The wacky economics of Germany’s parallel universe – Wolfgang Münchau – FT.com

This is an outstanding, must-read article by Wolfgang Münchau, published in the FT. Check it out!

via The wacky economics of Germany’s parallel universe – FT.com.

Having been close to this subject for over three years, I commend Wolfgang Münchau on his clarity of explanation.

Personally, I agree with the conclusions namely:

Germany is exporting ordoliberal ideology to the rest of the single currency bloc. It is hard to think of a doctrine that is more ill suited to a monetary union with such diverse legal traditions, political system and economic conditions than this one. And it is equally hard to see Germany ever giving up on this. As a result the economic costs of crisis resolution will be extremely large.

In recent months, I have been respectful of the German position that Southern Europe (including France) needs structural reform, like freeing up labor markets. I have been optimistic that with a little genuine structural reform from Southern Europe, Germany will countenance massive Keynesian stimulus in the form of investment. This is further supported by the European Commission’s changed position too.

Now I fear that I am close to admitting defeat. With Germany still at the economic helm in the Eurozone, it will be continued pain for all. Once again, the winners will be the privileged and the wealthy. If economic policies are unworkable, there will soon be social and political crises – this will include the increasing power of both the Far Left and the Far Right of the political spectrum.

Thoughts?

Europe could jump-start a sustained recovery |Michael Spence – The Japan Times

This is an important story from Nobel Prize winning economist, Michael Spence, published in the Japan Times.

via Europe could jump-start a sustained recovery |Michael Spence – The Japan Times.

Living in Cyprus, Southern Europe, this head-line seems a little ambitious. I maintain that excessive austerity has damaged countries like Greece, Italy, Cyprus, Spain, Portugal and France. Germany has had many artificially good years because of the Euro’s exchange rate but now according to German experts, Germany is seriously at risk too. Meanwhile, Germany wants and expects European countries to live within their agreed budgets – this was a position which all the Euro countries accepted.

I am hopeful that common sense will prevail and Germany will relent on austerity, in exchange for real reforms.

Thoughts?

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