Some politicians seem to enjoy the crisis so much that you shouldn’t expect them to solve it.
The solutions to the European crisis are surprisingly simple, well-known and increasingly gaining support even from sceptical economists. The solution would be imminent if the politicians opened their eyes and pulled their heads out of the 1980s’ paradigm. Whether it can happen is a different question.
The European crisis is a consequence of two and practically only problems: the cyclical crisis of demand and the systemic crisis of eurozone institutions. The debt and financial crises are mere symptoms. If we solve the demand-led vicious circle and rectify the institutional set-up of the common currency, the debt and financial crises will cease to be an issue.
The nationalists bring the drachma back. Literally.
If the Eurozone breaks up, so will the European Union. At least in the form we know it. Everybody talks about it and it’s true. The current crisis is however a reason, why the European union will survive and become stronger.
At the end of May, the Greek Commissioner for fisheries Maria Damanaki told the media that the question of Greece leaving the Eurozone is now on the table. Together with an unsourced sentence from der Spiegel it brought a wave of political speculations and increased volatility in bond and foreign exchange markets.
"Just sell the islands you banrupt Greeks!" "The Bild writes to the Greek bankrupt PM: You won't get anything from us!" etc.
Greeks were happily spending others’ money and piling up uncovered debts. They were living beyond their means. They should be therefore punished or at least publicly humiliated. Anyway, all southerners are similar idlers and slackers. All you hear is just their mañana, domani, siesta and fiesta. Greeks are especially repulsive. They’re fat, they sit all day long outside their houses, eat lamb and drink ouzo.
Indeed, the Greeks are the fifth most obese developed nation, they eat by far the most lamb in Europe and they have a world monopoly for ouzo. But how do you want to measure laziness? There’s no clear indicator whatsoever, which would capture it in its entirety and hence confirm this dangerous but seemingly obvious popular wisdom. On the contrary, the indicators we have would suggsest the very opposite.
Just few days ago, Petr Nečas, the Prime Minister of the Czech Republic, declared that the floating exchange rate helped the Czech Republic to handle the recent crisis (FT). It would be really intriguing to know, whether he was analysing a briefing for Richard Nixon from 1973, or he actually looked at what happened between the Czech crown and Euro in last years. Continue reading