Wednesday, December 10, 2008

Krugman on European Coordination

Paul Krugman, still in Stockholm on his Nobel tour:

A brief note on real economic issues. Everyone here seems to be talking about two things: the fate of the auto industry, which is in almost as much trouble in Sweden as it is in the United States, and the German problem. At a time when expansionary policies are desperately needed, the leaders of Europe’s largest economy seem to have their heads in the sand. This is a huge problem: there are large spillovers in fiscal policy among EU nations — that is, a significant fraction of, say, French fiscal expansion ends up promoting employment in Germany or Italy rather than France. So there’s a crying need for a coordinated policy. But the Germans aren’t participating.


Alain Q. said...

One could think that the bi-partisan government in Germany is a form of Union Nationale.

In fact, it is another bad case of cohabitation as France is too familiar with, with its well known consequences of immobilism and indecision.

Louis said...

Difficult not to agree with Krugman (again). There are "common problems which need common solutions", but nobody in Europe is ready for the kind of shift in economic sovereignty from the national to the European level. Or even (perish the thought!) for the creation of a level of economic cooperation between a small group of European countries ready to put their economic policies together. A sort of economic coalition of the willing (joke, joke...).
Instead of that, it seems to be politics and economics as usual, at the national level, and a kind of "re-nationalization" of the EU. The Commission merely gives its imprimatur to national plans dealing with national problems. I am on thin ice because I have only the slimest knowledge of economic mechanisms, but it seems to me that we are hit back by what we created in 1992, that is a common monetary policy without a common economic policy. Sort of stating the obvious, but the times are difficult to read.

Leo said...

In today's Le Monde, Daniel Vernet has a nuanced explanation for Geermany(s position which he ascribes more to Angela Merkel's prudence than to other factors discussed here. He goes on to say that she has recently proved that she can quickly change her mind.