Ed Dolan on Latvia vs the Czech Republic

Exchange rates matter writes Ed Dolan (Ed Dolan’s Econ Blog). Excerpt:

“When the crisis hit, the koruna depreciated as quickly as it had earlier strengthened, quickly restoring competitiveness. The recession in the Czech Republic was among the mildest in the EU.

The effects of the crisis on Latvia were entirely different. Without a devaluation, the only way Latvia could restore competitiveness was through deflation of prices and wages. This strategy, often called "internal devaluation," has been extremely painful. The unemployment rate has soared to 22 percent as prices and wages fall. Meanwhile, unemployment in the Czech Republic has risen only slightly and has remained below the EU average throughout the crisis.”

Read the whole paper here and have a look at the slides.

Hat tip: Tyler Cowen (Marginal Revolution).

Neoliberalism and Market Reforms: the Debate

An outstanding post by Scott Sumner (The Money Illusion), titled Fallacies of the left and right. First sentences:

« I’ve been surprised how much discussion has occurred in response to my neoliberalism post. Perhaps that was because Paul Krugman responded. In any case, I’d like to briefly discuss what I regard as some fallacies of the left and right on the subject of market reforms. »

An absolute must read on economic prosperity and economic systems.

Neoliberalism and America’s Amazing Success

Scott Sumner (The Money Illusion) has a great post about America’s amazing success since 1980.

He takes issue with Paul Krugman who, in dozen of posts, « ridicules the idea that tax cuts for the rich, deregulation and privatization produce prosperity. »

Comparing the performance of many countries between 1980 and 2008 (with an intermediate observation in 1994) he concludes that :

« the performance of every single country on the list is consistent with my view that the neoliberal reforms after 1980 helped growth, and inconsistent with Krugman's view that they did not.

Krugman makes the basic mistake of just looking at time series evidence, and only two data points: US growth before and after 1980. Growth has been slower, but that's true almost everywhere.

What is important is that the neoliberal reforms in America have helped arrest our relative decline The few countries that continued to gain on us were either more aggressive reformers (Chile and Britain), or were developing countries that adopted the world's most capitalist model. (According to every survey I have seen HK and Singapore are the top two in economic freedom.)"

The evidence he provides, GDP per capita as a fraction of US GDP per person, drawn from the World Bank database, is well worth looking at.

Note: and especially the weak relative performance of European economies ...

The Bright Side of the Euro Crisis

The collapse of the euro would open the door to democracy: The European project has been shown to be economically and politically bankrupt, says Simon Heffer in The Telegraph.

See also my 2005 paper, the “Calculus of Democracy” (“Arithmétique de la démocratie”, in French, here ).

The Eurocracy is Only Postponing the Day of Reckoning

… writes Irwin Stelzer in the Wall Street Journal Europe today.

"To politicians steeped in the ethos of the euro zone, it is a matter of war and peace, of preventing the European project from collapsing and leaving mighty Germany free to pursue its own rather than European interests. To them, if the euro collapses, or if the euro zone shrinks rather than continuing to attract new members, the European "project" will be at an end, with consequences foretold in Europe's bloody history.

Less apocalyptically, the French fear that if there is a default—the polite term is "restructuring"— they will have wasted a crisis, and failed to take the next step to replace a Europe of sovereign states with a United States of Europe by centralizing control over individual nations' fiscal policies. The only questions are what form the formal central review will take, and what penalties will be imposed on nations that overspend—fines, loss of votes, or expulsion of serial miscreants are all being discussed.
...

Economists see things somewhat differently …
… there isn't enough money available from the north to prevent restructuring Greece and others for very long. Soon the burden of solving the problem will pass to Greece's creditors, who undoubtedly are already figuring they will have to write off a portion of their loans—30% is the number being bruited about.

Unless, of course, the European Central Bank begins printing money to pay for the sovereign debt it is buying.”

In that case the value of the euro will fall towards parity with the dollar (and maybe lower, I would suggest). But that will not be enough:

“ … clouds that won't be dispelled until writedowns and fundamental economic reforms replace attacks on "speculators" as part of the solution. Meanwhile, austerity and slow or no growth will be the order of the day …”

The whole article is well worth reading.

The Decline of European Democracy: A Common Misunderstanding.

Peter Boone and Simon Johnson claim that European countries are traveling down Hayek’s “Road to Serfdom”, because of unregulated finance and the ideology of unfettered free markets, in their article in today’s Sunday Telegraph.

