Prohibited by the law of intellectual property or in any way unauthorized use\/ownership of this article, with serious civil and criminal penalties for the infringer.<\/em><\/p>\n\n\n\n In the first part (Part-I) of this series of analyses with title \u201cThe Sustainable Solution for the Eurozone (EU) Economy\u201d we will present the ECB\u2019s political and economic efforts so far in order to avoid the prevalence of deflation in the Eurozone, but also which is the appropriate fiscal strategy for the Eurozone (EU) economy. <\/p>\n\n\n\n In the second part (Part-II) we will present the ineffectiveness of the current Eurozone (EU) fiscal framework and clearly, we will indicate what are these fiscal policies that must implement in the Eurozone as a whole.<\/p>\n\n\n\n In the third part (Part-III) we will outline how the proposed policies to reduce the government expenditure should be applied to the budgets of the central governments of the Eurozone member countries in order to drastically reduce the taxation in their economies. <\/p>\n\n\n\n In addition, we will show the future results of the proposed fiscal framework that will must apply in the Eurozone\/EU.<\/p>\n\n\n\n In the fourth and final part (Part IV) of this series of analyses we will mention, and we will indicate the introduction of operational in practice rules to tackle unemployment across the Eurozone\/EU as a whole. <\/p>\n\n\n\n Furthermore, we will present the appropriate organizational structure for the fiscal framework proposed by us in the euro area, which has not yet existed in the Eurozone, but also its results.<\/p>\n\n\n\n The “weapons” to date used by the Eurozone through the ECB<\/strong><\/p>\n\n\n\n The European Central Bank (ECB) in its effort to induce inflationary pressures on the Eurozone economy in order to decompress prices and profits with aim to induce an artificial increase in investment behavior across the Eurozone has used its main “weapons of its arsenal \u201cwhich are:<\/p>\n\n\n\n 1.<\/strong> The policies to intervene in the money supply in the Eurozone economy which includes:<\/p>\n\n\n\n a)<\/strong> Quantitative easing <\/p>\n\n\n\n b)<\/strong> Credit easing<\/p>\n\n\n\n c)<\/strong> ECB interventions in the euro exchange rates with other major world currencies with a view to increasing exports to the Eurozone.<\/p>\n\n\n\n 2.<\/strong> The interference policies in the money-pricing that include:<\/p>\n\n\n\n a)<\/strong> the policy of close to zero basic borrowing interest rates to commercial banks; This policy includes also a series of reductions in the euro short term basic borrowing interest rate (overnight) which ECB offers to commercial banks.<\/p>\n\n\n\n b)<\/strong> The negative interest rates on commercial banks deposits which ECB offers to commercial banks.<\/p>\n\n\n\n c)<\/strong> ECB\u2019s oral policies as to the no surprises in the international capital markets as regards its intentions to reduce short-term interest rates.<\/p>\n\n\n\n Despite the efforts of the ECB,\nwith the implementation of its above policies, the problem of inadequate\naggregate demand and deflation remains in the Eurozone and since interest rate\nlevels will must follow the prevailing inflation rate levels, these interest\nrate levels will have to be at low levels (negative levels) to increase total\nEurozone demand levels. <\/p>\n\n\n\n But at zero levels of euro basic\nborrowing interest rates there will be no increase in total demand. <\/p>\n\n\n\n The orthodox economic thought\nshows that the ECB should never renounced the only weapon it has to deal with\nfuture endogenous and exogenous crises in the Eurozone, by selecting the\n“abyss” of the negative euro basic borrowing interest rate. <\/p>\n\n\n\n This choice will forcibly push it\ninto the constant printing of money to make attractive investments in the\nEurozone, while leaving the Eurozone unprotected.<\/p>\n\n\n\n The increase in liquidity through\nthe reduction of the euro basic borrowing interest rate is not helping, because\nthe yields of government bonds of euro area member countries are at a very low\nlevel. <\/p>\n\n\n\n In addition, there has been no\nreal cleaning up of which European banks are viable-profitable and must\ncontinue to operate and which are not. <\/p>\n\n\n\n The\nsupport for the Eurozone’s banking system with aim to support\nthe real Eurozone economy through the strategy of increasing liquidity and\nreducing basic borrowing interest rates resembles the decade of 1990\u2019s, where\nJapan has tried to support its banking system with gigantic injections of\nliquidity and zero level basic borrowing interest rates policy (1995). <\/p>\n\n\n\n With this strategy it was led to\nits impasse to stick its interest rates on this same low level from 1995 to the\npresent, leading to the known “lost decades” for the Japanese\neconomy. <\/p>\n\n\n\n This strategy of the Bank of Japan shows us that independently of the degree of aggressive policy that a central bank can implement in the country’s economy (in this case the Central Bank of Japan), this does not mean that it will necessarily cause that degree of\ninflationary pressures that will cause in their turn an increase in total\ndemand and consumption levels in order to increase the growth rate of the\neconomy.