13 April 2018

Costas Lapavitsas: Money, money, money

Interviewed by Benjamin Bürbaumer

Al Pacino as Scarface

Originally published in French in Periode:


BB: How would you describe your intellectual and political trajectory between Greece and England?

CL: I went to Britain when I was very young. I came out of the ferment in Greece after the fall of the Regime of the Colonels, so I participated in that period of very intense politicization. I also come form a left-wing family tradition. I was a Marxist and a socialist long before university, I didn’t discover Marx at university. But I went to Britain very young- in the late 1970s – so my development has always been in the British and European left. I have been participating in the political and intellectual life in Britain and the rest of Europe for a long time now. In that sens, getting involved in Greek economic and political debates in the last 7 years was for me a return to Greece. But whatever I have done I tried to maintain distinctive aspects in my work that come from my Greek cultural origins. I firmly believe that we need to bring into social science something that we have from our selves and our own development. If we simply reproduce something we learned elsewhere we become hobbies.

BB: Profiting without Producing and also your brand newMarxist Monetary Theory draw on Hilferding’sFinancial Capital but also highlight its shortcomings. What are Hilferdings main theoretical insights for understanding contemporary capitalism?

CL: Let me first of all say that Hilferding, with whom I have profound political differences, is in terms of economics the only Marxist of the 20th century to have the claim to belong to the tradition of monetary theorists. Hilferding isn’t just a Marxist political economist, he is also an important monetary theorist in his own right, and the only Marxist in that field in my judgment. Monetary in the broad sens, not so much because of what he has to say on money, but much more because of what he has to say on finance. The real contribution of Hilferding was on finance and without Hilferding it is very difficult to understand finance today. Hilferding is fundamental to any monetary theory of Marxist description for today. He offered two very important things. The first is an innovative way of analyzing the relationship between industrial capital and financial capital. He has understood financial capital for what it is: a separate type of capital and analyzed it separately. He explained the organic links with industrial capital. I would argue that the connection today isn’t the same as then but the understanding and the way to analyze it comes from Hilferding. The second point is that Hilferding analyzed profit, financial profit. The return to financial capital, the connection between financial and industrial profit in innovative ways, is something which Marxist economics, at least in the anglosaxon tradition, has begun to understand only recently. 100 years after the publication of Hilferding’s book. So in that regard too he is a very important Marxist theorist. Obviously, a last point, not so much about theory, Hilfdering was fundamental in understanding the change of periods in capitalism, which of course, Lenin took when he formulated his theory of imperialism. So that’s a broader concern.

BB: Recently, empirical data at hand, Marxists such as Andrew Kliman and Michael Roberts repeatedly argued for the law of the tendency of the rate of profit to fall as the general cause of crisis. What role does this tendency play in your account of the 2007 crisis which is based on the pivotal role of finance?

CL: When i look on the development of the Marxist political economy, especially during the last 3-4 decades of the 20th century, to be honest I’m amazed. During that period a tendency has emerged explaining everything pretty much in terms of some putative tendency of the profit rate to fall. This kind of thinking has somehow mutated into the Marxist account of the macroeconomic performance of capitalism and the behavior of capitalism over time. I want to stress that this understanding, particularly the tendency of the rate of profit to fall because of the organic composition of capital, this understanding of explaining everything is a very new thing. Classical Marxists, Marx himself never did that. You won’t find it in the great Marxists at the beginning of the 20th century, Rosa Luxemburg, Lenin, Hilferding, Kautsky , Otto Bauser, you won’t find it in these people, and historically they were the best of the Marxists. You will not find it in Marx and Engels. This is a creation of the end of 20th century and it reflects in my judgment a decline of Marxism. It is Marxism becoming a narrow self-referential kind of intellectual endeavor, which has found some kind of principle and then keeps turning around it, irrespective of what the rest of the world says. So, in theoretical terms I find this kind of practice by Marxists terribly poor and saddening. It tells you very little in theoretical terms. Empirically it has no substance at all. I measured the rate of profit time and again. In fact, I’m publishing work now serious empirical work on the rate of profit in the USA and there is no evidence that it has been falling in any serious ways since the early 1980s. Of course it fluctuates but there has been no evidence that is has been falling in the long term. So neither theoretically nor empirically it makes sens. In terms of the theory of crisis finally, I want to stress something very important: crises are very complex events. A theory of crises is a very complex thing, by its own nature. To think that because presumably you have shown a decline in the rate of profit, let’s say, because you have shown that there will be a crisis is to misunderstand what a crisis is. Often many of these so-called theories, basically demonstrate somehow a decline in the rate of profit, often to invent the decline and then on the basis of that add some kind of low level of sociology which presumably explains what the results are from the rate of profit. I don’t like this kind of Marxism, I think it is confusing, misleading. The sooner Marxist theory gets out of this the better for all of us. Politically, as well it is appalling. The emphasis on the rate of profit to fall is a direct reflection of the political relevance of much Marxism. The less influential Marxism becomes among real people the more you stress the tendency of the rate of profit to fall. A lot of people think that if they demonstrated somehow that the rate of profit is falling, they are being revolutionary. Because they are showing that capitalism generates crisis and that capitalism will somehow create impossible situations for working people. They achieve nothing with that. It’s pointless for political purpose. It’s a reflection of political weakness. We need complex arguments that make sense. I’ve been involved in politics in Greece in the last years and i can tell you that if you start you analysis with the rate of profit to fall, most people don’t know what you’re talking about. And there are parties in Greece that reproduce that analysis, such as the Communist party, but they have been utterly irrelevant to political events in Greece in the last few years.