I agree with their description of the current predicament:

“As a result of the continuing euro crisis, European Central Bank (ECB) now finds itself buying up the debt of all the weaker eurozone governments, making it the – perhaps unwittingly – feudal boss of Europe. In the coming years, it will be the ECB and the European Union who dictate policy. The policy elite who run these structures – along with their allies in the private sector – are the new overlords.

We can argue about who exactly are the peasants, the vassals, and the lords under this model – and what services exactly will end up being exchanged. But there is no question we are seeing a sea change in the post-war system of property, power, and prosperity across Western Europe, just as Hayek feared. An overwhelming debt burden will bring down even the proudest people.”

But I think that they are dead wrong when they state that:

“Hayek had the sign and the destination right but was entirely wrong about the mechanism. Unregulated finance, the ideology of unfettered free markets, and state capture by corporate interests are what ended up undermining democracy both in North America and in Europe. All industrialized countries are at risk, but it’s the eurozone – with its vulnerable structures – that points most clearly to our potentially unpleasant collective futures.”

They fail to understand that the current worsening of the eurozone crisis is due to … the euro itself. Spain and Portugal for instance were not profligate in their budgetary policies before the 2007-2009 crisis. But since they had no independent monetary policy and could not rely on devaluation any more, after entering the eurozone, the only way for these countries to dampen the shock was to use keynesian public deficits policies, dramatically increasing deficits that the recession first created.

Now, I agree that “state capture by corporate interests” and, indeed, the politicians’ interests, are undermining democracy by maintaining the euro against the will of a majority of people in several countries, thus locking several economies in a hopeless mess. This has nothing to do with free market ideology and unregulated finance. In particular, because big financial interests here are tightly linked to governments and state bureaucrats rather than playing the game of really "free markets".

The overlords in this model are the ECB, EU and national bureaucrats and politicians, and their big business allies. The lords are the managers of large corporations that are allowed by governments to reap some rents from the consumers. The “peasants” are the wage earners and small local firms.

The question of the bloated welfare states, the growth of which has been made possible in large part by the absence of defense spending (a "cold war dividend" since European countries were protected by the U.S. defense umbrella), is quite another matter. The problem here is that these systems have now reached the limit of fiscal possibility in a globalized economy where economic activity is mobile, firms can easily relocate abroad, and where, as a consequence, the marginal welfare cost of taxes has been increasing steeply.

The decline of democracy is alas too real, but it results from the collusion of the "overlords" trying to reorganize national corporatist and oligopolistic systems on a broader, continental, level by the means of the European Union and the euro, against globalized free markets, and not in favor of free markets. It is an exercise in centralized and technocratic, antidemocratic state building, against the odds, and that will, hopefully, ultimately fail.

Of Asset-Prices Bubbles and Rationality

A simple definition of bubbles and of possible explanations is to be found in an interesting post by Richard Posner on the Becker-Posner Blog, followed by a discussion, by Gary Becker, of the limits of an explanation by social interactions

Excerpts:

“Buying a house or other asset because other people are doing so may seem an example of irrational “herd” behavior. But herd behavior is not irrational. If you are an antelope, and you see your fellow antelopes begin to stampede, you are well advised to join them, because they may be fleeing from a lion. We commonly take our cues from people who we believe have desires and aversions similar to our own.” (Posner).

“The most plausible view of asset price bubbles is that the price increases of an asset are supported by expectations of even further price increases that makes it worthwhile to buy and hold the asset at prices that far exceed the prices determined by the fundamentals. A sophisticated and attractive version of this argument is that social interactions produce large and cumulative changes in prices from modest initiating forces. It is well known in social interaction theory (see, for example, the book Social Economics by Gary Becker and Kevin Murphy) that a “social multiplier” can magnify small initial changes in demand for a good or asset into large changes in prices or consumption.

(…) Although I find a social interaction approach to bubbles appealing, it does run into several difficulties. Why do not enough savvy investors see through what is going on, and build up large short positions. These short holdings would prevent a bubble from getting out of hand because they in effect increases the supply of the asset to help offset much of the unrealistic increase in demand?” (Becker).

Both posts are well worth reading in full.

Biology and the Innovation Shortfall

Mike Mandel on how undoubted scientific progress in life sciences can coexist with an economically disastrous innovation shortfall.

Read about the big bet of the U.S. economy here .

