers has fallen sharply in the US, while rising in Europe as a whole.

The trend is even more striking measured from the start of the recession. It used to be that when a downturn began, profits fell faster than workers’ income because companies were reluctant to lay off employees and couldn’t easily cut wages given union contracts or the threat of unionization.

That is still the case in Europe, courtesy of stronger unions and labor-market ...

We can best honor those who have given their lives for this nation in combat by making sure our military might is proportional to what America needs.

The United States spends more on our military than do China, Russia, Britain, France, Japan, and Germany put together. 

With the withdrawal of troops from Afghanistan, the cost of fighting wars is projected to drop – but the “base” defense budget (the annual cost of paying troops and buying planes, ships, and tanks – not including the costs of actually fighting wars) is scheduled to rise. The base budget is already about 25 percent higher than it was a decade ago, adjusted for inflation. 

One big reason: It’s almost impossible to terminate large defense contracts. Defense contractors have cultivated sponsors on Capitol Hill and located their plants and facilities in politically important congressional districts. Lockheed Martin, Raytheon, and others have made spending on national defense into America’s biggest jobs program. 

So we keep spending billions on Cold War weapons systems like nuclear attack submarines, aircraft carriers, and manned combat fighters that pump up the bottom lines of defense contractors but have nothing to do with 21st-century combat. 

For example, the Pentagon says it wants to buy fewer F-35 joint strike fighter planes than had been planned – the single-engine fighter has been plagued by cost overruns and technical glitches – but the contractors and their friends on Capitol Hill promise a fight. 

The absence of a budget deal on Capitol Hill is supposed to trigger an automatic across-the-board ten-year cut in the defense budget of nearly $500 billion, starting January.

But Republicans have vowed to restore the cuts. The House Republican budget cuts everything else — yet brings defense spending back up. Mitt ...

According to both the Mayan and Hindu calendars, 2012 (or something very close) marks the transition from an age of darkness, violence and greed to one of enlightenment, justice, and peace.  It’s hard to see that change just yet in the events relayed in the major media, but a shift does seem to be happening behind the scenes; and this is particularly true in the once-boring world of banking.

In the dark age of Kali Yuga, money rules; and it is through banks that the moneyed interests have gotten their power.  Banking in an age of greed is fraught with usury, fraud, and gaming the system for private ends.  But there is another way to do banking, the neighborly approach of George Bailey in the classic movie “It’s a Wonderful Life.”  Rather than feeding off the community, banking can feed the community and local economy.

Today the massive too-big-to-fail banks are hardly doing George Bailey-style loans at all.  They are not interested in community lending.  They are doing their own proprietary trading—trading for their own accounts—which generally means speculating against local interests.  They engage in high-frequency program trading that creams profits off the top of stock market ...

Without major reductions in the use of fossil fuels, sunlight is to kill an unknown number of ocean phytoplankton, the planet's most important organism, a new study reports this week.

Not only are phytoplanktons, also known as marine algae, a vital component in the ocean's food chain, they generate at least half of the oxygen we breathe. 

In the not so distant future, sunlight, the very source of life for phytoplankton, will likely begin to kill them because of the ocean's increasing acidity, researchers from China and Germany have learned. 

"There's a synergistic effect between increased ocean acidity and natural light," says Ulf Riebesell of the Helmholtz Centre for Ocean Research in Kiel, Germany. 

Riebesell added that it was also possible "phytoplankton could adapt". 

Researchers were surprised to discover that diatoms, one of the most important and abundant types of phytoplankton, fared very badly during shipboard experiments conducted by co-author Kunshan Gao, from the State Key Laboratory of Marine Environmental Science at Xiamen University, Xiamen China. 

Previous experiments in labs like Riebesell's found that diatoms actually did better in high-acid seawater, unlike most other shell- forming plankton. Burning fossil fuels has made the oceans about 30 percent more acidic researchers discovered less than 10 years ago. Oceans absorb one third of the carbon dioxide (CO2) emitted from using fossil fuels. 

