Deutschland lehnt jede Änderung des Stabilitätspakts und anderer Euro-Regeln ab. Dabei beruhen sie auf mittlerweile überholten Annahmen der 80er Jahre, kritisitiert US-Starökonom Stiglitz. Fast alle Dogmen haben sich in der Eurokrise als falsch erwiesen.
Von Joseph E. Stiglitz
Much of the euro’s design reflects the neoliberal economic doctrines that prevailed when the single currency was conceived.
It was thought that keeping inflation low was necessary and almost sufficient for growth and stability; that making central banks independent was the only way to ensure confidence in the monetary system; that low debt and deficits would ensure economic convergence among member countries; and that the free flow of money and people would ensure efficiency and stability.
Each of these doctrines has proved to be wrong. For example, partly because of their misguided focus on inflation instead of financial fragility, partly because of ideological presuppositions that markets, on their own, are always efficient and that therefore, regulation should be kept to a minimum, the independent U.S. and European central banks performed much more poorly in the run-up to the crisis than less independent banks in some leading emerging market.
The crisis caused the deficits and high debt, not the other way around.
Spain and Ireland had fiscal surpluses and low debt/GDP ratios before the crisis. The crisis caused the deficits and high debt, not the other way around.
The free flow of people, like the free flow of money, seemed to make sense. But as money left the banks in the afflicted countries, lending contracted, a private sector austerity that exacerbated that of the public sector. Similarly, migration from crisis-hit countries has been hollowing out the weaker economies, and left an increasing tax burden on those left behind.
Internal devaluation – lowering domestic wages and prices – is no substitute for exchange-rate flexibility. Indeed, there is increasing worry about deflation, which increases leverage and the burden of debt levels that are already too high.
The extreme austerity that many European countries have adopted in the wake of the crisis has almost been a knockout blow. A double-dip recession and soaring unemployment are terrible costs to pay for slightly improved current account balances – which are better in most cases more because imports have decreased than because exports have increased.
Germany and some of the other northern European countries have balked at helping their struggling neighbors emerge from the crisis. But if they continue to insist on pursuing current policies, they, together with their southern neighbors, will wind up paying a far higher price than if the Eurozone adopts the program outlined above.
The euro can be saved, but it will take more than fine speeches asserting a commitment to Europe. If Germany and others are not willing to do what it takes – if there is not enough solidarity to make politics work – then the euro may have to be abandoned for the sake of salvaging the European project.
This article was first published in Queries, the European Progressive Magazine under the title “Saving a broken euro”. Repost with kind permission of the editors. Part I (“Wie der Euro gerettet werden kann”) is here
Die Eurokrise ist noch nicht überstanden. Dies hat die Panikattacke um eine Problem-Bank in Portugal gezeigt. Doch es geht nicht nur um Portugal, warnt US-Starökonom J.E. Stiglitz: Auch Deutschland ist auf falschem Kurs. Ohne tiefgreifende Reformen kann die Währungsunion nicht überleben.
Von Joseph E. Stiglitz
As we survey the damage from the years of crisis and recession in Europe that finally seems to be ebbing, there is a sigh of relief that the Eurozone has not fallen apart.
But the return to growth is a far cry from a return to prosperity. At the current pace of “recovery,” no return to normalcy can be expected until well into the next decade.
Even Germany, which is often touted as the most successful country, has grown by a miserly .63 percent over the past 5 years — a rate that in other circumstances would be called an utter failure.
The euro is not an end in itself. It was supposed to be the means to a more prosperous Europe, with higher living standards. For the Eurozone as a whole, incomes today are some 20% below what they would have been, had the growth trend that prevailed in the years before the euro continued.
Europeans have been asked to make continuing further sacrifices — lower wages, lower benefits, weakened systems of social protection — all in the name of saving the euro.
PROMOTING AN AMBITIOUS AGENDA
A much more ambitious, and different, agenda is needed: it is clear that, in its current form, the euro is failing the continent. And yet allowing the currency to dissolve would also be extremely costly.
What is needed, above all, is fundamental reform in the structure and policies of the Eurozone. By now, there is a fairly clear understanding of what is required:
- A real banking union, with common supervision, common deposit insurance, and common resolution; without this, money will continue to flow from the weakest countries to the strongest.
- Some form of debt mutualization, such as Eurobonds: with Europe’s debt/GDP ratio lower than that of the US, the Eurozone could borrow at negative real interest rates, as the US does.
- Industrial policies to enable the laggard countries to catch up. Current strictures bar such policies as unacceptable interventions in free markets.
- A central bank that focuses not only on inflation, but also on growth, employment, and financial stability.
- Replacing anti-growth austerity policies with pro-growth policies focusing on investments in people, technology, and infrastructure.
- A solidarity fund for stabilization—just as there has been a solidarity fund to help new entrants into the EU.
This article was first published in Queries, the European Progressive Magazine under the title “Saving a broken euro”. Repost with kind permission of the editors. Tomorrow in Part II: ERRONEOUS DOCTRINES – Die Fehler der Euro-Doktrin.
Neue Töne in der europapolitischen Debatte: Die EU dürfe nicht nur Grenzen einreißen und Räume öffnen, sondern müsse ihre Bürger auch schützen und ihnen eine Heimat bieten, sagt Ratspräsident Van Rompuy. Wird Protektionismus plötzlich hoffähig in Brüssel?
Von Craig Willy
European Council President Herman Van Rompuy, who chairs the meetings of national presidents and prime ministers, has again criticized the EU’s excessive focus on abolishing economic/financial borders and that instead it should “balance” this with “protection.” The EU has been too much of an open “space” rather than a rooted “place.”
From a recent speech:
With Europe, our focus has always been on space. Just think about it. From the very start, the typical action was to remove borders, for goods, workers, investment, to let people and companies move, take initiatives, seize opportunities. Even today – on fields as diverse as energy, telecom or the digital economy – it is still about bringing down borders, creating this big common space. But we’ve never really thought of Europe as a home, a shelter, and today we pay a price for it.
The implications are inevitably left pretty vague but his argument raises an important issue. Many Anglos and euroskeptics have often feared that European integration isn’t really about free trade but is in fact a French plot to create an independent and moderately protectionist European Superstate as a counter-weight to the U.S.A. and globalization.
This Europe puissance would be dominated by the “Carolingian core” of France (naturally), Germany and the Benelux. Van Rompuy, a Flem hailing from the heartlands of the old Lotharingian and Burgundian realms, is evidently not insensitive to this ambition.
In practice, nothing has really come of this stuff (Mitterrand’s Big Idea for achieving superpower status was the euro..). And the EU remains very much the great “opener” and abolisher of borders, pushing for free trade agreements with just about everyone.
Van Rompuy himself has welcomed the upcoming EU-U.S. free trade agreement (TTIP) as “the real game-changer in the making,” a deal which at its most ambitious seems to want to create a Transatlantic economic regime.
Skeptics will also point out that Van Rompuy is at best an “influencer” rather than a decision-maker so his words are inoperable. But I for one am comforted by the fact that some people at the highest levels are at least conscious of the problems borderlessness and rootlessness have caused over the years and are troubled by the predictable long-term consequences for Europe.
This is a short version of the blog post “Is the EU presided by a closet protectionist?” The original text can be found here