Germany and the Euro

Former German central bank head Karl Otto Pöhl is quite critical of the of the rescue plan, in a Spiegel Online interview. Excerpt:

“It was about protecting German banks, but especially the French banks, from debt write offs. On the day that the rescue package was agreed on, shares of French banks rose by up to 24 percent. Looking at that, you can see what this was really about -- namely, rescuing the banks and the rich Greeks.”

The battle to determine which country is exiting first is going on.

Read the article here .

For an analysis in French, see my paper in Le Figaro, downloadable from my homepage.

The Euro, Eichengreen, Feldstein, Spence and Stiglitz.

Several American economists suggest ways of “saving the euro”:

Martin Feldstein, Barry Eichengreen, Michael Spence , and Joseph Stiglitz.

Feldstein, Eichengreen and Spence advocate some sort of fiscal centralization and political integration on the American model. All these good economists understand that a monetary union in a non-optimal currency area (Europe), can only survive if complemented by a central, fiscally redistributive, apparatus, that is, a state. But having the American example in mind they fail to understand that the conditions for a political integration in a large, centralized, federal state, of several independent and ancient states, which were approximately met in the context of developing empires of the 19th century (but at the cost of civil war or external conflicts), have radically disappeared since the information revolution of the late 20th century.

The globalization of markets has been followed by a general trend of disintegration of states. As a consequence, I think that the fiscal consolidation that would make the eurozone “workable” will not happen.

I thus feel, to my own surprise, much more in agreement with Joe Stiglitz, who seems much more realistic in his analysis than his colleagues.

Hat tip: Greg Mankiw.

I Told You So

Richard Baldwin’s post on Vox , « A re-cap of Vox columns on the Eurozone crisis » (May 13) begins with the following self congratulating abstract:

“As early as 2008, Vox columnists provided research-based warnings that the global crisis could lead to a Eurozone crisis. This column provides a recap of the contributions on this site where leading economists used economic logic and a firm grasp of the facts to think ahead about Europe. The main outline of today’s crisis was plain months ago; EU leaders’ dilatory response made things worse”.

Well, let me try a hand at that currently widely popular exercise:

As early as 1998 I published a book, l’Erreur européenne (Euro Error) that warned, on the basis of economic theory and empirical evidence, that first, European countries planning to enter a common currency zone did not actually belong to an optimal currency area (OCA), and that moreover, these European States did not belong to a common “optimal state area” either. (You can check that on my homepage here ).

Richard Baldwin, you are beaten by ten years at your own game …

Financial Crises Are « White Swan » Events: Roubini

Interesting book, interesting paper here .

Myth N° 1 : Greeks Are Lazy

An OECD statistic (below), widely quoted in the blogosphere, shows that Greeks actually work an average 2120 hours a year. Much more than the average German (1430 hours) or average French worker (1544 hours) does. So much for the current notion of subsidizing “lazy” Greeks in order to "save" the euro.



Read the Economix post.

The European Bailout Explained

James Hamilton (Econbrowser) has an excellent post on the trillion dollar rescue package.

Excerpt:

“ … as was the case in the 2008 difficulties, one can either view (the Greek predicament) primarily as a liquidity problem, for which we simply need the central banks to step in boldly to arrest the jitters, or as a solvency problem, in which case the policy decision is how to allocate the unavoidable capital losses among bank owners, bank creditors, and the government so as to minimize collateral damage to innocent bystanders. The fundamentals facing Greece suggest there is an overwhelming solvency component to the current problems. And the policy response so far seems to be choosing to allocate 100% of losses to the European and U.S. taxpayers."

Greece, Banks, and Immoral Hazard

Monday’s euphoria about the bailout plan negotiated with the European Union and the IMF is waning today. Stock markets worldwide come to a more sober evaluation of the situation and many commentators wonder if the plan can succeed, who is responsible for the mess, and who is going to pay for it.

The New York Times editorialist notes that Greece is supposed to reduce its deficit to less than 3 percent of GDP by 2014, “an adjustment equal to one-tenth of its economy. At the same time, it is supposed to remain current on all of its debt service payments. It is hard to see how that is fiscally possible.”

