Guardian
May 20, 2011
The crisis of the eurozone seems to be going from bad to worse. Not only have the key players not yet found convincing solutions for the fiscal problems in Greece, Ireland and Portugal but we are already witnessing the beginning of a political backlash that could undermine the achievements of decades of European integration. There is generally a lack of ideas about what needs to be done to turn things around so here are my suggestions:
1. Say it as it is: it's about politics, not economics
As Wolfgang Muenchau observed, the debt to GDP ratio of the eurozone as a whole is less than that of the UK or the US and does not pose an overall economic problem. The problem is that there is a lack of political mechanisms to deal with fiscal crises in some areas of the eurozone. So this crisis is not about economics, it is about politics and economically illiterate politicians.
2. There are no payments – be honest with Europe's citizens
It is frankly shameful that most European leaders, especially in Germany, keep their population believing that there are direct payments to countries such as Greece. This nurtures the wrong assumption that the German taxpayer pays for early retirement and other luxuries they themselves do not enjoy.
This is just wrong. The bailout is not a direct payment – it provides IMF and EU lending facilities that lend at lower than market interest rates but at higher rates than the countries that underwrite it can get money for. So the bailout (actually a misnomer) is not a handout but a loan at a profitable rate if there is no default.
What this dishonesty does, however, is to undermine solidarity and to create a widespread mood against Europe in debtor as well as creditor countries.
The fact that anti-European parties are on the rise all over the place is therefore unsurprising and to a significant extent due to the mainstream parties not being honest about what is going on.
More
No comments:
Post a Comment