From The New York Times: http://www.nytimes.com/2012/05/18/opinion/krugman-apocalypse-fairly-soon.html
By PAUL KRUGMAN
Published: May 17, 2012
Published: May 17, 2012
Suddenly,
it has become easy to see how the euro — that grand, flawed experiment
in monetary union without political union — could come apart at the
seams. We’re not talking about a distant prospect, either. Things could
fall apart with stunning speed, in a matter of months, not years. And
the costs — both economic and, arguably even more important, political —
could be huge.
This doesn’t have to happen; the euro (or at least
most of it) could still be saved. But this will require that European
leaders, especially in Germany and at the European Central Bank, start
acting very differently from the way they’ve acted these past few years.
They need to stop moralizing and deal with reality; they need to stop
temporizing and, for once, get ahead of the curve.
I wish I could say that I was optimistic.
The
story so far: When the euro came into existence, there was a great wave
of optimism in Europe — and that, it turned out, was the worst thing
that could have happened. Money poured into Spain and other nations,
which were now seen as safe investments; this flood of capital fueled
huge housing bubbles and huge trade deficits. Then, with the financial
crisis of 2008, the flood dried up, causing severe slumps in the very
nations that had boomed before.
At that point, Europe’s lack of
political union became a severe liability. Florida and Spain both had
housing bubbles, but when Florida’s bubble burst, retirees could still
count on getting their Social Security and Medicare checks from
Washington. Spain receives no comparable support. So the burst bubble
turned into a fiscal crisis, too.
Europe’s answer has been
austerity: savage spending cuts in an attempt to reassure bond markets.
Yet as any sensible economist could have told you (and we did, we did),
these cuts deepened the depression in Europe’s troubled economies, which
both further undermined investor confidence and led to growing
political instability.
And now comes the moment of truth.
Posts
No comments:
Post a Comment