Who is responsible? According to the editorial:

“The quasi official diagnosis is built upon a distorted narrative: profligate governments from Europe’s less responsible nations spent beyond their means and now can’t repays their debt. Except for Greece that is not what happened.
In 2007, before the financial crisis, Spain had a budget surplus of 2 percent of GDP. Ireland had a balanced budget. Portugal’s deficit of 2.6 percent was well within the euro accepted limits. Today their budgets are deep in the red because the global collapse slashed economic activity, boosted unemployment and required large-scale government response.”


And, one must add, absent independent monetary policies due to the euro, and thus adapted monetary response to the shock being out of the question, only budgetary policy could dampen the effects of the crisis. The euro and the corresponding ECB one-size-fits-all policy are thus responsible for the predicament of southern Europe.

But the banks have been instrumental in the consequent excess financing of these economies. They profited handsomely from the euro-induced disequilibrium that led to deficit finance. And while they helped create the current mess they “are getting all their money back. A more equitable approach would require the banks to pay at least part of the bill – writing down the debts of some European governments or extending their maturities into the future to allow battered European economies time to recover”, writes the editorialist.


Arvind Subramanian, of the Peterson Institute for International Economics, reaches a similar conclusion:

“the burden of adjustment is now being spread to include European ($105 billion) and international ($40 billion) taxpayers. China, India, and Brazil, among many others will contribute—which is as it should be—given their growing economic status and the cooperative nature of the endeavor. But there will still be no contribution from European banks that hold large amounts of Greek debt. That taxpayers in much poorer countries should contribute so that rich financial institutions can get away with reckless lending seems unfair and perverse. One might call this "immoral hazard": heads the banks win, tails much poorer taxpayers thousands of miles away pick up the tab.

What is worse is that this bailout of European financial institutions increases the already high odds of failure of the IMF program. Greece's fiscal predicament requires not just adjustment and financing but devaluation and debt restructuring. And with devaluation being achieved through painful deflation, the case for restructuring looks only stronger. Substantial debt write-offs are necessary and will probably remain so even if Greece exits the eurozone.”

I could not agree more.

Read the complete paper here.

Stelzer: Germany as Another China

The Wall Street Journal Europe publishes an excellent paper by Irwin Stelzer, clearly explaining the current and future difficulties of the southern countries of the eurozone. The best analysis I have read since the new package of financial support has been decided in Brussels.

Excerpt:

“China keeps its export machine rolling by pegging its yuan to the dollar, so that America cannot devalue its currency relative to the yuan, and instead must live with a large trade deficit. Which Americans can't afford. So China lends America the money with which to buy Chinese goods.

Germany keeps its export machine rolling by in effect pegging its currency, the euro, to the currencies of its European trading partners, who share that currency. So Greece, to which Germany sells lots of goods cannot devalue, and must live with large trade deficits. Which it can't afford. So Germany is setting about lending money to Greece—other countries to follow shortly —so that Greeks can continue to buy Mercedes and other products of the efficient German manufacturing and service sectors. And for good measure, it benefits from the falling euro, driven down by the Greek tragedy or comedy, take your pick, to increase its sales to non-euro countries.”

A must read .

Krugman, Mankiw, and Beckworth on OCAs and Optimal Government Size

David Beckworth has an interesting post on his blog (Macro and Other Market Musings) about what optimal currency areas (OCA) are, titled “Krugman, Mankiw, and the U.S. as an OCA”.

He quotes Mankiw’s comment on Krugman’s claim that the euro is doomed because the area lacks a central government capable of redistributing a large amount of a centralized tax:

« A large part of [Krugman's] argument is that Europe is not an optimal currency area because it lacks a large central government enacting transfer payments among the various regions... Is that right? I am not so sure. The United States in the 19th century had a common currency, but it did not have a large, centralized fiscal authority. The federal government was much smaller than it is today. In some ways, the U.S. then looks like Europe today. Yet the common currency among the states worked out fine.”

And Beckworth goes on:

« Mankiw attributes the success of the U.S. currency union in the 19th century to wage flexibility and labor mobility. He notes, though, that Greece and much of the Eurozone lack these and thus the Euro experiment may be doomed. I agree with Mankiw that the Eurozone problems are more than just the lack of a centralized fiscal authority. »

The discussion becomes, at this point, a bit confusing. Let’s try to clarify it.

The original OCA theory did not include a central, federal government as a condition for an OCA to exist. The conditions as formulated by Mundell, McKinnon and Kenen were that trade between would-be members of the currency area should be large as a percentage of GDP, concentrated primarily among these partners, that the countries size would be quite different, factors of production mobile between them, business cycles and inflation rates correlated, and the structure of production relatively similar so that macroeconomic shocks would not be asymmetric from one country to another.

