Saturday, April 21, 2012

The Wolfson Prize, Evans-Pritchard, and German Ideologues

The Wolfson Prize on how to break up the euro (incidentally I am one of the judges) is completely at odds with the German policy establishment’s ideology, writes Ambrose Evans-Pritchard in The Telegraph,  here.


“The German elites seem to believe that a new cycle of global growth is safely under way after the nasty scare of the winter, and that the European Central Bank has done more than enough to shore up Club Med and the EMU banking system – too much, if anything, risking an inflationary surge (in their view, obviously, not mine).”

“There is almost no intellectual recognition – except among those who have lived abroad and worked in global finance – that monetary union has become an engine of contractionary havoc along the lines of the 1930s Gold Standard (…) or that Euroland would be in crisis today whether or not the Greeks fiddled their books a decade ago, or even if Spain and Ireland had taken drastic measures to offset ECB stimulus six years ago.”

The Evans-Pritchard answer to the Wolfson question is as follows: “the only way to break up EMU without a disaster is for the Teutonic bloc to withdraw, leaving a Latin euro with the existing institutions of monetary union intact and euro contracts upheld.” (I suggested another solution in my recent book, “Euro Exit”).

But, he adds, this will of course not happen. “Politics prohibit such a painless liberation. There is no figure in Germany able or willing to lead such a move. He intellectual ground has not been prepared.  (…) The Project will be defended by its fanatics in the bunkers until the social, political, and diplomatic landscape has been reduced to ruble …”

Meanwhile, after having repeated for many years that European governments had to “save” the euro, George Soros now says that if he were still an active investor, he would “bet against the euro”.

PS:  A reminder, by David Beckworth, of the Paul Krugman’s diagnosis (in February this year) of what, really, ails Europe, here.

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