Krugman: Being Bad Europeans – NYTimes.com

One of the fathers of the euro, Romano Prodi, says clearly that the euro was only a step towards further political integration. The fact that the process was frozen in its tracks left the euro dangling without the necessary mechanisms to coordinate economic policies. It’s at best a premature baby, which the eurosceptic would love to throw away with the water
Trouble is that Krugman and anybody who is calling for relaunching the economy has been roundly ignored for the last six years. The best part is that the conservative recipe is just not working and getting worse, which is only a reason to insist on doubling up on austerity instead of relaunching the economy. Can’t argue with blind faith
Actually, I don’t think that anybody in his/her right mind would talk about transfers from Germany to other EU countries, that would be unsustainable even for the good folks in the Vatican, who are supposed to be professional do-gooders. I think that it’s more a matter of simply investing in the country’s own infrastructure and encouraging people to spend more to rev up the economy. Germany is in the position Japan was around 20-some years ago: an economic powerhouse, exporting a lot and buying very little from anybody else, hoarding all the surplus. If Germans could be convinced to buy more instead of saving it all, Spanish agricultural products, French and Italian luxury goods and – whatever it is that the UK produces? – could be sold, putting more money in circulation in a more natural way than the ECB pumping funds into banks for practically nothing, with the banks sitting on the funds and not using them to get the wheels spinning – which has been happening for years now.
The whole issue is much bigger than a post of this kind can accommodate but let’s go back to the beginning of the crisis in 2008: Bush, pushed by Brown, decided to save the banks at all costs, to avoid a total collapse of the economy, on the assumption that, once banks were stabilised then recapitalised, they would put the economy back on its feet. As we have known since at least 5 years, that has happened in a very limited measure or not at all: the rescued bankers paid themselves handsome bonuses and lived happily ever after. As soon as Obama came to power, the conservatives on both sides of the Atlantic noticed that the gigantic deficits Bush had created were ballooning out of control so they decided, against any evidence to the contrary, to slam the brakes and start paying off the debt in the middle of a major crisis. We’ve seen the results since: 6 years of crisis and counting, without an improvement in sight. Krugman has been claiming all along that states have to spend to restart the economy, instead of stopping all investments, to pay off the deficits. We should know by now who was right and who was wrong: the deficits are still mostly there, as the economy has stalled repeatedly and, as people are making less money, they are also paying less tax. Only the rich have become much richer, while everybody else is a lot poorer. But the Republicans, Tories, Tea Partiers and Merkel worry about the debt and deficits and disregard the real economy and all that goes with it. Angela is not entirely wrong when she says that southern Europeans will never make any effort unless they hang by their fingernails, and even then they try to squirm out of their responsibilities, but we are, at the moment, throwing the baby with the bath water and even Germany is suffering from the excess of rigour.
As to Germans saving less or more I’ve seen it in Switzerland, they have the same reflex: when there is even a hint of trouble ahead, the Swiss stop spending and increase their savings. Increase, because they always save, even during good times. That’s why Switzerland has a rich and stable economy or is it the opposite, can the Swiss afford to save more and reduce their spending without the economy collapsing because the economy is so healthy in the first place? I suspect that a weaker economy would simply stall and collapse, which is what has happened in the Club Med countries, when people had no money to spend.
Are Europeans ready to listen to a German voice? I reckon that by now, yes. If the then Polish foreign minister Rad Sikorski asked the Germans to be more active on the crisis front, that speaks volumes about the way we view Germany today. Not everything should be forgotten and even less forgiven, but the new generations cannot be held responsible for their parents’ or grandparents’ crimes, we have to move on.
Perceptions in different parts of Europe: we come to an interesting question in which language, history and culture interact to influence our perceptions. Greeks, Italians or other Mediterranean countries have had no problem enjoying blonde tourists flocking to their coasts and looking for a Latin lover thrill and a sunburn, in this order, particularly that they came bringing money. However, when Germans and other northerners start preaching discipline and restraint, they pulled out all the skeletons out of the closets and started shrieking that they wouldn’t take the bitter medicine. Voting left for debt forgiveness or extreme right to affirm racial, historical, religious superiority is just another way of shrieking against the nurse giving you an injection – and about as effective. I am leaving Spain out of this, as it had a very different history before and during WWII.
Are Europeans ready to listen to a German voice? I reckon that by now, yes. If the then Polish foreign minister Rad Sikorski asked the Germans to be more active on the crisis front, that speaks volumes about the way we view Germany today. Not everything should be forgotten and even less forgiven, but the new generations cannot be held responsible for their parents’ or grandparents’ crimes, we have to move on.Perceptions in different parts of Europe: we come to an interesting question in which language, history and culture interact to influence our perceptions. Greeks, Italians or other Mediterranean countries have had no problem enjoying blonde tourists flocking to their coasts and looking for a Latin lover thrill and a sunburn, in this order, particularly that they came bringing money. However, when Germans and other northerners start preaching discipline and restraint, they pulled out all the skeletons out of the closets and started shrieking that they wouldn’t take the bitter medicine. Voting left for debt forgiveness or extreme right to affirm racial, historical, religious superiority is just another way of shrieking against the nurse giving you an injection – and about as effective. I am leaving Spain out of this, as it had a very different history before and during WWII.

Travelling in Germany or most of northern Europe we admire the cleanliness, order, wealth and, why not, the people looking healthy and fit. Travelling in the Club Med countries we admire the laid back lifestyle, the ready smile, the fact that people seem to have unlimited time to enjoy their friends and family. The southerners are very happy with their lifestyle and, when you add to that improved health services, investment in infrastructure and lots of other advantages which came with the EU membership, they started feeling quite happy as they considered the improvement to be permanent – with hardly any change of habits. Then came the crisis and the ugly truth reared its head: you can’t relax with your friends all day long, never pay tax and still expect first world social services and infrastructure, ignoring the fact that the florid looking Germans work their ass off all year round to earn their income.

It’s a lot easier to strike and throw tantrums than reforming your country. But an essential question, seldom asked is: should they do it? Should the southerners sacrifice their relaxed, privileged lifestyle for a balanced budget? It’s gross generalisation to say that in the north people live to work, in the south they work to live – or is it? Let’s say that, for argument’s sake, you prefer to keep your relaxed lifestyle, but then you shouldn’t expect the privileges of a wealthy, advanced country like a good health service, functioning bureaucracy, good infrastructure. Make no mistake, there are people working very hard for little money in the south, working even harder than up north because society is so chaotic and corrupt – but they have to work for themselves and all those who don’t and it’s not enough to compensate for all.

The crisis has compelled some governments to face the unpleasant necessity of putting their house in order: a government not exclusively based on corruption and theft, with people paying tax, without millions of civil servants enjoying secure lifelong jobs with little to do, while millions of young people can’t get their first job, etc. Hence, again, the anti-euro backlash, as it doesn’t allow the easy escape most governments had taken so far: devalue and manipulate your currency to make your products cheaper, for a short amount of time, instead of facing unbearably painful reforms.

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