Friday, May 17, 2013

James Galbraith's Plan for Europe

Jamie Galbraith thinks that what Europe needs is not a stimulus plan but a "stabilization plan." Specifically, he thinks that the Eurozone needs an expansive social protection plan, like Social Security in the U.S., providing equal benefits to all member countries' citizens and financed jointly by contributions from each. The word "stimulus," he says, gives the wrong idea of what true Keynesian economics is about, which is smoothing across the business cycle.

Hollande's "Surprise Maneuver"

The German network ARD calls it a "surprise maneuver," but all Hollande did was revive the call of his predecessor--and of all previous French administrations  since Maastricht--for more centralized economic governance of the Eurozone. The surprise may be that this time around, Germany is less hostile to the idea, no doubt because Germany no longer sees it as a French plot to do an end run around the ECB. What the Germans want is tighter control of national budgets in other countries, and a Europresidency may now seem like a reasonable way of getting it.

Or so says the press. Frankly, I think Hollande felt that he needed to show some initiative on Europe, since he has been beaten up over his failure to renegotiate the Sarkozy-Merkel agreement after he was elected, as he promised he would do. This is one of the main sources of the allegation of "weakness" against him, so he had to react, and this was his ploy. But actually getting from here to there requires persuading many countries to give up a little more of their sovereign prerogatives, and all will be reluctant to do so--France more so than most. But Hollande's maneuver will allow everyone to look as though they're doing something while awaiting the German elections, in which far too much hope for change is invested. The elections won't change anything either.

Meanwhile, however, Hollande has at least temporarily changed the conversation. I don't think he had any more ambitious goal. He is, as he keeps reminding us, a realist, after all.