As if they don’t have enough to worry about in Europe these days, what with the relief of the Spanish bank bailout fading within hours yesterday and with a Greek election looming this weekend that could lead to a disorderly exit of the nation from the currency union, now there’s apparently a “loose cannon” by the name of Maria Fekter, an Austrian Finance Minister, who seems intent on sowing further confusion about the next potential bailout recipient – Italy.

Maria FekterMs. Fekter was responsible for these two conflicting headlines that appeared earlier today:

These two reports were released within hours of each other and, the fact is that both are true, though not in the order implied by the links above. First she said that, given Italy’s soaring borrowing rates, they’ll also probably need a bailout and then, no doubt prodded by other EU officials concerned about the impact on financial markets, those comments were walked back, developments that are all detailed in the Reuters report.

Also in the Reuters account we learn that, not long ago, Ms. Fekter said that Greece might be asked to leave the European Union and, when U.S. Treasury Secretary Tim Geithner visited last year, that the fiscal mess in the U.S. is more dire than in Europe.

In all three cases – Italy, Greece, and the U.S. – it seems she was making good sense…

As for Italy, its role in the Spanish bailout was characterized this way by Jeremy Warner in a story at the Telegraph today- This latest euro fix will come apart in less than a month:

Also stressed to virtual breaking point, Italy, becomes liable for some 17.9pc of the cross guarantees, raising the absurd spectacle of Italy borrowing at 5pc to lend to the Spanish banking system at 3pc. European solidarity may be a noble cause, but there must be limits.

This is all getting to be a little bit more ridiculous than its been for the better part of three years now. Perhaps they ought to promote Ms. Fekter into a position of greater power – at least that way, this whole affair would probably be brought to a conclusion – for better or worse – far sooner than it is likely to be with the current cast of characters making all the decisions and issuing all the press releases.


-Iacono Research

Category: Bailouts, Currency

Please use the comments to demonstrate your own ignorance, unfamiliarity with empirical data and lack of respect for scientific knowledge. Be sure to create straw men and argue against things I have neither said nor implied. If you could repeat previously discredited memes or steer the conversation into irrelevant, off topic discussions, it would be appreciated. Lastly, kindly forgo all civility in your discourse . . . you are, after all, anonymous.

5 Responses to “Those Crazy Austrians…”

  1. ConscienceofaConservative says:

    Keynsian argument can best be summed up by saying government’s can spend their way out of any crisis, deficits may matter at some point, but that time is not now. Seems we have applied this logic for so long now and further compounded matters by bailing out countries and financial institutions where there is now so much paper money and debt floating around that we no longer have a sound system for allocating capital.


    BR: That is a misstatement of what Kenyes. I guess its easier to argue against a strawman man than understand what he actually said. For those of you who prefer intelligent analysis over ideological rubbish, I suggest you read his work on causes of business cycles and aggregate demand.

    Keynes’ magnus opus is The General Theory of Employment, Interest, and Money.

  2. Rick Caird says:

    But, what Keynes wrote in the General Theory is not Keynesian Economics as implemented today. Keynes advocated the government run a surplus during “good times”. That has not happened in decades in the US (even Clinton did not run a surplus because he spent the Social Security surplus) and who knows when Europe actually ran a surplus.

    As “ConscienceofaConservative” points out, Keynesian Economics, as practiced, is spend now and spend even more when times are hard. We should never have hard times because we are always over spending. It is only a question of how much are we over spending. And, when the size of the debt comes up, we are met with arm waving about how we can take care of that later, but later never comes. Mauldin along with Reinhart and Rogoff are more instructive on the dangers of debt than all the Keynesians put together. Keynesian Economics is faith based economics: “it will all work out if we keep stimulating the economy”.

    Aggregate demand ignores the usefulness of what is being demanded. How many buggy whips can we actually use or holes should we create and then fill?

    Keynes also said his theory would be easier to implement in a totalitarian society.

    “Nevertheless the theory of output as a whole, which is what the following book purports to provide, is much more easily adapted to the conditions of a totalitarian state, than is the theory of the production and distribution of a given output produced under conditions of free competition and a large measure of laissez-faire.”

    Keynesian Economics appeals to those who favor a large, powerful central government.

    You can also download a free pdf of the General Theory:

  3. ConscienceofaConservative says:

    Interestingly enough Michael Pettis has written extensively about the investment led model in China. A consequence of the increase in gov’t led investment has been a decline in Consumption relative to GDP

  4. jashead says:

    In all three cases – Italy, Greece, and the U.S. – it seems she was making good sense…

    The US situation is more dire than Europe. Really. Would you be voting for Romneybot then?

  5. jnkowens says:

    Anyone who speaks the truth as regularly and publicly as she apparently does, won’t last very long in her present position much less be given more authority. G8 playbook says: hesitate, obfuscate, appropriate. No tolerance for audibles or truthiness.