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Arabica Robusta

Europe's Ugly Future: A review of Varoufakis, Galbraith & Stiglitz - Foreign Affairs | ... - 0 views

yanisvaroufakis.eu/...raith-stiglitz-foreign-affairs

neoliberalism europeanunion eu varoufakis galbraith stiglitz

shared by Arabica Robusta on 29 Oct 16 - No Cached
  • Without a currency that could appreciate against those of her trading partners, German productivity increased and its technical excellence produced a declining real cost of exports, while in its European trading partners, deprived of currencies that could depreciate, stable purchasing power and easy credit produced a corresponding increase in demand for German goods.
  • Stiglitz concedes that austerity may eventually work, but he argues that even if it does, the cost is too high. Better to allow countries to declare bankruptcy and start over, just as individuals and firms can do in a domestic economy. Varoufakis and Galbraith dismiss austerity as flatly self-defeating, because low growth simply ends up increasing the debt-to-GDP ratio.
  • Germany has emerged almost unscathed—at least so far. Berlin has preserved the existing euro system, which advantages it as an international creditor, an exporter of high-quality goods, and a country that suppresses wage increases. It has enjoyed lower interest rates and higher growth than the rest of Europe, which has depressed the real cost of its exports, resulting in a trade surplus larger in absolute terms than China’s.
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  • Such options range from Grexit to his preferred alternative of breaking the eurozone into several subgroups, each with its own currency.
  • Varoufakis and Galbraith would likely sympathize with his proposal and clearly regret that Greece lacked the political courage to forsake the system earlier, when it could have done so more easily. Yet even the radical step of breaking up the eurozone, Stiglitz makes clear, would probably help deficit countries only if Germany agreed to increase domestic spending, rein in speculation, and reduce deficits
  • As Varoufakis writes, “All talk of gradual moves toward political union and toward ‘more Europe’ are not first steps toward a European democratic federation but, rather, and ominously, a leap into an iron cage that prolongs the crisis and wrecks any prospect of a genuine federal European democracy.” Thus, one is forced to conclude that short of a catastrophic economic crisis, Europe can do little more than continue to muddle through in a self-induced state of austerity, thereby undermining its future prospects and global standing.
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