A large federal government appropriating a large fraction of GDP through taxes, and thus able to transfer income from high growth regions (or states) to depressed ones, was not considered a basic condition for an OCA, but rather as a compensating shock absorber for a non optimal currency area. The shock absorber is what enables such a non-optimal monetary zone to function almost as an OCA. But nevertheless a non-optimal zone with the right (centralized) type of government is less efficient economically than an OCA because the high level of central taxes necessary for its working is heavily distorting.

That the eurozone is not an optimal monetary area derives not from the lack of a federal European government similar to the U.S. one, but from basic characteristics of the European economies, particularly the low international mobility of labour, the low correlation of business cycles and inflation (mostly), and the different structures of production and specialization, as well as the rather similar dimensions of several of the member countries. Thus, even if European countries were able to build up a federal government right now (which is rather unlikely for reasons I develop below) the eurozone would not be an OCA and would remain economically dominated by a regime of independent national currencies.

Now, what about history? Is it true, as Mankiw says, that wage flexibility and labour mobility in the 19th century made the U.S. an OCA? I tend to agree since these are two basic conditions of OCAs in theory. And I would add as an illustration that the large international mobility of labour in that century (the “age of mass migration”) could explain, in the OCA theory perspective, why the gold standard prevailed in that period: the gold standard was in fact a common currency area, and it could be established, without a common government, among countries among which capital and labour moved rather freely, as well as goods and services, and where business cycles and inflation accordingly tended to move together.

Large centralized governments, and large central banks, came later, with the second industrial revolution by the end of the 19th and beginning of the 20th century, and with them large empires evolving into separate economic and monetary areas during the “first 20th century” (see my book referenced below). The Federal Reserve System was not completely established before 1913, and the European “gold bloc” disappeared shortly after WWI.

All this means that the non-optimal U.S. currency area could become workable – even though suboptimal - due to the growth of the federal government by the end of the 19th century. A larger government and larger federal taxes provided a growing “asymmetric shock absorber” in a currency area that was still not optimal. It followed that, from that point, monetary policy could be centrally managed, and the Federal Reserve established for that purpose. As mentioned by Beckworth, Hugh Rockoff makes the case that the U.S. economy did not become an OCA until the 1930s, but in my view, and as several U.S. economists claim, the U.S. is still not and OCA today! What changed during the 1930s was that the “shock absorber” became big enough to be effective.

In the case of Europe, the promoters of the euro hoped indeed that its creation was a first step towards the centralization of government at the continental level.

But governments do not grow at will, in spite of the experience of their continuous growth that characterized the last century. As I showed in “The Second Twentieth Century” (Grasset 2000, Hoover Press 2006, and see also my paper “The Shrinking Hand” on my SSRN page) large hierarchies grow when there is a growing scarcity of information, relative to total output. When information grows faster than production, the contrary result obtains: hierarchies, public as well as private, shrink and many disintegrate. Large and/or heterogeneous states implode: the USSR, Czechoslovakia, Yugoslavia …

These are not good conditions to integrate several independent nations into a large federal state as the U.S did, but in 1866, on the eve of the second industrial revolution. In the still evolving information revolution, it is quite unlikely that European countries can coalesce into a single federal state. As a warning of that impossibility, the project of an “even closer union” has been repeatedly rejected by voters in several countries during the last several years.

This is why the European non optimal monetary area will not survive, contrary to the U.S. one (probably, even though economists come to realize that the U.S. is not an optimal currency area, and is thus submitted to a welfare loss by sustaining it), because European nations cannot build, in today’s conditions, a large enough shock absorber.

Joseph Stiglitz on the Euro

Excerpt :

“The Greek financial crisis has put the very survival of the euro at stake. At the euro’s creation, many worried about its long-run viability. When everything went well, these worries were forgotten. But the question of how adjustments would be made if part of the eurozone were hit by a strong adverse shock lingered. Fixing the exchange rate and delegating monetary policy to the European Central Bank eliminated two primary means by which national governments stimulate their economies to avoid recession. What could replace them? »

His conclusion :

“Those countries whose deficits have soared as a result of the global recession should not be forced into a death spiral – as Argentina was a decade ago.”

