And here’s the inevitable bear view.
A good bullish perspective.
The thing is, arguing over who is blame is not really productive at this point. As Jeffrey Sachs rightly points out, the Western world gave debt relief to Germany in 1953 when Germany — burdened with massive debt — needed it, after that country’s previous leader started World War II and committed multiple genocides as part of his master plan to build a thousand-year Aryan reich. When it comes to bad deeds by previous leaders, Greece’s current troubles are nothing like Germany’s former ones. But the West chose not to punish Germany for the Third Reich. And Germany did well in the wake of its debt relief, eventually growing back into the industrial powerhouse it is today.
Back then, the world better understood the need for debt relief. The crippling war reparations agreed at Versailles that plagued the German economy in the wake of World War I had, after all, been a key factor in creating the conditions ripe for the rise of the Nazis. Why impose those conditions again?
John Maynard Keynes presciently condemned the Versailles settlement that crippled the German economy, asking: „Will the discontented peoples of Europe be willing for a generation to come so to order their lives that an appreciable part of their daily produce may be available to meet a foreign payment…?
Yet almost a century after Versailles, we are imposing similar conditions yet again on a different set of countries. Greece is expected to continue to repay its loans until 2054. The periphery has been beaten about the head, not just by economic circumstances, but also by the irresponsible moralising of German policymakers like Jürgen Stark who insist that austerity and structural reform is the answer to everything, and that further debt-relief is impossible even though their own country’s success owes to it.
Stop the #Austericide! Free the Greek people!
Europe’s future will be bright to the extent that we manage to use the euro crisis as an opportunity to bring about a United States of Europe. Anything less will lead to the fragmentation and eventual collapse of the euro (as Nicholas Kaldor had prognosticated in 1971) and the disintegration of the EU, with terrible consequences for Europeans.
However, while federation would have prevented this crisis, federating now is not a feasible solution to it. If anything, the euro crisis has, tragically, set one proud nation against another, making a ‘coming together’ politically impossible – for now. The current ‘difficulties’ we are facing within the Eurogroup, and the various stand-offs, are a reflection of political divergence caused by the crisis’ never ending ‘progress’.
Today I came to this fine venue to argue that what Europe needs is a solution to the current crisis that utilises, and re-deploys, existing institutions smartly and within the letter of current Treaties and rules. I have presented one example of how this can be accomplished in the realm of aggregate, pan-European investment. The proposal for an EIB-ECB partnership (where the ECB performs QE by purchasing EIB-bonds in support of a large-scale investment-led recovery program) demonstrates precisely how Europe can mobilise existing institutions (in this case the EIB and the ECB), Europeanise aggregate investment, and lead to recovery without any need for Germany to pay for this program or for the productive investments that will flow into the deficit nations.
Come to think of it, what we have here is the potential for simulating a European New Deal without the need for a federal treasury, for any type of fiscal transfers, or for any new institution. While the richer nations, with Germany at the fore, will not need to pay a single euro toward this European New Deal, Europe needs leadership from surplus countries, like Germany, to bring this about.
In the early 1950s, the United States led Europe’s revivification with the Marshall Plan. It cost the American taxpayers 2% of GDP to transfer the necessary funds to Europe (money well spent even from an American perspective). The European New Deal will cost Germany, Holland, etc., nothing, since it will be funded through EIB-bond issues that, in fact, help mop up excess liquidity in Germany’s financial sector thus helping restore positive interest rates for German pension funds. It is my vision that Germany should lead the rest of Europe down this mutually advantageous path. Indeed, why not turn this into a legacy project that will, in decades to come, be known as the Merkel Plan. Such a development would help heal needless divisions and give European integration a much needed boost.
Today I only gave one example of Decentralised Europeanisation: aggregate investment. Similar solutions exist for Europeanising part of national debts, for unifying properly our banking sectors and forfor dealing with poverty and deprivation – without fiscal transfers, without deficit spending, without Germany footing the bill and, crucially, without loss of national sovereignty.
Allow me to close with a heartfelt remark: The time has come to stop thinking of Europe’s recovey as a zero-sum game, where the interests of one nation are to be served by having some other nation pay. Europe has immense developmental potential which, however, requires an immediate paradigm shift within the existing Treaties and rules. Our generation has the duty to make that shift so that future generations can say that we enabled them to live in a truly united Europe; a Europe of shared prosperity in which being Greek or Italian or German is a cultural identity rather than a politically significant datum
Now that I read these logical economic ideas that make so much sense, for the first time I start to have faith in the European project. If only Germany would listen, or at least leave the other European countries judge for themselves instead of intoxicating them with hatred and prejudice.