The good news is this has slowed the rate of global warming. The bad news is oceans are now more acidic and it will get worse as more CO2 is emitted. This is basic, well-understood ocean chemistry. 

Gao and his team made several trips into the South China Sea taking samples from surface waters where phytoplankton are found. While still on the research vessel, those samples were made as ...

According to official figures, the unemployment rate affecting people under 25 years of age has reached 50 percent in Spain, 48 percent in Greece, 35 percent in Portugal, and 31 percent in Italy. Youth unemployment is also high in Ireland (30 percent), France (23 per cent), and Britain (22 percent). 

On average, 25 percent of European's youth labor force is unemployed and yet another 25 percent only has a precarious, low paid job, even though most of unemployed young people possess high educational qualifications, including university diplomas. 

In all these countries affected by high sovereign debt and economic recession, conservative governments have imposed drastic cuts in public spending, reduced social welfare programs and pensions and increased taxes, especially those paid by consumers, among other austerity measures. 

These programs have deepened economic slumps and fiscal difficulties across Europe. 

As the Organization for Economic Cooperation and Development (OECD) announced on Mar. 29 in its more recent economic assessment for the G7, the seven most industrialized countries of the world, "Our forecast for the first half of 2012 points to robust growth in the United States and Canada, but much weaker activity in Europe, where the outlook remains fragile." 

"We may have stepped back from the edge of the cliff," the OECD’s chief economist Pier Carlo Padoan cautioned, "but there’s still no room for complacency." 

Padoan also warned that the Eurozone’s three largest economies - Germany, France, and Italy – might have shrunk by an average of 0.4 percent during the first quarter of the year. 

The German economy already suffered a slowdown of 0.2 percent during the last quarter of 2011. Given the OECD ...

Four times in the past century, a large chunk of the industrial world has fallen into deep and long depressions characterized by persistent high unemployment: the United States in the 1930’s, industrialized Western Europe in the 1930’s, Western Europe again in the 1980’s, and Japan in the 1990’s. Two of these downturns – Western Europe in the 1980’s and Japan in the 1990’s – cast a long and dark shadow on future economic performance. In both cases, if either Europe or Japan returned – or, indeed, ever returns – to something like the pre-downturn trend of economic growth, it took (or will take) decades. In a third case, Europe at the end of the 1930’s, we do not know what would have happened had Europe not become a battlefield following Nazi Germany’s invasion of Poland.

In only one instance was the long-run growth trend left undisturbed: US production and employment after World War II were not significantly affected by the macroeconomic impact of the Great Depression. Of course, in the absence of mobilization for WWII, it is possible and even likely that the Great Depression would have cast a shadow on post-1940 US economic growth. That is certainly how things looked, with high levels of structural unemployment and a below-trend capital stock, at the end of the 1930’s, before mobilization and the European and Pacific wars began in earnest.

"Follow Project Syndicate on Facebook or Twitter. For more from J. Bradford DeLong, click here."

In the US, we can already see signs that the downturn that started in 2008 is casting its shadow on the future. Reputable forecasters – both private and public – have been revising down their ...

As Greece continues to try and arrest its economic decline, Germany OK'd another $170 billion worth of bailout funds to keep the government operating, to prevent the country from going bankrupt and to keep Greece in the eurozone.

On Monday the German Parliament approved the latest round of bailout funds for Greece.

It’s about $170 billion worth of loans to keep Greece from defaulting on its debts. Germany’s expected to come up with most of the cash.

Until now, German politicians have presented a pretty united front when it came to keeping Greece in the eurozone. That’s despite the fact that many Germans are fed up with giving the Greeks any more money.

But on Monday, the German tabloid Bild had this headline message for German politicians: “STOP!”

“Don’t go down this crazy path any longer," the tabloid wrote.

Meanwhile, other German papers recently carried a full page ad taken out by Greek businessmen that said, “Give Greece a Chance.”

Chancellor Angela Merkel expressed her support for the bailout Monday morning ahead of the parliamentary debate on the next tranche of German bailout money.