<\/p>\n\n\n\n The appropriate fiscal strategy for the Eurozone (EU) economy<\/strong><\/p>\n\n\n\n In my view, it is a mistake to\nreduce the Eurozone\u2019s key basic borrowing interest rate to almost zero levels\nwithout first having to implement policies in the Eurozone economy to increase\nthe real (disposable) income of citizens, particularly of citizens who belong\nto low and medium-sized income scale. <\/p>\n\n\n\n In the current era of the globalized economy, this increase in the real (disposable) income of citizens will have to come through the implementation of an equivalent fiscal value measures in the economies caused by the simultaneous drastic reduction of direct and indirect taxation in all economies of Eurozone member countries.<\/p>\n\n\n\n The drastic reductions in\nindirect and direct taxation in the economies of the member states will must\ncome from a reduction in governmental expenditures and, above all, from the\nreduction in the size of the annual primary government expenditures in the\nbudgets of their central governments. <\/p>\n\n\n\n This increase in the real\n(disposable) income of Eurozone\u2019s citizens in turn will cause both the increase\nin total demand and consumption levels and the increase of their savings\nlevels. <\/p>\n\n\n\n In conjunction with the accompanying economic policies that I proposed for guaranteed deposits in the euro area dominion (see, analysis\nentitled, \u00abHow the guaranteed deposits in the EU can help to\ndevelop the Eurozone economy\u00bb posted at https:\/\/www.liberalglobe.com, 21\/12\/2018,\ncategory: economics) the increase in savings level will be high (either in the\nform of bank deposits or in the form of private insurance). <\/p>\n\n\n\n A drastic increase in the levels of aggregate demand and consumption by Eurozone citizens especially by low and middle incomes equally will then support an increased turnover of businesses. <\/p>\n\n\n\n Which in turn will cause an increase in businesses production levels, which in turn, these companies will create new full-time jobs to absorb the unemployment. <\/p>\n\n\n\n In addition, it will minimize any\nuncertainty of the business world for the future, which will cause an increase\nin their investments to cover their increased production levels. <\/p>\n\n\n\n Why should avoid the strategy of low-level basic borrowing interest rates in the Eurozone (EU) economy?<\/strong><\/p>\n\n\n\n Without first having implemented\npolicies to increase the real (disposable) income of citizens with low and\nmedium-sized incomes that are most citizens, policies to reduce the euro basic\nborrowing interest rate in lows levels are usually operated as financing of\nstock and capital markets investments respectively, with low borrowing cost in\neuros. <\/p>\n\n\n\n The low cost of borrowing will be\ndirected to refinancing of private debt, to equity investments and more\ngenerally to investments in securities (e.g. shares, government bonds, etc.). <\/p>\n\n\n\n In this case, the aim is to\nobtain a fast and higher profit return in investment compared to the\ninvestments in the real economy of the Eurozone. <\/p>\n\n\n\n Where the investments in the real\nEurozone economy may currently contain a higher investment risk and lower\ncorresponding returns due to the low aggregate demand and consumption in the Eurozone\nand always compared with the yields of investments in transferable securities. <\/p>\n\n\n\n In addition, the\ncheap euro currency-denominated borrowing will finance non-euro zone\ninvestments. <\/p>\n\n\n\n As outside the euro\narea dominion the returns of the investments in the real economy may be higher\nthan the returns on investment in the real economy of the euro zone member-countries\nand given that the investment risk in both cases is the same.<\/p>\n\n\n\n Such a strategy would lead to\nincreased demand for the euro currency due to low borrowing costs, making the\neuro currency more expensive in the long term, without these funds necessarily\nbeing directed to the real Eurozone economy to create mainly new full-time jobs. <\/p>\n\n\n\n In the peripheral Euro-area\nmember-countries such as Greece, due to distortions and non-implementation in\nthe act of reforms in the economy and the non-implementation of drastic cuts in\nthe annual primary public sector expenditures of the central government budget,\nthese funds will not be directed to the real economy to reduce unemployment. <\/p>\n\n\n\n But will be used mainly for the\nre-financing of private and sovereign debt making their future repayment more\ndifficult, given the existence of negative inflation in the Eurozone economy. <\/p>\n\n\n\n In the Euro area member countries\nsuch as France, Spain, Portugal, etc., in addition to the public and private\ndebt re-financing, which, due to negative inflation, will become more difficult\nto repay, it is very likely to have further deviations from the fiscal targets\nfor a general government budget deficit of less than 3% of the GDP in the state\nbudgets of their general governments. <\/p>\n\n\n\n And of course, due to artificial\ngrowth in demand policies through increased social benefits. <\/p>\n\n\n\n Slippage of the value of the euro\ncurrency (devaluation) in relation to the main world currencies, and especially\nagainst the US dollar, favors exports mainly from the Nordic member countries\nof the Eurozone. <\/p>\n\n\n\n But does not favor the member\ncountries whose economies use the oil as main raw material, because oil costs\nare priced in U.S. dollars and its price increases since its supply remains\nstable and demand for oil is increasing. <\/p>\n\n\n\n In addition, a rising value of $\nU.S. can increase total demand in the U.S. economy but will create great\ndifficulties both in the economies of China and Latin American countries (e.g.