Monday, January 9, 2012
Euro Dithering Continues
From: Wall Street Journal Online Edition. Credit to Zuma Press.
What do these two EU leaders have in common, and why are they smiling? Answers are : "Very little," and "Mandatory Photo Op."
After a year of meetings in hotels, beach resorts, chateaux and medieval castles, nothing of substance has changed. Ostensibly, the German and French leaders are trying to (1) restore European competitiveness and create job growth; (2) implement last year's 130 bn euro Greek bailout, as the Greek government tepidly tries to impose austerity and negotiate with private bondholders; (3) keep the European Union from crumbling, while simultaneously, (4) creating a regime of sanctions for profligate members who run persistent budget deficits.
What countries would want to be members of this kind of union? The former Eastern European nations are on the sidelines wondering, as is Sweden. The Wall Street Journal points out, "Mr. Sarkozy, who faces a tough election in May, was also pushing ahead of the meeting (Tuesday with the IMF) to stress the need for promoting economic growth and jobs, rather than belt-tightening and austerity." Solving the euro crisis under the current framework is all about fiscal pain; it's not about competitiveness and jobs with available policy instruments.
Economist Robert Barro of Harvard writes today in the Journal, "I suggest that it would be better to reverse course and eliminate the euro. ...The euro is a noble experiment, but it has failed." A European Union running fiscal policy for its member states out of Brussels was never in the cards--that could not have been a noble experiment.