“There is a second solution: the exit of Germany from the eurozone or the division of the eurozone into two sub-regions. The euro was an interesting experiment, but, like the almost-forgotten exchange-rate mechanism (ERM) that preceded it and fell apart when speculators attacked the British pound in 1992, it lacks the institutional support required to make it work.”


Read the complete paper in English here, and in French here.

I suggested the same kind of analysis (in French) on the same day exactly here , except that I do not believe that a “southern eurozone” would meet the Mundell optimal currency area criteria any better than the broader eurozone does. Greece will have to default and devaluate, just as Argentina did, for its own good.

The IMF and European Governments as Gamblers.

Read Desmond Lachman’s most reasonable assessment of the Greek prospect here .

Krugman on Exiting the Euro

Excerpt:

“The only thing that could seriously reduce Greek pain would be an economic recovery, which would both generate higher revenues, reducing the need for spending cuts, and create jobs. If Greece had its own currency, it could try to engineer such a recovery by devaluing that currency, increasing its export competitiveness. But Greece is on the euro. So how does this end?

Logically, I see three ways Greece could stay on the euro.

First, Greek workers could redeem themselves through suffering, accepting large wage cuts that make Greece competitive enough to add jobs again. Second, the European Central Bank could engage in much more expansionary policy, among other things buying lots of government debt, and accepting — indeed welcoming — the resulting inflation; this would make adjustment in Greece and other troubled euro-zone nations much easier. Or third, Berlin could become to Athens what Washington is to Sacramento — that is, fiscally stronger European governments could offer their weaker neighbors enough aid to make the crisis bearable.

The trouble, of course, is that none of these alternatives seem politically plausible.

What remains seems unthinkable: Greece leaving the euro. But when you’ve ruled out everything else, that’s what’s left.”

My comment: I agree of course (see my previous post). Krugman mentions the similar experience of Argentina. Two remarks: first the predicament of Argentina seemed at the time at least as serious as the present Greek one does. But nevertheless the economy recovered quickly after the default and the exit from the peg to the US dollar. Second, the FMI did the same mistake that it is now repeating with Greece, believing that lending more money and restructuring the debt would do. It didn’t.

For Greece, the alternative policy of default and exiting the euro now seems definitely less damaging than pursuing a policy of drastic deflation for many years without real hope of recovery (and with aggravated deficits), which leads to chaotic social unrest. That’s why Eichengreen is basically wrong when he pretends that entering a currency zone such as the eurozone is an irreversible move, as I noted in an earlier post.

Read the whole Krugman paper, A Money Too Far .

Mon interview dans "Le Parisien"

Jeudi 6 mai 2010

Q - La Grèce a-t-elle intérêt à sortir de la zone euro?

R - Je ne vois pas d'autre solution. La monnaie unique n'a jamais été une bonne chose pour la Grèce, l’obligeant à suivre une politique monétaire qui ne lui convenait pas. La privant de la possibilité de dévaluer, elle lui a fait perdre en compétitivité à l’exportation. La crise actuelle aggrave encore les choses. Pour s'en sortir ce pays doit abandonner l'euro pour dévaluer sa monnaie et regagner ainsi en compétitivité, et donc en croissance.

Q - Le plan préconisé par le FMI et les Européens ne permettra pas d'endiguer la crise?

R - L’argent prêté ne servira à rien. La faillite, au moins partielle, de la Grèce est programmée. La rigueur prônée par le FMI et les Etats européens va aggraver la crise économique par la déflation, la réduction des dépenses publiques ayant pour effet de ralentir plus encore l'activité, et donc de réduire aussi le niveau des recettes publiques. L’endettement public sera accru. C'est une politique sans issue.

Q - Quelles conséquences la crise grecque va-t-elle avoir sur la zone euro?

R - Une sortie de l'euro ne devrait pas entraîner de conséquences importantes pour les autres pays de la zone. Une faillite de l’Etat, même partielle, posera des problèmes à certaines grandes banques, notamment françaises et allemandes, qui ont souscrit des obligations grecques. Mais, ces établissements devraient être en mesure de faire face à ces pertes, dans des conditions à négocier. Pour l'heure, la crise Grecque a aussi ses bons cotés puisqu'elle permet de faire baisser l'euro face au dollar, ce qui soutient l’activité dans la zone.

Q - Selon vous cette crise marque l'échec de l'euro?