BB: Where does today’s financialized accumulation come from? You mention 3 underlying tendencies which are monopolization, restructured banks and the consumption of workers.

CL: I think financialization is a very important dimension to contemporary capitalism and I understand it as a period in historic development. And as you indicated in your question, one must start with productive capital. Of course the rise of big business, monopoly capital, whatever you call it and its own behavior is very important. What we observe there, and it holds in France, it holds in Germany, it holds in England and the USA , is that that big business at the moment doesn’t depend on banks as much as it used to. This is a fundamental point. For a long time big business has been in command over substantial money resources, capital which it doesn’t it invest domestically. We have weak investment and huge availability of financial capital, and the use of this by big business to extract financial profit. Financialization starts with that. It is the result of underlying developments in the mode of production and the result of institutional changes in the state, the frame of the financial system and its own regulations. This remains the core reality, and the fastest financializing country is France. So that’s were it starts. Then of course, there are changes in banks. Banking capital has its own logic. Banking capital is not some kind of capital that is dragged along by big business or alternatively commands big business, it has its own logic. It doesn’t work towards big business in the way Hilfdering assumed it 100 years ago, or as Lenin assumed. And if the prospects of profitability from lending to big business are not very good, big banks will do other things. In that respect we have a change in banking. Banks are more geared in making profit out of transactions, out of dealing in big markets and out of lending to ordinary people and households. And as you know from my book, that’s the 3rd thing that is very important: the penetration into households. That in some ways is the most evident aspect of financialization, the aspect that all of us see. Modern capitalism is very unusual in this respect. And that has economic and non-economic aspects. Of course households have economic behavior but there are also non-economic in what they do because people aren’t businesses. You’ve got a family, to have to bring up children, you got to recreate labor power. This in not directly an economic process. So how finance connects to you is a very complex process that varies from country to country. But what we have is the extraction of profits directly form households, directly from workers. This is a new phenomenon. Value transfer from individuals and households directly to the financial institutions, this a very important development in the behavior of finance and households. A new form of exploitation.

BB: The Monthly Review current but also Giovanni Arrighi claim that there has been an epochal shift in the balance between the spheres of production and circulation, in favour of the latter. Similarly, there is the figure of banks as monied capitalists, often considered as rentier, distant from production, and predatory toward accumulation. Could you explain more broadly the relationship between finance and real accumulation?

