It is said that liberal economists, in particular Krugman e stiglitz, have overexposed themselves by supporting the Tsipras referendum with drawn sword, which then had to come to more lenient advice. He rues that such attitudes would be part of an "undeclared war" on the euro, well beyond the long-standing skepticism about the single European currency that these economists had already displayed. To do so, on the Corriere of the 22nd, is the intelligent pen of Federico Fubini, with arguments to be taken into consideration. I think it is entirely legitimate to criticize even Nobel laureates in economics. However, I think it is wrong to look at the Greek crisis - the micro dimension - without considering how it is part of a bigger crisis - the macro dimension - that is, the European one.
It seems to me that the problem does not only concern Greece but the very existence of a united Europe or not. A Europe which, despite having within itself the possibility of reacting to the crisis that started six years ago, is showing its side and is unable to get out of it. Today the Greek problem will come home to roost, tomorrow, if we continue with the same approach, the Italian, Spanish, Portuguese, etc. will come home to roost. An EU that is unable to relaunch economic growth has no future and sooner or later breaks down .
Obviously, when it started, in 2010, almost the entire responsibility for the crisis rested with Greece, which had fixed the accounts. But today, more than five years later, with various restructurings of the Greek debt, Greek reforms only timid and counterproductive fiscal austerity policies, the responsibilities are widespread. Today, maintaining an accounting approach aimed at making the debt pay off by lengthening it, even cutting it slightly and lowering rates is no longer enough. You have to grow the economy to make that debt sustainable.
Reforms within individual countries are going in the right direction: they improve supply conditions but are not enough. We also need an ability to generate aggregate demand, which must come from Brussels, which must express policies for growth, well beyond what is in the Junker Plan (only 20 billion in fresh capital and many unattainable good wishes). There is no use being competitive, having low wages and all the benefits brought by the reforms if there is no aggregate demand. Schaeuble and the austerity policymakers should be locked up in a classroom learning Keynes's general theory. Only then would they know that there is an aggregate demand problem in today's Europe. And they would know that the USA came out of the economic depression following the crisis of '29, in the presence of unemployment at 25%, with a New Deal, creating jobs, making infrastructure investments and thus increasing aggregate demand. If countries experiencing debt crises cannot devalue their currencies, expand public spending and can only make pro-competitive reforms in the country, they cannot do it. How are jobs created without aggregate demand? In Europe, the countries that have fared better have been driven by exports, that is, by the aggregate demand of the others, not of Europe. We too are told to export more… but it is irresponsible. An economic area that is among the world's largest cannot afford to base growth on the aggregate demand of others. All the more so today that the Chinese economy is also showing clear signs of a slowdown.
In short, it is the whole of Europe that has a growth deficit and even highly competitive countries with solid macroeconomic fundamentals such as Finland have been in stagnation for years. The OECD tells us that persistently high youth unemployment – especially in countries affected by sovereign crises – will produce a permanent depletion of human capital, a disaster in terms of increased inequality and poverty.
Faced with this scenario, it makes little sense to defend the status quo and identify conspiracy theories that come from overseas. The main culprits for the situation in which we find ourselves are in Europe alone. It was known to all who wanted to see it – not just Krugman and Stiglitz – that the euro area at its inception was not, in technical terms, an “optimum currency area”. However, even non-optimal areas can become optimal over time if adequate policies are adopted to favor convergence between the various member countries. This is where unforgivable mistakes tainted by a wrong view were made. At first it was hoped, in fact, that the convergence between euro countries would be automatic. It didn't and it couldn't be. On the contrary, rather than favoring convergence, the euro has for many years favored “divergence” among member countries.
On the one hand, the structural lowering of interest rates to German levels has produced an easing of budget constraints in peripheral countries. For individuals, this has meant cheap mortgages, unleashing real estate bubbles, the explosion of which in many parts of Europe is still being licked. For governments, it has led to a lowering of the attention threshold on deficits and public debt. For example, it is there for all to see how in Italy, between 1998 and 2010, lower interest charges (several tens of billions a year) were not used to break down the public debt boulder or lower taxes, instead letting the rest of public spending grow, too often unproductive (to put it mildly).
On the other hand, the strong economies – primarily Germany – have further increased their competitiveness not only with larger productivity increases than in the peripheral countries but also with more marked wage moderation policies. (European) experts of the caliber of Paul De Grauwe believe that the lack of coordination of wage policies, which has produced dramatically divergent dynamics between Germany (too low wages) and peripheral countries (too high wages), is one of the main (if not the main) detonators of the euro crisis.
To return to the topic touched upon above, it is right to ask the weak countries, which have been the protagonists of that "divergence", to get back on track by adopting pro-competitive reforms and, therefore, a more competitive aggregate offer. But such reforms must be accompanied by a European New Deal that also creates aggregate demand at the same time. Otherwise the peripheral economies will be clinically healed but, unfortunately, with a flat encephalogram. And there is also the risk that social unease will lead these countries, through democratic elections, to establish governments that no longer want to drink those medicines, unleashing conflicts whose contours are difficult to figure out.
