Wednesday, September 14, 2011

Slings and Arrows

The atmosphere is turning nasty on the Socialist side of the spectrum as well. Jean-Pierre Jouyet, who is now advising Hollande after having been in charge of European affairs under Sarkozy (and under Jospin before him), has accused economist Daniel Cohen, who advises Aubry but is also a consultant to Lazard Frères, which advises the Greek government, of advocating for Greece at the expense of the French taxpayer. The issue is the issuance of eurobonds by a eurobank, which some see as the solution to the debt crisis. But Jouyet, wearing his politician's hat, is attacking Cohen for conflict of interest.

Sigh. There is a genuine debate to be had about eurobonds. There are moral hazard issues, in that fiscally undisciplined states will be rewarded with lower borrowing costs than they would otherwise enjoy, while better-managed states will have to pay higher costs. And without an enforcement mechanism of some kind, the formula is a recipe for a future disaster. But the issues will never be reached if two men who know each other well as colleagues at Cepremap and undoubtedly respect each other's expertise descend to this level of mudslinging.

For my part, I am glad to hear that Cohen is talking to the Greeks, and I would hope that Jouyet would be talking to them as well. They need all the advice they can get.

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