Monday, December 16, 2013

FT Claims that France Is Holding Back the Eurozone

The Financial Times has a rather pessimistic piece on France today, which makes the claim that France is the sick man of the Eurozone. (I can't quote from the article without violating the FT's rather strict reading of the copyright laws, so you'll have to settle for the link and find your way beyond the paywall). Suffice it to say that the article's stark conclusion is based entirely on the Purchasing Managers' Index, which has been misleading in the past and probably is now as well.

Don't get me wrong, I don't think that the French economy is doing at all well. But to single it out as the weak link in the European economy is wrong, and probably a prelude to louder calls for stricter adherence to austerity by the French, on the grounds that more austerity-minded governments had a better third quarter. This is wrong-headed and short-sighted.

Pissarides on the Euro

Nobel laureate Christopher Pissarides, once a passionate supporter of the euro, now thinks the EMS must either be changed profoundly or dismantled:

The euro should either be dismantled in an orderly way or the leading members should do what’s necessary as fast as possible to make it growth and employment friendly. We will get nowhere plodding along with the current line of ad hoc decision-making and inconsistent debt-relief policies. (Compare, for example, Cyprus and Greece, where the source of problem was similar but the solution very different). The policies pursued now to steady the euro are costing Europe jobs and they are creating a lost generation of educated young people. This is not what the founding fathers promised.