Presenting his investment plan to the European Parliament, Jean-Claude Juncker compared it to the use of electric cables to jump-start a car with a flat battery. The expected "discharge" is 315 billion euros. It is a pity that the amount, already largely inadequate, will be disbursed over a long time compared to the gravity of the crisis. But what is more important is that once again the diagnosis of the crisis implicit in the solution of the Juncker Plan does not take into account that the European economy is not moving, not because the battery is flat, but because it has run out of fuel, i.e. without internal demand enough to take advantage of the Juncker shock.
In the conference "Euro at crossroads: Union of austerity or growth?”, organized in Athens by the Levy Institute of New York, I found myself in a session that included Peter Bofinger, one of the 5 advisers to the German government. In his speech, Bofinger (hear! Hear!) ridiculed what he called the "mantra" of structural reforms as a panacea for the crisis. And he rhetorically wondered why countries much more flexible than Europe such as the United States came out of the crisis with an expansive fiscal policy (the US made a 12,5% deficit/GDP while we destroyed European savings with austerity).
And he also found agreement with my thesis, which unlike the traditional Keynesian recipe which calls for a drop in savings to create demand, proposes that the savings stolen from them by dint of austerity be returned to European families. To obtain this result, an indispensable premise for a recovery in confidence and spending, the best way forward is to let the overall European deficit run. The problem, Bofinger later explained to me, is that the other 4 members of the expert committee "are more conservative than Prime Minister Merkel".
The broad consensus among the speakers at the conference was that a fiscal injection is needed in the eurozone, but that there is not yet a politically acceptable plan to be able to implement it in a pro-rata way, i.e. without bringing into question issues of fiscal union and transfers between villages. Political union would be the textbook solution, but 6 years of dangerously experienced crisis have eroded mutual trust, triggered forces of disintegration, and made this solution even further away than it already was at the outbreak of the crisis.
To understand the climate in Europe, it suffices to know that two central bankers, guests of the same conference, from EU countries not belonging to the eurozone, had the impudence to state that it is their intention to stay in Europe but outside the EUR. As if to say: we only take what we like best from Europe (including the structural funds). It is a pity that they overlook a small detail, namely that the treaty signed by their governments commits them to converge and join the euro. Unlike the United Kingdom and Denmark, which asked for and obtained a formal clause in the treaty, Poland and the Czech Republic do not have the privilege of being able to decide "on paper" which European institutions they choose to join.
In short, the climate is difficult. But there are no credible alternatives to a fiscal maneuver agreed by the 18 (soon 19) countries of the Eurozone. The single European market, on which the integration process relied as an engine of growth, is in dire need of an internal demand management policy.
Of course, the euro could be depreciated (if it really succeeds) and thus export some unemployment in those countries that have public debt. But the internal problems would remain: Germany has accumulated credits towards the countries of Southern Europe, and when these fail definitively and exit, the creditor country Germany will be left with nothing but a handful of flies. In Athens, Jan Kregel (who in 2009 was the rapporteur of the president of the UN Commission on the reform of the international financial system) put it this way: with the current rules of the euro, those who do not export will not grow, but those who grow by exporting sooner or later he gets his pens back. A diabolical spiral.
What is still keeping Europe from taking the decisive step? The issue is all political, it requires foresight and the ability to come up with original solutions. In the meantime, the only discussion is about putting in some patches, such as for example the request for exceptions to the fiscal compact, which if granted would have the meager result of dispersing that "plus" in demand in a thousand rivulets that end up in the global economy, with on the creation of jobs at home. Padoan and Taddei think about it when they try to get a few more deficit points.
Is it possible that the prospect of the French presidential elections in 2017 is not enough to put European leaders at ease? And when Syriza has won the elections in Greece and wants to renegotiate the letter of intent with the Troika, what will Spain, Portugal and Italy do? Will they be spectators or will they enter the game to renegotiate the overall rules of the euro and give a positive turn to the history of our continent? Meanwhile, Russia is backing anti-euro parties in the news. Are you doing it because you are cherishing the idea of a stronger and more united Europe or that of a weaker and more divided Europe? I leave the answer to the reader.
Attachments: By the same author: "Europe needs a jolt to get out of stagnation: a 50% VAT cut"
