I think muddling through. Most states do that, individual leadership notwithstanding. I think in trying to get everyone domestically on the same page is difficult, let alone internationally. But many European states do spend money on welfare and lots of it so I wonder if individually they have their stimulus plan adequately at the national level shouldn't it work out for the union? Maybe I am not reading much the local European news but any news from the US is always grim these days.
Anthony On Mon, Mar 16, 2009 at 4:37 PM, Jim Devine <[email protected]> wrote: > does this mean that Europe may be moving toward breaking up? or toward > increased centralism? or toward muddling through, i.e., persistent > deflation and depression? > > New York TIMES / March 16, 2009 > Op-Ed Columnist > A Continent Adrift > By PAUL KRUGMAN > > MADRID > > I’m concerned about Europe. Actually, I’m concerned about the whole > world — there are no safe havens from the global economic storm. But > the situation in Europe worries me even more than the situation in > America. > > Just to be clear, I’m not about to rehash the standard American > complaint that Europe’s taxes are too high and its benefits too > generous. Big welfare states aren’t the cause of Europe’s current > crisis. In fact, as I’ll explain shortly, they’re actually a > mitigating factor. > > The clear and present danger to Europe right now comes from a > different direction — the continent’s failure to respond effectively > to the financial crisis. > > Europe has fallen short in terms of both fiscal and monetary policy: > it’s facing at least as severe a slump as the United States, yet it’s > doing far less to combat the downturn. > > On the fiscal side, the comparison with the United States is striking. > Many economists, myself included, have argued that the Obama > administration’s stimulus plan is too small, given the depth of the > crisis. But America’s actions dwarf anything the Europeans are doing. > > The difference in monetary policy is equally striking. The European > Central Bank has been far less proactive than the Federal Reserve; it > has been slow to cut interest rates (it actually raised rates last > July), and it has shied away from any strong measures to unfreeze > credit markets. > > The only thing working in Europe’s favor is the very thing for which > it takes the most criticism — the size and generosity of its welfare > states, which are cushioning the impact of the economic slump. > > This is no small matter. Guaranteed health insurance and generous > unemployment benefits ensure that, at least so far, there isn’t as > much sheer human suffering in Europe as there is in America. And these > programs will also help sustain spending in the slump. > > But such “automatic stabilizers” are no substitute for positive action. > > Why is Europe falling short? Poor leadership is part of the story. > European banking officials, who completely missed the depth of the > crisis, still seem weirdly complacent. And to hear anything in America > comparable to the know-nothing diatribes of Germany’s finance minister > you have to listen to, well, Republicans. > > But there’s a deeper problem: Europe’s economic and monetary > integration has run too far ahead of its political institutions. The > economies of Europe’s many nations are almost as tightly linked as the > economies of America’s many states — and most of Europe shares a > common currency. But unlike America, Europe doesn’t have the kind of > continentwide institutions needed to deal with a continentwide crisis. > > This is a major reason for the lack of fiscal action: there’s no > government in a position to take responsibility for the European > economy as a whole. What Europe has, instead, are national > governments, each of which is reluctant to run up large debts to > finance a stimulus that will convey many if not most of its benefits > to voters in other countries. > > You might expect monetary policy to be more forceful. After all, while > there isn’t a European government, there is a European Central Bank. > But the E.C.B. isn’t like the Fed, which can afford to be adventurous > because it’s backed by a unitary national government — a government > that has already moved to share the risks of the Fed’s boldness, and > will surely cover the Fed’s losses if its efforts to unfreeze > financial markets go bad. The E.C.B., which must answer to 16 > often-quarreling governments, can’t count on the same level of > support. > > Europe, in other words, is turning out to be structurally weak in a > time of crisis. > > The biggest question is what will happen to those European economies > that boomed in the easy-money environment of a few years ago, Spain in > particular. > > For much of the past decade Spain was Europe’s Florida, its economy > buoyed by a huge speculative housing boom. As in Florida, boom has now > turned to bust. Now Spain needs to find new sources of income and > employment to replace the lost jobs in construction. > > In the past, Spain would have sought improved competitiveness by > devaluing its currency. But now it’s on the euro — and the only way > forward seems to be a grinding process of wage cuts. This process > would have been difficult in the best of times; it will be almost > inconceivably painful if, as seems all too likely, the European > economy as a whole is depressed and tending toward deflation for years > to come. > > Does all this mean that Europe was wrong to let itself become so > tightly integrated? Does it mean, in particular, that the creation of > the euro was a mistake? Maybe. > > But Europe can still prove the skeptics wrong, if its politicians > start showing more leadership. Will they? > -- > Jim Devine / "Segui il tuo corso, e lascia dir le genti." (Go your own > way and let people talk.) -- Karl, paraphrasing Dante. > _______________________________________________ > pen-l mailing list > [email protected] > https://lists.csuchico.edu/mailman/listinfo/pen-l > -- xxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxx Anthony P. D'Costa Professor of Indian Studies and Research Director Asia Research Centre Copenhagen Business School Porcelænshaven 24, 3 DK-2000 Frederiksberg, Denmark Email:[email protected] Ph: +45 3815 2572 Fax: +45 3815 2500 http://uk.cbs.dk/arc www.cbs.dk/india xxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxx _______________________________________________ pen-l mailing list [email protected] https://lists.csuchico.edu/mailman/listinfo/pen-l