“I know there are people asking whether Greece was a bottomless pit, a hopeless case, whether it would be better for all if Greece went back to the Drachma, whether — to sum it up — the eurozone wouldn’t be better off without Greece than with Greece,” she said. “These questions are valid. After weighing up all pros and cons I, however, come to the conclusion that the opportunities lying within this new package outweigh its risks.”

For two years now, Merkel and her party faithful have stuck to the idea that the eurozone is better off with Greece in it. But cracks are now showing.

This past weekend, Merkel’s own Interior Minister suggested that Greece’s chances of recovery might be better outside ...

Well in advance of the 2014 centennial of the beginning of “the war to end all wars,” the First World War is suddenly everywhere in our lives. Stephen Spielberg’s War Horse opened on 2,376 movie screens and has collected six Oscar nominations, while the hugely successful play it’s based on is still packing in the crowds in New York and a second production is being readied to tour the country.

In addition, the must-watch TV soap opera of the last two months, Downton Abbey, has just concluded its season on an unexpected kiss.  In seven episodes, its upstairs-downstairs world of forbidden love and dynastic troubles took American viewers from mid-war, 1916, beyond the Armistice, with the venerable Abbey itself turned into a convalescent hospital for wounded troops. Other dramas about the 1914-1918 war are on the way, among them an HBO-BBC miniseries based on Ford Madox Ford’s Parade’s End quartet of novels, and a TV adaptation of Sebastian Faulks’s novel Birdsong from an NBC-backed production company.

In truth, there’s nothing new in this.  Filmmakers and novelists have long been fascinated by the way the optimistic, sunlit, pre-1914 Europe of emperors in plumed helmets and hussars on parade so quickly turned into a mass slaughterhouse on an unprecedented scale. And there are good reasons to look at the First World War carefully and closely.

After ...

It is now increasingly clear that what started in late 2008 is no ordinary economic slump. Almost four years after the beginning of the crisis, developed economies have not managed a sustainable recovery, and even the better-off countries reveal signs of weakness. Faced with the certainty of a double-dip recession, Europe’s difficulties are daunting.

Not only is Europe running the risk of lasting economic damage; high long-term unemployment and popular discontent threaten to weaken permanently the cohesiveness of its social fabric. And, politically, there is a real danger that citizens will stop trusting institutions, both national and European, and be tempted by populist appeals, as in the past.

Europe must avoid this scenario at all costs. Economic growth must be the priority, for only growth will put people back to work and repay Europe’s debts.

READ FULL POST 1 COMMENTS

Bolstered by Germany’s strong economy, Berlin has become the unofficial capital of the battered European monetary union.

However the German government’s proposals to solve the sovereign debt crisis, by imposing severe austerity programs to reduce state deficits and rejecting the distribution of Eurobonds, are coming up against increasing opposition across most of the 17 countries that comprise the Eurozone.

On Jan 9, French president Nicolas Sarkozy was in Berlin to meet German chancellor Angela Merkel and discuss fresh new solutions to the European sovereign debt crisis.

On Jan 11, Italian Prime Minister Mario Monti, in office since November, visited the German capital for the very same purpose but made no secret of his wish to modify the austerity program, which successive governments have hurled at the crisis with little to no success.

In an interview with the German daily newspaper Die Welt, Monti said that his government has imposed "severe burdens" upon the Italian citizenry by following Berlin’s austerity model, but so far "the European Union has made no concession towards Italy, by way of lower interest rates" for the country’s state bonds.

"If Italian citizens do not see (the immediate) fruits of their austerity efforts, there will be protests against the EU, against Germany, and against the European Central Bank," Monti warned. "There are already signs of these protests."

Although almost all 17 members of the Eurozone currently suffer from sovereign debt, financial markets sanction each of them differently by imposing different interest rates for new state debt bonds.

For instance, Germany, which has a sovereign debt of some 2.1 trillion Euros, pays extremely low interest rates for new debt bonds. Earlier in January, the interest rates for new German debt bonds were negative, meaning that investors were willing to pay Germany for taking out ...