R - Oui, c'est la reconnaissance de l'échec de la monnaie unique. Certains pays - dont la France dont la compétitivité est pénalisée depuis plusieurs années par un euro surévalué - auraient intérêt à l'abandonner. Cette crise montre bien qu’une monnaie unique est une mauvaise idée pour des pays économiquement très différents. Il serait peut-être possible de maintenir une zone «rétrécie» entre Etats qui ont des conjonctures et des taux d'inflation assez proches. Ce serait éventuellement le cas d’une «zone mark» qui regrouperait autour de l'Allemagne, les Pays-Bas, l'Autriche, ou le Danemark, si ces pays le souhaitent.

Q - Pourtant depuis le début de la crise financière, de nombreux économistes pointent le rôle protecteur de l'euro...

R - Les faits ont totalement démenti cette prétention qu’aucun raisonnement valable n’a jamais justifié. L'euro ne nous a protégé ni de la crise économique, ni de la crise financière, que nous avons subi tout comme les pays qui ne sont pas dans la zone. Notre croissance n’a pas été meilleure que celle des autres, bien au contraire, et les signes de reprises sont moins forts qu’aux Etats-Unis ou dans certains pays européens non membres de l’euro.


Propos recueillis par Valérie Hacot

Contrepoint : Un impôt fédéral signerait la destruction des économies européennes.

Un impôt fédéral continental serait la pire cause d’effondrement des économies européennes, après la faute majeure de 1999, celle de la création de l’euro, que nous n’avons pas fini de payer comme le montrent les évènements en cours. Est-il nécessaire d’exprimer l’évidence, dans des économies - particulièrement celle de la France - qui souffrent d’un fardeau fiscal excessif décourageant massivement l’offre comme la demande de travail (voir mon article « Comment gagner plus » disponible sur mon site web) ? Oui sans doute puisque la classe parlante ne connaît qu’une seule « solution » à tous les problèmes de société : plus d’impôts et plus d’interventions administratives.

Ainsi, le quotidien parisien Le Monde vient-t-il d’éprouver le besoin, pour la première fois depuis mon article sur les effets ravageurs du SMIC, destructeur de l’emploi des jeunes non qualifiés, paru en … 1994, de demander l’avis de l’hérétique que je suis sur la crise de l’euro (Le Monde du 5 mai 2010). C’est en soi une indication intéressante par ce qu’elle révèle sur la fragilisation du dogme monétaire qui était censé, souvenez-vous, nous apporter la croissance garantie ainsi qu’un « bouclier » incontournable contre les divers chocs financiers et économiques qui affecteraient les autres et malheureux pays hors zone, mais nous épargneraient, nous, et nous seuls.

Dans les limites étroites de cet exercice j’ai indiqué que je ne voyais pas comment la Grèce pourrait éviter une sortie de l’euro, ce qui serait certainement la seule solution efficace pour elle de retrouver la croissance, plutôt que de s’enfermer dans une politique de déflation pour de longues années, porteuse de dépression économique et de graves risques sociaux et politiques. Après tout l’Argentine a connu des problèmes analogues qu’elle a surmontés en peu d’années, après avoir décroché sa monnaie de la parité avec le dollar (malgré les efforts mal inspirés du FMI pour la « sauver » par des prêts, assortis de l’imposition d’une politique restrictive, erreur que l’institution réitère aujourd’hui avec la Grèce) et après avoir fait défaut sur le remboursement de sa dette. La Grèce doit donc choisir entre la dépression prolongée assortie de troubles politiques, et la sortie de l’euro avec répudiation de sa dette, partielle ou totale. Prolonger le déni de réalité n’améliorera pas la condition du patient mais l'aggravera encore.

Dans la suite de l’interview il m’est alors demandé si la zone euro elle-même est condamnée à disparaître. C’est bien ce que je crois. Il est clair en effet que la crise actuelle montre la validité de la théorie des zones monétaires optimales et le rôle fondamental d’un taux de change adéquat pour la poursuite de la croissance. Les évolutions observées depuis 1999 ont montré, à l’inverse, l’inanité de la théorie étonnante selon laquelle la création d’une monnaie commune suffirait à obliger des économies dissemblables à converger vers un même rythme d’inflation et des taux de croissance comparables, bref vers les conditions d’une zone monétaire optimale. C’est ce que ces théoriciens défenseurs à tout prix de l’euro ont baptisé la « théorie des zones monétaires endogènes ». En somme la monnaie aurait la capacité extraordinaire de modeler l’économie réelle à volonté. Pourquoi pas alors une monnaie mondiale qui suffirait à homogénéiser toutes les économies de la planète, depuis les plus arriérées jusqu’aux plus évoluées ? Le problème du développement serait ainsi résolu par la monnaie. L’hypothèse débouche sur l’absurde.