CL: Finance is a very old thing. In fact we have evidence of financial transactions in classical Greece and ancient Rome. Very sophisticated transactions and clearly capitalistic, capitalistic in the sens of investing money to make money profit, which is the most basic dimension of capitalism. So financial capitalism is a very ancient thing. It existed long before the capitalist mode of production. These people knew how to make profits in a variety of ways, they don’t needed a capitalist mode of production to make financial profits. This knowledge is there since, as it is inherent in being finance, working with money and money capital. That also contains a predatory element, because finance is a step removed from production and it makes profit out of real production, whether it is capitalistic or not. So ultimately finance doesn’t care about production and if it makes profit by squeezing productive capital it will do so. So the predatory element is always there toward production and individuals. Finance will destroy individuals as we know from a long tradition. Industrial capitalism in the way Karl Marx and the great political economists discussed it in some ways was an unusual period. What happened in the years of intensified industrial capitalism is that for the first time in the history of humanity a system of finance emerged, not just financial activity. So a structured system of finance emerged. And this system was mobilized to serve the interest of industrial capital. As Karl Marx said financial capital is subordinated to industrial capital and serves it. And indeed that’s how it worked in the 19th century in England and elsewhere. This is the classical model that Marx had in mind, where banking, stock markets and financial institutions served the accumulation of productive industrial capital. The 20th is very different, and 21th is again different. What we observed with the maturing capitalism is of course a break in this simple way of formulating and an increasing autonomy of financial capital. Financial capital has always had some potential for autonomy but in the 19th century it was kept under control by industrial capital. In the 20th century autonomy increased and even more with financialisaiton. With Hilferding we can think the autonomy of financial capital reestablishing itself and dominating industrial capital. It’s a reversal of what Marx had argued, and this is Lenin’s classical imperialism. During the 20th century industrialists came back and pushed financial capital back down during the period o f Keynesianism. Now finacializaiton can be considered as a second period of renewed ascendency of finance. This time, not by controlling industrial capital but by making profits in a variety of ways, by dealing with individuals and giving to the financial system a profound degree of independence, where it can expand in a variety of ways. This has happened while the industrial capital in the west hasn’t been growing very much and where profits, although not falling, have not been rising significantly. So we have a re-balancing of the capitalist economy in the last 40 years in a way that is historically unprecedented. Finance expanded, production is more stagnant. This is financialization and it means some ancient tendencies reasserting themselves and Marxism needs to take that into account and needs to think innovatively and creatively.

BB: You consider that the crisis that has been triggered in 2007 is a peculiar one because of the distinctive significance of finance, which has its own internal logic. In this context, you hold that money is the basis from which credit and finance derive. What are the foundations of a Marxist monetary theory today?

CL: You’ve asked me 2 things. The crisis 2007-2009 isn’t due to a falling rate of profit. Let’s begin with that. Those who think that and that they are defending Marxism because they link it to some reality of capitalist economy are misguided. It’s irrelevant. The crisis emanated from the heart of capitalism, but the heart of capitalism contains finance. The crisis emanated from very peculiar events. Just think about it: it is the fact that the poorest section of the US working class had borrowed very heavily, couldn’t repay it, and these housing debts triggered a gigantic global crisis. In the context of Karl Marx this would have been unthinkable. And that tells you the transformations of capitalism and how we should integrate finance. Money is of course at the foundations of finance for a Marxist approach. And its importance has been demonstrated very vividly since the crisis. Marxist theory of money has also been a very problematic field for many reasons. In the Anglo-saxon world Marxist theory of money has historically been very week. In the German tradition and even more in the Japanese tradition it has always been much stronger. Only gradually its getting better in the Anglo-saxon world. My approach to it is this: logically, we must understand money as a commodity, as Marx said. But this is only the beginning. Once we understood it as a commodity then the next thing is to understand the evolution of money and the particular way in which credit money and fiat money work. These are the two most important forms of money for modern capitalism. Contemporary money from this perspective very important for 2 reasons. First of all, the great bulk of it is created by private banks through the credit mechanism. Second, and even more important, the foundation of this system, the ultimate means of payment, the legal tender is state fiat, convertible into nothing. It ‘s a promise to pay itself, nothing else, produced by the state through the banking system. That’s what makes it different: it is fiat but produced through the banking system. This gives to the modern state enormous power: it allows him to drive interest rates down to 0 – which is unprecedented in the history of capitalism – essentially by producing huge amounts of this fiat money, which is possessed by banks. So what we witness today is a incredible explosion of the hoarding tendency. In gigantic dimensions this money produced by the state is hoarded by banks. So it is the ability of the state to create money and to put it in the hands of the banks that has allowed the modern state to deal with the crisis. Without that it would have been impossible. It is also this ability of the state to create money in this way, that has allowed the state to support financialization. This power of the state is placed at the service of the financial system. It allows the financial system to obtain liquidity, it drives interest rates down, it subsidizes the financial system by creating gaps between interest paid and interest received. It is a very powerful lever of managing the capitalist economy and supporting finance. That’s for the domestic system. Internationally, the role of money is more complex and there it’s the opposite of the domestic system. In the domestic use of money we have a degree of knowledge and management, according to specific purposes. Internationally, it’s the opposite, anarchy. There is no money that can operate like that, there is no structure serving these purposes in the world markets. We have competition between states, contest between big businesses for payment, for transaction, for shifting wealth. These contests are mediated by forms of money created by powerful states, mainly the USA but also the EU to a certain extent, which compete with each other, but which are unstable. This is a source of the global uncertainty and instability which we are witnessing at the moment. We have been on the brink of a currency of a currency war for 2 years now. Whether it will break out we don’t know but it shows the instability of the system globally. The international dimension of money, i can see no prospect of stabilizing it. Therefore, all the vast contradictions of the global capitalist system are manifested there.

