Wed Jul 20th, 2011 at 01:46:34 AM EST
I have had a piece on the Euro crisis published in Eurointelligence: THE FLAWS OF THE EU'S ASYMMETRIC APPROACH TO IMBALANCES
The EU is pursuing a lopsided approach to resolving the eurozone's internal imbalances. If all the adjustment were to take place among deficit countries, one of the consequences would be a situation under which the capital investment to improve productivity can hardly take place.
With thanks to afew, JakeS and kcurie who helped edit the draft, and to Wolfgang Münchau of Eurointelligence for the final tweaks and the choice of title and blurb. Negative thanks to the spellchecker of Münchau's copy of Microsoft Word for introducing typos in the final draft.
Please read the piece over there and comment over here.
front-paged by afew
The origin of the article is my reaction to an earlier column carried by Eurointelligence:
I am appalled at this article from the Bruegel think tank: EIP 1.0 - time to address macroeconomic imbalances forcefully! by Guntram B. Wolff on 7th July 2011
This column argues that the euro zone has no time to waste for structural reforms given the risk of default of Greece. The new excessive imbalance procedure (EIP) could play a crucial role in fostering such structural reforms. If needed, the Commission should start the EIP procedure as early as September should countries such as Spain not deliver on their reform commitments. The European Parliament and the public should monitor that the Regulation is applied forcefully and timely.No concept at all of the crucial role surplus countries play in the generation and maintenance of Eurozone internal trade imbalances.
Policymakers have shown their resolve to significantly step up the governance of the euro area. The so-called "six-pack" consisting of 6 pieces of legislation is in the final stage of becoming effective EU law: the trilogue discussions between the European Parliament, Council and Commission close to final. The remaining differences between the Council the positions of the European Parliament as voted on June 23 should as soon as possible be resolved so that the package can be implemented early. The six-pack has a completely new "Regulation for the prevention and correction of macroeconomic imbalances" (EIP), which has the potential to revolutionize European governance.Then he goes on about how the EU Commission should immediately intervene in Spain to impose "reform". The article ends with an afterthought in which reform of suplus countries' deflationary policies is also called "less urgent":
Finally, policy action to boost growth and domestic demand is also needed in current account surplus countries but the degree of urgency is smaller. The European Parliament and the public at large should hold the Commission and Council to account on these policy options. Let's make the EIP already a success in version 1.0 and not waste precious time.I should note this is the second time in two months I take exception to an article by the same deputy director of a reputable economic think tank...