An excellent article by Jeremy
Warner in The Telegraph (September 27) along
the lines I developed in Euro Exit some time ago. The crisis exacerbated the underlying fundamental disequilibrium due to the euro, and not to some irresponsible macro policy mismanagement by the Spanish government or to a refusal to adopt a German style "strategy and reform".
Excerpts:
“To understand why, it is first
necessary to explode some myths about the nature of the eurozone debt crisis.
This is not at root either an isolated banking crisis or indeed a fiscal one,
though that’s how public policy in Europe attempts to define it.
As many of us have long argued,
both these phenomena are but symptoms of what in essence is just a good old
fashioned balance-of-payments crisis. This has been greatly exaggerated by
monetary union, which is also preventing the application of time-honoured
solutions. Utopian pursuit of the single currency is damning Europe to economic
oblivion. Political hubris has eclipsed economic common sense.
After monetary union, capital
flowed in ever-increasing quantities from Europe’s surplus to its deficit
nations; Germany and others were in essence lending the periphery the money to
buy German goods and services.”
(…)
“Relative to the core, wages and
prices rose, rendering these countries progressively less competitive and
deepening the problem of trade imbalances.”
(…)
“Since the onset of the financial
crisis, the process has gone violently into reverse. Money has fled the
periphery, starving it of credit and exacerbating the economic downturn. Tax
revenues have collapsed, causing budget deficits to soar and fiscal crisis to
take root.
With a shrinking economy has come
a mounting bad debt problem, which Spain and others have yet fully to recognize.”
(…)
“Other than leaving monetary union
and defaulting on its euro debts, which for the moment even the rebellious
Catalans don’t seem to want, is there any way out for Spain? The answer looks
ever more likely to be no.”
Read more.
My comment: But now eurocrats and national politicians (mostly the same) have to recognize first that they were fundamentally wrong from the beginning of the euro speculative project, and second that they have to commit to a complete reversal of their european policies, while trying at the same time to save their reputation among voters. That is the real difficulty.
