Peter Coy states the tired conventional wisdom for Bloomberg Businessweek, Record Euro Zone Debt Makes the Crisis Messier 04/23/2012:
The Keynesian solution for Europe’s crisis is government spending to rev up economic growth. Restoring growth will generate more tax revenue, the thinking goes, so the fiscal pump-priming will eventually pay for itself. But debt makes the Keynesian fix harder to implement. Heavily indebted countries can't spend more for fear of losing the confidence of investors.For all of the countries involved, it has not been debt but the straighjacket of the euro under current EU structures that took away their "fiscal wiggle room". More specifically, it's German Chancellor Angela Merkel who has taken it away by imposing her "ordoliberal" austerity economics on them during a depression. And it is both foolish and shameful for the EU countries being victimized by this now to continue to allow it to happen. I mean Ireland, Italy, Greece, Portugal and Spain. Even, as Coy points out, the Netherlands: "Even the Netherlands, one of the four remaining AAA-rated countries in the euro zone, had an increase in its debt-to-GDP ratio from 62.9 percent to 65.2 percent, according to the European Union." Of course, Coy has his head so stuck in the austerity economics mode that he can't explain that such a debt ration is not at all bad if it represents a country trying to stimulate its economy out of a depression. What's bad is that the euro currency makes it and all the other eurozone nations vulnerable to financial speculation in away that countries with their own currencies are not.
Debt, in short, takes away countries’ fiscal wiggle room.
Coy just parrots Angienomics and her confidence game on the issue:
The Dutch have been stalwart supporters of Germany’s austerity drive until now, but they may be getting weak in the knees. ... "There is a danger that we will see a move to more radical, less Europe-friendly policies in the Netherlands," Elisabeth Afseth, an analyst at Investec Bank in London, told Bloomberg News. [my emphasis]Hopefully, the political elites of Norway and the other countries most victimized at present by Angienomics will wise up quickly and dump Angie's so-called "Europe-friendly" policies. They may be Angie-friendly. But it's insane for the other EU countries to let Germany ruin their economies so that Germany can have favorable trading conditions via the euro.
It's too late for the EU to reform adequately to stop the economic carnage of Angienomics. Countries that want to prevent themselves from being devastated need to get out of the euro, sooner rather than later.
Tags: eu, euro, european union, germany