My blog has been repeating “ad nauseum” since its creation in April, 2011, that the whole Eurozone structure was extremely badly conceived and since Mr. Blanchart, a permanent “number two” and good “pro” at IMF having achieved retirement age left his job with IMF at age 65, he now comes public with all his accumulated disagreements with all the “policies” (sic) of supranational organization, his “own” IMF,  the European and Eurozone’s EU and EC respectively, et al… 

When one thinks that Olivier Blanchart’s last “boss” (sic), Christine Lagarde, a mere PR figure at IMF, is now being considered as a possible Presidential candidate for 2017 French elections, you really see how bad “politicking” is in Europe…and elsewhere

I am referring to The Telegraph‘s 10/10/2015 article: “Fiscal union will never fix a dysfunctional eurozone, warns ex-IMF chief Blanchard”, which I will quote entirely and precede with my own very short comments (trying not to repeat myself all the time).

My – short – Comments

Mr. Blanchart‘s comment show how impotent he was to have IMF take the “right” decisions, since IMF is really “governed” by US interests and like all supranational organizations, including mainly Central Banks – FED / ECB – has as a primary mission to Boost Markets – the FED finally conceding that no rate hikes would be made in 2015, acknowledging – indirectly – that 2015 growth would be insufficient and that the labor market’s total unemployment (including Under Employment) was still way too high with over 10% of US civilian working population.

The European and mainly Eurozone’s (non) Governance want to even increase their useless techno bureaucracy by creating new and totally “obstructive” so called European integration organizations and new top jobs on top of already existing mammoths, where it is far more urgent to start implementing serious and comprehensive social-economic structural reforms, which is their job and for a decade at least they did zilch (only talk).


Deeper integration and EU superstate will be no “panacea” for ills of the eurozone says Olivier Blanchard

The euro will be consigned to a permanent state of malaise as deeper integration will bring no prosperity to the crisis-hit bloc, according to the former chief economist of the International Monetary Fund.

In a stark warning, Olivier Blanchard – who spent eight years firefighting the worst global financial crisis in history – said transferring sovereignty from member states to Brussels would be no “panacea” for the ills of the euro.

 “We should not think once fiscal transfers are done, the euro will work perfectly and things will be forever fine”, said Olivier Blanchard.
The comments – from one of the foremost western economists of the last decade – pour cold water on grandiose visions for an “EU superstate” being hailed as the next step towards integration in the currency bloc.

Following this summer’s turmoil in Greece, leaders from France’s Francois Hollande, the European Commission’s Jean-Claude Juncker, and European Central Bank chief Mario Draghi, have spearheaded the drive to create new supra-national institutions such as a eurozone treasury and parliament.

The plans are seen as essential in finally completing” economic and monetary union 15 years after its inception.

Olivier Blanchard’s comments are a departure from the views of his IMF successor

But Mr Blanchard, who departed the IMF two weeks ago, said radical visions for a full-blown “fiscal union” would not solve fundamental tensions at the heart of the euro.

“[Fiscal union] is not a panacea”, Mr Blanchard told The Telegraph. “It should be done, but we should not think once it is done, the euro will work perfectly, and things will be forever fine.”

Although pooling common funds, giving Brussels tax and spending powers, and creating a banking union were “essential” reforms, they would still not make the “euro function smoothly even in the best of cases”, said the Frenchman.

Any mechanism to transfer funds from strong to weak nations – which has been fiercely resisted by Germany – would only mask the fundamental competitiveness problems that will always plague struggling member states, he said.

“Fiscal transfers will help you go through the tough spot, but at the same time, it will decrease the urge to do the required competitiveness adjustment.”

The creation of a “United States of Europe” has been seen as a necessary step to insulate the eurozone from the financial contagion that bought it to its knees after 2010.

It is a view shared by Mr Blanchard’s successor at the IMF, American Maurice Obstfeld, who has championed deeper eurozone integration as the best way to plug the institutional gaps in EMU.

Mr Blanchard, however, said no institutional fixes would bring back prosperity back to the single currency.

Without the power to devalue their currencies, peripheral economies would forever be forced to endure “tough adjustment”, such as slashing their wages, to keep up with stronger member states, he said.

In this vein, Mr Blanchard dismissed any talk of a growth “miracle” in Spain – which has been hailed as a poster child for Brussels’ austerity diktats. He added he was “surprised” that sluggish eurozone economies were not doing better in the face of a cocktail of favourable economic conditions.

“When people talk about the Spanish miracle, I react. When you have 23 pc unemployment and 3 pc growth, I don’t call this a miracle yet.”

“I thought that the zero interest rate, the decrease in the price of oil, the depreciation of the euro, the pause in fiscal consolidation, would help more than they have”, he said.

Real GDP growth in the US and eurozone (base = 2000)  Photo: IMF

In a sign of the deep structural problems that still beset monetary union, growth in the eurozone is only expected to reach 1.5 pc this year, according to the IMF’s forecasts – far below the 2.3 pc average growth of the pre-crisis era.

Britain and the US are expected to expand by 2.5 pc and 2.6 pc this year respectively.

I think Brexit would be very costly to Britain and costly to Europe, said Olivier Blanchard

He now said he had a “gut feeling” a UK exit from the European Union would prove damaging for the economy and the financial sector.

“I think Brexit would be very costly to Britain and costly to Europe as well.

“I can see how some people are very fed up with Brussels, but that would be a very superficial reaction to just leave Europe because there are technocrats that you don’t like.”

For all his misgivings about the single currency, Mr Blanchard said the EU as a whole remained a “fundamentally good construction”.

“It requires compromises, and sometimes countries don’t get exactly what they want. But the benefits exceed the costs – the European Union is more than Brussels.”

During his reign as chief economist, the IMF came under severe criticism over its handling of the Greek debt crisis. The Fund has yet to formally commit itself to a new €86bn bail-out as they push the likes of Germany to relent to significant debt relief for the battered economy.

Mr Blanchard maintained that IMF calculations show “some decrease in debt, whether through haircuts or long rescheduling, is absolutely needed”.

Should the Fund fail to gain guarantees that Greek debt is sustainable, it is poised to withdraw its involvement altogether.

During his final months as chief economist, Mr Blanchard made two personal interventions in blog posts which called for mass debt relief at the height of Greece’s woes. He said he was motivated to do so because the IMF’s position on Greece was being “misrepresented”.

But European creditors are set to ignore the Fund’s recommendations for repayment extensions of up to 40 years. They will instead propose to “cap” the amount the government pays to reduce its debt to 15 pc of GDP a year.