General Discussion
Related: Editorials & Other Articles, Issue Forums, Alliance Forums, Region ForumsKrugman: Those Revolting Europeans
By PAUL KRUGMAN
The French are revolting. The Greeks, too. And its about time.
Both countries held elections Sunday that were in effect referendums on the current European economic strategy, and in both countries voters turned two thumbs down. Its far from clear how soon the votes will lead to changes in actual policy, but time is clearly running out for the strategy of recovery through austerity and thats a good thing.
<...>
What is true is that Mr. Hollandes victory means the end of Merkozy, the Franco-German axis that has enforced the austerity regime of the past two years. This would be a dangerous development if that strategy were working, or even had a reasonable chance of working. But it isnt and doesnt; its time to move on. Europes voters, it turns out, are wiser than the Continents best and brightest.
Whats wrong with the prescription of spending cuts as the remedy for Europes ills? One answer is that the confidence fairy doesnt exist that is, claims that slashing government spending would somehow encourage consumers and businesses to spend more have been overwhelmingly refuted by the experience of the past two years. So spending cuts in a depressed economy just make the depression deeper.
<...>
One answer an answer that makes more sense than almost anyone in Europe is willing to admit would be to break up the euro, Europes common currency. Europe wouldnt be in this fix if Greece still had its drachma, Spain its peseta, Ireland its punt, and so on, because Greece and Spain would have what they now lack: a quick way to restore cost-competitiveness and boost exports, namely devaluation.
<...>
Yet breaking up the euro would be highly disruptive, and would also represent a huge defeat for the European project, the long-run effort to promote peace and democracy through closer integration. Is there another way? Yes, there is and the Germans have shown how that way can work. Unfortunately, they dont understand the lessons of their own experience.
- more -
http://www.nytimes.com/2012/05/07/opinion/krugman-those-revolting-europeans.html
RainDog
(28,784 posts)alittlelark
(18,890 posts)eridani
(51,907 posts)I'm going to fax this to Nancy Pelosi--she needs to hear a LOT from people who oppose her capitulation to Simpson-Bowles.
jwirr
(39,215 posts)instead of starving the workers.
johnd83
(593 posts)Confederacies have been tried several times in the past and have pretty much always failed. The EU had a common currency, but not a common monetary policy. Because all the countries have conflicting agendas they just ended up with a complete monetary mess. Throw in corrupt bankers and idiotic governments that borrowed in a currency they had no control over without an economy with even the potential to repay and it resulted in a huge mess.
The difference is that here in the US we can afford the things we want if we weren't so idiotic in terms of taxation and cost control. We have insanely low effective taxes and basically give health care and military companies truckloads of free money. Also our trade policies are ridiculous.
harmonicon
(12,008 posts)The only real trouble they face is from internal right-wing elements, which they're now voting out. The euro is, and will be fine. It's still rather strong, especially compared to ten years ago. These calls of doom and gloom are simply a right-wing boogeyman foisted on the public to blackmail them into accepting the right's policies. Thankfully, it's no longer working.
DallasNE
(7,402 posts)The roadmap is already out there and they just need to follow it meaning the tools already exist for devaluation. Merkel should call for early election in Germany as a referendum on austerity but she will cling to power without getting a mandate for the policy she continues to push.