De winnaar van het Sch ützenfest is platza k

[Cees Binkhorst]

REPLY TO: D66 at nic.surfnet.nl

Het onderstaande commentaar doet me denken aan een *Schützenfest, dat
werd gewonnen door een onbemiddelde jonge vent.
De aanwezige lokale notabelen hadden slechts één commentaar: dit feestje
is voor onze rekening ;)

Groet / Cees
*
February 15, 2010
Op-Ed Columnist
The Making of a Euromess
http://www.nytimes.com/2010/02/15/opinion/15krugman.html
By PAUL KRUGMAN

Lately, financial news has been dominated by reports from Greece and
other nations on the European periphery. And rightly so.
But I’ve been troubled by reporting that focuses almost exclusively on
European debts and deficits, conveying the impression that it’s all
about government profligacy — and feeding into the narrative of our own
deficit hawks, who want to slash spending even in the face of mass
unemployment, and hold Greece up as an object lesson of what will happen
if we don’t.
For the truth is that lack of fiscal discipline isn’t the whole, or even
the main, source of Europe’s troubles — not even in Greece, whose
government was indeed irresponsible (and hid its irresponsibility with
creative accounting).
No, the real story behind the euromess lies not in the profligacy of
politicians but in the arrogance of elites — specifically, the policy
elites who pushed Europe into adopting a single currency well before the
continent was ready for such an experiment.
Consider the case of Spain, which on the eve of the crisis appeared to
be a model fiscal citizen. Its debts were low — 43 percent of G.D.P. in
2007, compared with 66 percent in Germany. It was running budget
surpluses. And it had exemplary bank regulation.
But with its warm weather and beaches, Spain was also the Florida of
Europe — and like Florida, it experienced a huge housing boom. The
financing for this boom came largely from outside the country: there
were giant inflows of capital from the rest of Europe, Germany in
particular.
The result was rapid growth combined with significant inflation: between
2000 and 2008, the prices of goods and services produced in Spain rose
by 35 percent, compared with a rise of only 10 percent in Germany.
Thanks to rising costs, Spanish exports became increasingly
uncompetitive, but job growth stayed strong thanks to the housing boom.
Then the bubble burst. Spanish unemployment soared, and the budget went
into deep deficit. But the flood of red ink — which was caused partly by
the way the slump depressed revenues and partly by emergency spending to
limit the slump’s human costs — was a result, not a cause, of Spain’s
problems.
And there’s not much that Spain’s government can do to make things
better. The nation’s core economic problem is that costs and prices have
gotten out of line with those in the rest of Europe. If Spain still had
its old currency, the peseta, it could remedy that problem quickly
through devaluation — by, say, reducing the value of a peseta by 20
percent against other European currencies. But Spain no longer has its
own money, which means that it can regain competitiveness only through a
slow, grinding process of deflation.
Now, if Spain were an American state rather than a European country,
things wouldn’t be so bad. For one thing, costs and prices wouldn’t have
gotten so far out of line: Florida, which among other things was freely
able to attract workers from other states and keep labor costs down,
never experienced anything like Spain’s relative inflation. For another,
Spain would be receiving a lot of automatic support in the crisis:
Florida’s housing boom has gone bust, but Washington keeps sending the
Social Security and Medicare checks.
But Spain isn’t an American state, and as a result it’s in deep trouble.
Greece, of course, is in even deeper trouble, because the Greeks, unlike
the Spaniards, actually were fiscally irresponsible. Greece, however,
has a small economy, whose troubles matter mainly because they’re
spilling over to much bigger economies, like Spain’s. So the
inflexibility of the euro, not deficit spending, lies at the heart of
the crisis.
None of this should come as a big surprise. Long before the euro came
into being, economists warned that Europe wasn’t ready for a single
currency. But these warnings were ignored, and the crisis came.
Now what? A breakup of the euro is very nearly unthinkable, as a sheer
matter of practicality. As Berkeley’s Barry Eichengreen puts it, an
attempt to reintroduce a national currency would trigger “the mother of
all financial crises.” So the only way out is forward: to make the euro
work, Europe needs to move much further toward political union, so that
European nations start to function more like American states.
But that’s not going to happen anytime soon. What we’ll probably see
over the next few years is a painful process of muddling through:
bailouts accompanied by demands for savage austerity, all against a
background of very high unemployment, perpetuated by the grinding
deflation I already mentioned.
It’s an ugly picture. But it’s important to understand the nature of
Europe’s fatal flaw. Yes, some governments were irresponsible; but the
fundamental problem was hubris, the arrogant belief that Europe could
make a single currency work despite strong reasons to believe that it
wasn’t ready.

**********
Dit bericht is verzonden via de informele D66 discussielijst (D66 at nic.surfnet.nl).
Aanmelden: stuur een email naar LISTSERV at nic.surfnet.nl met in het tekstveld alleen: SUBSCRIBE D66 uwvoornaam uwachternaam
Afmelden: stuur een email naar LISTSERV at nic.surfnet.nl met in het tekstveld alleen: SIGNOFF D66
Het on-line archief is te vinden op: http://listserv.surfnet.nl/archives/d66.html
**********