Dans ces conditions une zone euro plus ou moins large pourrait néanmoins subsister entre pays qui remplissent ensemble les conditions d’une zone monétaire optimale : peut-être l’Allemagne et ses voisins immédiats, mais, je l’espère pour le niveau de vie des Français, pas la France …

Il existe cependant une possibilité de survie d’une monnaie partagée entre des Etats qui ne répondent pas aux critères des zones monétaires optimales. C’est le cas notamment des Etats-Unis dont les différents Etats pourraient trouver un avantage économique à se répartir entre plusieurs zones monétaires (voir par exemple l’article intéressant de Geoffrey M.B. Tootell, « Central Bank Flexibility and the Drawbacks to Currency Unification », New England Economic Review, May/June 1990, ou encore plus récemment David Beckworth, «One Nation Under the Fed? The Asymmetric Effects of U.S. Monetary Policy and Its Implications for the United Stats as an Optimal Currency Area", Working Paper, McCoy College of Business, Texas State University).

Les Etats-Unis cependant peuvent se permettre de conserver un dollar unique d’abord parce qu’ils ont créé cette monnaie unique à une autre époque, le XIXème siècle, dans laquelle des facteurs économiques de fond poussaient les unités politiques et économiques à rechercher la grande dimension (ce que j’analyse dans L’erreur européenne, comme dans Le second vingtième siècle). Mais de plus ils peuvent maintenir cette monnaie unique face à des chocs qui affectent différemment leurs différents Etats membres parce qu’ils disposent d’un dispositif amortisseur qui n’existe pas dans la zone euro : l’impôt principal y est au niveau fédéral, alors qu’il est essentiellement au niveau national en Europe. De ce fait l’Etat fédéral peut aider les Etats les plus touchés par une crise avec les recettes fiscales prélevées sur les Etats qui continuent à connaître la prospérité. Ce qui rend la crise tolérable pour les premiers. L’amortisseur fiscal rend tolérable le fonctionnement d’une zone monétaire non optimale, bien que cette solution soit économiquement inférieure à celle qui consisterait à regrouper entre eux les Etats qui répondent ensemble aux conditions d’une zone monétaire optimale.

Ayant dit cela ne signifie en rien que je préconise la création en Europe d’un impôt fédéral représentant 30 ou 40% du PIB européen, comme l’article du Monde semble l’indiquer. Ce serait à mon avis un désastre, d’abord parce que les Etats nationaux ne renonceraient certainement pas à leurs ressources actuelles, et par conséquent un impôt fédéral viendrait s’ajouter aux impôts nationaux déjà excessifs, décourageant plus encore l’activité économique.

Mais en tout état de cause cela semble exclus car nous ne sommes plus au XIXème ni au XXème siècle : l’heure n’est pas aux empires et aux impérialismes, bien au contraire. La dimension moyenne des nations tend à diminuer dans nos économies d’information, de globalisation des marchés et de fragmentation des organisations hiérarchiques (dont les Etats). L’essai de création d’un super Etat européen serait ainsi voué à l’échec, ce que les refus successifs des électorats nationaux aux tentatives fédéralistes de ces dernières années ont assez clairement confirmé, malgré les pressions constantes des establishments politico-économiques en faveur d’une telle politique centralisatrice. C’est pourquoi la viabilité de la zone monétaire non optimale que constitue la zone euro est des plus douteuse car la voie de l’amortisseur fiscal n’est pas praticable.

En matière de fiscalité, tout au contraire, ce dont les Etats européens ont réellement un besoin urgent, c’est d’un allègement majeur du fardeau, et en particulier de l’impôt sur le travail qui continue à augmenter pour financer la croissance insoutenable de l’organisation corporatiste de la « providence bismarckienne » - la collusion entre les entreprises, les syndicats, et les administrations d’Etat – qui , valable à la fin du XIXème siècle, n’est plus adaptée en rien aux conditions du début du XXIème.

C’est dire, pour conclure, que je ne vois strictement aucune possibilité de sauvegarder l’euro actuel par imitation des Etats-Unis du XIXème siècle et la création d’un impôt fédéral européen.