Saturday 16 March 2013

Democracy and the eurozone crisis: quotes #9

 Photograph: [guardian.co.uk]

The outcome of the Italian elections should send a clear message to Europe’s leaders: the austerity policies that they have pursued are being rejected by voters.

[...]

[T]he reality is that much of the European Union is in depression. The loss of output in Italy since the beginning of the crisis is as great as it was in the 1930’s. Greece’s youth unemployment rate now exceeds 60%, and Spain’s is above 50%. With the destruction of human capital, Europe’s social fabric is tearing, and its future is being thrown into jeopardy.

[...] The reality [...] is that the cure is not working, and there is no hope that it will – that is, without being worse than the disease. Indeed, it will take a decade or more to recover the losses incurred in this austerity process.

[...] 

An alternative set of well-discussed policies could work. Europe needs greater fiscal federalism, not just centralized oversight of national budgets. [...] [I]t clearly needs far more European-level expenditure, unlike the current miniscule EU budget (whittled down further by austerity advocates).

A banking union, too, is needed. But it needs to be a real union, with common deposit insurance and common resolution procedures, as well as common supervision. There will also have to be Eurobonds, or an equivalent instrument.

European leaders recognize that, without growth, debt burdens will continue to grow, and that austerity by itself is an anti-growth strategy. Yet years have gone by, and no growth strategy is on the table, though its components are well known: policies that address Europe’s internal imbalances and Germany’s huge external surplus [...]. Concretely, that means wage increases in Germany and industrial policies that promote exports and productivity in Europe’s peripheral economies. 
 

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