BB: The concept of fictitious capital is relatively widespread in current debates. Could you explain the difference between financial profit from holding equity and financial profit from trading financial assets? And linked to that question, why is the figure of the speculator inadequate for the analysis of financial profit resulting from trading financial assets?

CL: I’m very skeptical of the use of the concept of fictitious capital and much of the debate around the figure of the speculator. Fictitious capital and speculation exist but I’m skeptical of stressing these things because it’s the other side of the coin of the tendency of the profit rate to fall. Usually, that kind of Marxist analysis starts with the tendency of the rate of profit to fall and thinks it explains the world, and once it has done that it adds fictitious capital and speculators and thinks it has explained finance. So it is an incredibly jumbo. Now, fictitious capital is an idea that Karl Marx used, the simplest way to understand it is as net present value. Those who do finance will know that. To impute a monetary value to some fictitious capital that corresponds to the regular payment that one receives. You can do that, finance does it all the time. Marx was aware of this and said it is fictitious, and he was right. But there is no capital of this type. When you receive money regularly it doesn’t mean that there is some capital behind. If trade it however, if you trade the right to receive those payments you create a price for it, which is how finance works. You create a piece of paper that corresponds to this capital and gives you a right on payment, then someone has to pay money for it. That money isn’t fictitious, it’s real. When we talk about fictitious capital that’s one thing, but it doesn’t mean that the capital we observe in the financial markets is fictitious, far from it. This capital should be understood as loanable money capital. That’s the real concept we need for finance. What Marxist theory should be spending its time discussing is loanable money capital, because fictitious capital is basically a widows cruse. It’s a pot out of anything can come. It gives you very little intellectual leverage. The real issue is loanable money capital. Which allows to understand the real capital that is available in the money form and is transacted among participants in financial markets, through borrowing and lending usually, creating often buying and selling transactions. This takes the form of fictitious capital, it creates fictitious capital but underneath there is a reality of it which corresponds to loanable money capital. In my work, I’ve been concerned to point precisely this out. To find the bridge, because the profits out of finance are not fictitious, they are very real and made out of loanable money capital. So what happens there? Two things which are analytically and politically important. First, real profits emerge because some agents obtain rights to future flows of value. That can be future profits, wages, future anything. You obtain rights of that and accumulate them. That’s a real source of return. The second thing that happens is the difference in monetary value between what you paid for a financial asset and what you receive for it. Capital gains, if you wanna call it like that, or capital losses. These are one-off differences in absolute terms of value, these are value transfers, they aren’t flows and that’s another mechanism of profit making in the financial markets. Financial profits then should be analyzed through a combination of these 2 things: change in the rights of future flows of value and change in differences in money paid and money received to obtain assets, capital gains. Here a key analytical instrument comes from Hilferding. Much of those capital gains, or the access to profits will depend on the rate of return, and on the rate of interest on the market. Hilferding was the first Marxist to analyze that, to analyze the systematic difference between the rate of profit and the rate of interest. He proposed the concept of „profit of enterprise“. Marxists should spend their time analyzing this instead of trying to show that the rate of profit is falling.

BB: To what extent has financialisation transformed the social relations in developed capitalist countries?

