EUROPEAN NEWS



Joseph Stiglitz and the EURO

2016-09-21

According to Joseph Stiglitz was the EURO conceived with a mixture of flawed economics and ideologies. His latest book: "The EURO and its Threat to the Future of Europe" was published in mid-august 2016 and is definitely worth reading and studying. I attach a well written and balanced review by Lucia Quaglia with in addition some excerpts from the afterword in the book. The ideologies primarily responsible for its flaws are market fundamentalism and neoliberalism. His critique on the Euro, one can read for instance in the Financial Times, unabashedly aligns itself with the anti-establishment left. This a typical reaction by which to discourage readers from carefully reading the book.

I had no doubt, as can be seen from earlier entries in my website, that the Euro was flawed though more for reason of European politics than economic ideologies. After all, one of the founding fathers of the Euro was Jacques Delors, French socialist and President at the time of the European Commission. As he argued in one of hist last interviews, with the Daily Telegraph on 2 december 2011: "The Euro came into existence without strong central powers to stop members running unsustainable debts, an ommission that led to the current crisis..."[Still] all European countries must share the blame for the crisis, with Germany as the principal culprit for its stubborn ideas on monetary control of inflation, austerity and reform; and its refusal to consider debt-restructuring.as advocated by INF. 

The effort to depict Stiglitz as an anti-establishment leftist, is of course nonsense. He may be considered left-wing by American standards, but in Europe he would rather be in the moderate political center. His critique, therefore, must be carefully read and taken into account. He is making a number of crucial points on the negative role of Germany in the Euro crisis, on growing divergence rather than (the intended) convergence inside the Eurozone and on growing inequality. The fact that Germany as creditor nation with a huge trade surplus calls the shots in the European Union, rather than an impartial supranational authority, is the consequence of the flaws at birth. It is also responsible for the growing rift between Northern and Southern member states.

Contrary to what some commentators (e.g. Guillaume Duval in Social Europe) concluded from some features in the press wherein Stiglitz appeared, the book does not advocate a smooth exit from the Euro. The book ends with - what might be called - three options: (1) an improved Eurozone with a Banking Union that includes a common deposit insurance and a common regulatory system; (2) an amicable divorce, where he suggests that Germany should leave first; and (3) A flexible Euro. What he rejects as a viable road is to continue muddling through as has been the policy sofar, but he clearly argues for the first option for economic, political and historical reasons.

The Euro, certainly, did not contribute as envisaged to further political integration. As a means to such end, it has definitely failed.  

 


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Frans A.M. Alting von Geusau

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