Jun 11 2012

EU in cul-de-sac: a rejoinder

Published by at 7:38 am under Europe,Opinion,Top Stories

Have you noticed how quiet it has gone around the issue of growth stimulation in the European Union? After a few weeks of get-togethers between state representatives, which produced very little (actually nothing) in the form of ideas to stimulate the Club Med economies in the short term, the topic vanished from the radar screens in the past week or two. Why? Has the need for short-term stimulation evaporated? To the contrary. The economic situation in these countries is dire and getting more dangerous (also as far as political stability is concerned) by the day. So, why do the governments do nothing?

More telling: in situations like these, private sector economists usually come to the rescue with ideas for the politicians. In a kind of “when-the-going-gets-tough-the-tough-gets-going” fashion. But from that front also: silence. No suggestions. No solutions are being suggested. Why is this?

Because there are no more solutions, or ways these economies can be stopped from sliding ever deeper into the economic morass. There is no way out. (As I’ve said before.)

Yes, the meetings to find ways to get the economies growing produced a few suggestions. But, these were all ideas how the Club Med countries could change the structures of their economies to make them grow faster in future. In other words structural measures. Which are, per definition, long-term measures. In the sense that it usually takes a long time for these measures to be approved and implemented and then yet another “long time” before they show effect. Of course, these countries need these changes, but that’s not what they need most in the current situation. They need measures which kick in immediately, or almost immediately.

Of that kind, there is none. All Keynesian ammunition is spent.

Politicians usually don’t make this distinction between short- and long-term measures. Maybe, because they don’t understand it. Maybe, because they simply aren’t interested in the long-term – they just want to look good today. Whatever the reason, they often make fools of themselves on this topic.

Like Joschka Fischer, Germany’s ex-foreign affairs minister, who still criticized Frau Merkel heavily just last week for not doing anything to stimulate the Club Med economies – amidst the silence I referred to above.

He hasn’t noticed yet that no-one knows how to save the situation!


One response so far

One Response to “EU in cul-de-sac: a rejoinder”

  1. adminon 11 Jun 2012 at 7:50 am

    Once again, I must just remind you who the culprits are here. In the past week, the fire burnt in Spain. And the fire was ignited by….yes, you guessed it: gross mismanagement of bank managers, who could not keep their greed under control and credit-financed property developments that should never have been financed.

    Different country, same cause: the banks.

    The time has come for the debate to start whether banks should be privately owned, or state-owned.


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