Saturday, May 10, 2014

Euro crisis over? Or in need of even more Austerität über alles?

Claus Hulverscheidt writes on Warum es den Euro noch gibt und wo die Gefahr lauert (Why the Euro Still Exists and Where the Danger Lurks) Süddeutsche Zeitung 10. Mai 2014.

The most striking thing about this piece is that he sees the need to explain to his German readers that in the first paragraph that the euro crisis is not over. The fact that it's not is a bad sign for German mainstream media. It may be that the euro crisis is for German media what the Whitewater story was for the American press, with the buildup to the Iraq War seeing them double-down a decade later - a plunge off the cliff of real journalism.

Hulverscheidt's op-ed itself goes rapidly downhill from there:

Eine politische Krise ist keine Naturgewalt, kein Fallbeil, das sich - einmal ausgelöst - mit grausiger Zwangsläufigkeit ins Leben schneidet. Eine politische Krise ist gestaltbar, eindämmbar, abwendbar.

[A political crisis is not a natural force, not a guillotine that - once released - cuts into life with with gruesome coercive force.]
To anyone who's been reading Barry Eichengreen, Jamie Galbraith, Paul Krugman, Wolfgang Münchau, Mark Schieritz, Joseph Stiglitz, Yanis Varoufakis, Simon Wren-Lewis, or Martin Wolf, to name some of the prominent economists and financial journalists who have continued to write about the ongoing euro crisis since 2009, it will be difficult to imagine what this strange strawman of historical determinism has to do with the crisis or the leading commentary on it.

Maybe he's slipping in weasel-words with the phrase "political crisis." Apparently he is not aware of instances in which economic crises, and economic crises exacerbated by a badly-constructed currency zone, have lead to political crises.

By paragraph four, he's praising Angela Merkel's wise statecraft in the situation. It was a challenge to find the motivation to read further.

Just to be clear on that point: Merkel is clearly one of the most talented leading politicians Germany has ever had. She's had a long and continuing run as Chancellor and likely has earned the respect of Bismarck and Machiavelli in whatever realm they currently reside.

But her greatest accomplishment in the art of politics has been to walk a very high tightrope for which the other end is not yet in sight. She has done, or allowed the ECB to do, just enough to prevent a collapse of the euro currency zone. But the Herbert Hoover/Heinrich Brüning economic policies on which she has insisted will destroy the eurozone and possibly the EU itself, if they haven't already fatally wounded both institutions. That has nothing to do with any mystical coercive iron laws of history. It does have to do with basic macroeconomics and the historical experiences of currency zones.

By paragraph five, I was embarrassed to be reading the piece. The continuing danger is not Hoover/Brüning economic policies, Herr Hulverscheidt explains to his readers. The danger is that countries like Greece and Spain in deep depression in the eurozone which is itself sliding into deflation might stop using Hoover/Brüning policies. And he think France especially needs to get more with the Hoover/Brüning program than it already has.

Wow! Just, wow!

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