\nBrazil) and in the Russian economy. <\/p>\n\n\n\n Since together, these economies\nare at the same time in a state of recession or declining growth, resulting in\nlong-term reductions in global aggregate demand levels. <\/p>\n\n\n\n Significant reductions in global\naggregate demand levels would force small and medium-sized enterprises in the\neuro area, which are the bulk of businesses in its economy, to reassign any\npre-planned investment projects. <\/p>\n\n\n\n While reducing at the same time\ntheir overall production levels and increasing the unemployment levels in the\nEurozone. <\/p>\n\n\n\n In such an unfavorable\nperspective for global aggregate demand, the only prospect of increasing the\ntotal demand for the products and services of Euro area companies will must\ncome internally from their customers\/citizens in the Eurozone\/EU.<\/p>\n\n\n\n I will must point out that the\nECB’s behavior to date is exemplary in its efforts to curb deflation and\nincrease inflationary pressures in the Eurozone while trying to persuade\ninternational capital markets and investors. <\/p>\n\n\n\n But in this strangle ECB is left\nalone to fight for the Eurozone economy. <\/p>\n\n\n\n Its room for man oeuvre and its policies-strategies have already been exhausted and the ECB does not have the proper assistance from the leaderships of the Eurozone\/EU member-countries that have left it alone to defend the \u201chot gates\u201d of the Eurozone economy.<\/p>\n\n\n\n The whole macroeconomic\nimpoundment that prevails in the Eurozone economy can very easily be rectified\nbut in this case are needed a high degree of serious fiscal decisions by all\nthe leaders of the Eurozone and the European Commission.<\/p>\n\n\n\n These fiscal (budgetary)\ndecisions for the whole of the Eurozone in some cases contain high political\ncosts in the short term. <\/p>\n\n\n\n But they will release significant\nlevels of prosperity for all Euro-area citizens, which will, among other things,\ngive great economic and mainly political benefits in the long term.<\/p>\n\n\n\n In the second part of this series of analyses we will clearly indicate what these fiscal policies will must be, which will must be implemented throughout the Eurozone (EU) economy.<\/p>\n\n\n\n <\/p>\n","protected":false},"excerpt":{"rendered":" The Eurozone economy in recent years has faced the problem of permanent deflation. The deflation is occurred as a result of the low levels…<\/p>\n","protected":false},"author":1,"featured_media":596,"comment_status":"closed","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[1217,5,860],"tags":[421,62,419,426,270,414,422,413,542,423,541,418,412,410,539,540,252,420,537,2191,538],"class_list":["post-445","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-economic-studies","category-economic","category-fiscal-economics","tag-boj","tag-ecb","tag-eurozone-banking-system","tag-eurozone-deflation","tag-eurozone-economy","tag-eurozone-fiscal-framework","tag-eurozone-fiscal-strategy","tag-eurozone-growth-rates","tag-eurozone-member-states-sovereign-debts","tag-eurozone-private-debt","tag-eurozone-production-levels","tag-eurozone-quantitative-easing","tag-eurozone-unemployment","tag-global-demand","tag-inflationary-pressures-in-eurozone","tag-investment-risk-in-real-economy","tag-japan","tag-overnight-euro-interest-rates","tag-the-appropriate-fiscal-strategy-for-the-eurozone-economy","tag-trust-economics","tag-why-eurozone-must-avoid-the-low-level-interest-rates-strategy"],"_links":{"self":[{"href":"https:\/\/www.liberalglobe.com\/index.php?rest_route=\/wp\/v2\/posts\/445","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.liberalglobe.com\/index.php?rest_route=\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.liberalglobe.com\/index.php?rest_route=\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.liberalglobe.com\/index.php?rest_route=\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/www.liberalglobe.com\/index.php?rest_route=%2Fwp%2Fv2%2Fcomments&post=445"}],"version-history":[{"count":6,"href":"https:\/\/www.liberalglobe.com\/index.php?rest_route=\/wp\/v2\/posts\/445\/revisions"}],"predecessor-version":[{"id":3658,"href":"https:\/\/www.liberalglobe.com\/index.php?rest_route=\/wp\/v2\/posts\/445\/revisions\/3658"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/www.liberalglobe.com\/index.php?rest_route=\/wp\/v2\/media\/596"}],"wp:attachment":[{"href":"https:\/\/www.liberalglobe.com\/index.php?rest_route=%2Fwp%2Fv2%2Fmedia&parent=445"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.liberalglobe.com\/index.php?rest_route=%2Fwp%2Fv2%2Fcategories&post=445"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.liberalglobe.com\/index.php?rest_route=%2Fwp%2Fv2%2Ftags&post=445"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}![\"\"](\"https:\/\/www.liberalglobe.com\/wp-content\/uploads\/2019\/03\/image.png\")
Author: Glentamara, licensed public domain
Source: https:\/\/commons.wikimedia.org\/wiki\/File:Eurozone.svg<\/figcaption><\/figure><\/div>\n\n\n\n