CL: Tremendously, that the simple answer because the change is enormous. One thing we need to stress is that we don’t really have the return of the financial rentier. People extract rent, they extract financial profit but they don’t seem to extract it by lending money or making money available. The rentier here, in the traditional political economy is the person that lends loanable money capital and makes it available. Such a thing is not immediately happening, this is not the age of the rentier. This is the age of the financial institution related to industrial business in an unusually way. It’s the age of institutional finance in a very complex fashion, that mobilized funding from across society. From the perspective of workers the transformation brought by financialisation is very important. Finance has penetrated individual life. On the side of debt but also on the side of asset. Typically people in the Marxist tradition or on the left look at the side of debt only. And they think that this is how financialisaiton works, because of course indebtedness has increased. And often there is an analysis that says that debt has increased because income isn’t high enough. People borrow to maintain their standard of living. This is fallacious thinking. It’s just not possible to increase private debt systematically for 30 years because income isn’t enough. Financial institutions that would have done that would have gone bankrupt a long time ago. So there are different processes. It isn’t simply that wages are not high enough, of course real wages in many countries like the US have been stagnant for a long time, but the reason why people increased their personal debt is far more complex. The biggest element of debt is for mortgages, for housing, only a smaller part is insecure borrowing for consumption and even there we don’t know exactly what is going on. Now, I suggest, the reason why this has increased in many countries is related to the development of real income, but more heavily, more closely it is related to the provision for basic goods, that households need: housing, eduction, health and so on, that make the consumption basket of the working class. Most provisions there moved away from social provision towards private provision. Private provision has been mediated increasingly by the financial system. Fiancliasation works in that way. So people became more heavily indebted because of commercialization of these activities, mediated by the financial system. Without negating the role of wage, the problem is much more complicated for the individual worker and household. And it affects the behavior of the worker. The workers feels the pressure of debt, he or she has a different behavior on the workplace, the worker feels that he or she can obtain goods from a variety of private providers, the mentality of the worker changes as a result because it’s a constant process of keeping pennies and pounds in order and in place. A muzzle pressure comes from housing, which brings me to the assets. The left only looks at the liabilities of the workers but working people also have assets, and also financial assets. They have financial assets for pensions, a lot of workers put money aside for pensions and this is a big deal for them, and housing can be thought as an asset. You have your mortgage but you also have your house. So on the asset side finacialisation is also very prominent. People learn how to play with their house, expecting to make profits and that’s a very important mental process. People also come to rely heavily on private providers of pensions on the asset side and there again they might lose money or acquire rights in complex ways. So fnancialisation also works on the asset side, making profits for financial institutions. The combination of these two sides makes powerful results, which we see in everyday life. This doesn’t only affect the middle class, but the working class also knows it very well. That creates new political pressures on the left. We must be able to offer concrete proposals to working people in this situation and know how to deal with the pressures they’re facing.

BB: Regarding the countries in the periphery you claim that there has been no return to formal imperialism, but financialization in developing countries takes a subordinated character which is linked to the hierarchical nature of the world market. What are the features of subordinate financialization?

CL: That in some ways is the most interesting developments of the last 15 years in terms of the global system. We don’t have a return to imperialism in the classical way. Those who consider that we have a return to imperialism in the way Lenin meant it have not studied Lenin carefully. Because Lenin talks about monopolization and unity of finance, banks and big business, which imposes trade controls, dominates the globe and redivides it. None of that is observable. And yet, we do have aggressive finance dominating the globe and penetrating everywhere, together with business, which is financialising itself. We do have forms of imperial imposition but not in the way Lenin meant it, which is why we don’t have similar phenomena. There is no empire in the formal sens. On the contrary, what we see is that when these aggressive states intervene, they create chaos. Instead of creating empire and dominating and integrating it in their own system of control. The US, in particular since the 1990s, has created chaos when it intervened: in Iraq, Afghanistan, Libya and the Balkans. So imperial presence is there, it’s aggressive, it’s destabilizing and it’s driven by the expansion of finance and the expansion of big business, establishing outposts everywhere but not in Lenin’s way. For a long time, the imperialists wished to maintain open borders, free trade and free movement of finance. How that will end up we will see. In the same context, for the last 40 years we have had financialization, also in the emerging world, in the middle income countries, but not in the poorest. There foreign banks have penetrated and transformed the domestic system along the lines discussed previously (especially regarding households in countries like Turkey, India, Mexico, South Africa…). This has had implications for a variety of developing countries. What is interesting is that that financialization is clearly derivative of the financialization of the main countries. There financialization has occurred and expanded while these countries were growing and therefore it shows that financialisation doesn’t necessarily mean stagnant production. The big unknown here is China, which might change everything. China is the last front in this regard because its economy is enormous, the financial system too, but China isn’t yet financialized in the way that the mature or several developing countries are. In China we still have a broad outline of a financial system that serves the purposes of capitalist accumulation. We have the outlines of a system that is there to promote investment in big business, the extraction of profit from industry. That can still create financial bubbles or over-extension of credit, but in key ways it still serves the interests of productive accumulation. The are two reasons for that. First, the continuing role of the state. Much of the Chinese financial system is state operated. Second, the Chinese financial system is still not fully internationalized, there are still controls over the flows of capital. If China financializes, like Britain or the US or another core country, then we will have gigantic phenomena in the world economy. We need to think carefully about that if and when it happens.

BB: On the left, the state is often supposed to be the antipode to the market. Against this assumption you underline that financialization is unthinkable without the systematic intervention of the state in the economy. Could precise this process?

