Saturday, September 10, 2011

Eichengreen Is Also Pessimistic


European leaders have responded with a cacophony of proposals for restoring confidence. Jean-Claude Trichet, the president of the European Central Bank, has called for stricter budgetary rules. Mario Draghi, head of the Bank of Italy and Trichet’s anointed successor at the ECB, has called for binding limits not on just budgets but also on a host of other national economic policies. Guy Verhofstadt, leader of the Alliance of Liberals and Democrats for Europe in the European Parliament, is only one in a growing chorus of voices calling for the creation of Eurobonds. Germany’s finance minister, Wolfgang Schäuble, has suggested that Europe needs to move to full fiscal union.
If these proposals have one thing in common, it is that they all fail to address the eurozone’s immediate problems. Some, like stronger fiscal rules and closer surveillance of policies affecting competitiveness, might help to head off some future crisis, but they will do nothing to resolve this one.
But Europe doesn’t have months, much less years, to resolve its crisis. At this point, it has only days to avert the worst. It is critical that leaders distinguish what must be done now from what can be left for later.

1 comment:

FrédéricLN said...

"If these proposals have one thing in common, it is that they all fail to address the eurozone’s immediate problems"

They all had 30 months, not to say ten years, to address these immediate problems. They did not. Bad administration is not something you can cancel-and-replace in emergency situations - tell Compaq, MySpace, Yahoo! and others.

The next step (which should have taken place one or two years ago) is "Chapter 11". It's not "the worst". It's the safeguard failed states need for the reconstruction years to come.

The United States had for themselves another option, "dollarizing" the debt, that's to say, having all dollar owners in the world pay for the U.S. stimulus and wars. Greece or Italy won't have that option, as Niger or Argentina hadn't had it, too. But "Chapter 11" may be a sounder way after all. The Nigerian or Argentine growth rates are fairly high now; let's hope he same for Greece, Italy or France.