CL: Modern capitalism depends on the state, despite everything it says. We spent 40 years with an ideology that basically called itself neoliberal and keeps talking about pushing down the state and freeing the economy, freeing the market. This is entirely an ideology. It’s has also been of course a policy that served the interests of some sections of the domestic and international bourgeoisie. The plain fact is that the financializing world has depended heavily on the state. The dependance on the state is manifest regarding regulation. The regulatory role of the state hasn’t gone away, it has just changed in character. The state used to regulate finance in terms of prices and quantities, it used to regulate the rest of interest and the extent of borrowing and lending that institutions could do. Now, it regulates practices of finance, it regulates capital adequacy, some of the lending operations in which banks can engage… there is a huge list of regulations, which provides some kind of order to the financial system and promotes or keeps down certain areas. So the regulatory role is very important. More important has been the ability of the state to intervene to regulate money. The period of neoliberalism has been a period where presumably the market was freed up from the shackles of the state, and markets were deregulated. One of the most important markets in capitalism is the market for money. Money is the most important commodity. In the market of money there is no deregulation. The market of money is actually dominated by a vast monopoly: the monopoly of the central bank which is actually the state. So at its heart neoliberalism has an enormous negation of the market by the state, and it’s a negation of the market that neoliberalism wants. Only consistent neoliberals like Hayek didn’t want that but most neoliberals wanted that. This has given the state vast power and that’s what provided some stability and allowed financialization and the transformation of capitalism to take place. The state is pivotal, without it financialisation is unthinkable. And in a way the state is coming back, I mean even openly, because it never went away. All that talk now of pushing the state back turned out to be superficial. You can see it in two ways: First, the Central Bank is now acknowledged to be an arm of the state. Before the great crisis it was supposed to be independent, even though some of us asked independent of what. That answer has never been given. Now nobody thinks of calling it independent because it is obvious that it isn’t independent. It does what the state wants it to do. Second, most importantly, the state appears to come back through fiscal policy, not only through monetary policy. I believe that in the years to come we will see a comeback of fiscal policy. A conscious attempt by the state to intervene in tax and spending. This will definitely change the balance of social and political power.

BB: In Profiting without Producing you hold that central banks have „emerged as the pre-eminent public institutions of economic policy in financialized capitalism”. What political conclusions regarding the Eurozone can be drawn from that insight?

CL: It’s a very difficult question because the European Central Bank (ECB) is a very peculiar form of central bank, just as the euro is a very peculiar form of money, the two go together. The Euro is the product of 19 states coming together and presumably adopting it as domestic currency while also using it in international transactions. But no individual state has individual responsibility for it, it is actually presumably based on mutual responsibility. And that has its reflection in the central bank: if you don’t have one single state that takes the responsibility for the money, you don’t have one single state supporting the central bank that supports this money. Therefore, the ECB in a sens belong to no state and to all states. As a result the ECB is the most private central bank. It hangs in the air. This private character is obvious from its balance sheet. The Bank of England or the US central bank, they both hold vast amounts of state debt of their own state, demonstrating the close connection to their state which allows to issue fiat money. The ECB isn’t like that and isn’t allowed to do that. It holds mostly private debt and some public debt which it has now been allowed to buy on the secondary market, not primary issues. So it’s the most private of the central banks. Why? This reflects the very logic of what the monetary union is. The monetary union is not a real union, each state has maintained its independence, those who think that their independence has gone don’t understand it. Every state has maintained its independence. So no state in the monetary union can accept responsibility for the debts of another or the deficits of another. That would negate the border of sovereignty between the states. This is a very important rule embedded in the monetary union and in the operations of the central bank. This creates a very peculiar situation. We do have this alliance of states, we do have a private central bank reflecting the alliance of states, but we know that within the alliance of states, one state is more equal than the others. This is an alliance of formally but not really equal states. To call things with their real name: Germany dominates because of its economic power and its lending capabilities. Germany can thus influence the ECB but it doesn’t dictate everything. Therefore, it doesn’t dictate how the central bank works. This creates a contradiction : it is not the central bank of the Germany state but it must reflect the interests of the German state and that cannot be resolved. It’s a contested terrain, that’s how the politics of the European monetary union unfold. Germany will push, its interests will be paramount, it will wish to impose them and the ECB will have to reflect these interests but it cannot be identical with those interests. It cannot be. That’s a constant source of instability. So far the French elites have accepted the subordinate position during the last 10-15 year. What they will do from now on in the ECB and in the monetary union will determine much of the future of Europe.