"Draghi's insistence that the fiscal contract eurozone leaders are attempting to thrash out at their latest summit will be sufficient in itself to restore confidence is cloud cuckoo land. He cannot sincerely believe it. The problem in the eurozone is not fiscal indiscipline, though there has certainly been a lot of it, but current account imbalances entrenched by big differences in competitiveness. These cannot be made to go away with repeated rounds of growth stifling austerity, and as for Mr Draghi's claim that it is possible to have both fiscal austerity and decent growth provided competitiveness is improved, it's simply naive to believe that's what is going to happen in practice. In fact, most of the evidence from the eurozone periphery is that it is continuing to lose competitiveness against the surplus north, with Germany progressively improving its share of an ever-shrinking market. As long as that goes on, the debt problem is going to get worse, not better. This weekend's summit will do little to solve the fundamentals of this crisis. Only a fully functioning fiscal and political union, with tax and spending decisions centralised in one authority across all 17 nations can do that. Even turbo-charged by financial and economic crisis, that's a very long road indeed."
Quote of the Day
From the UK paper The Telegraph:
"Draghi's insistence that the fiscal contract eurozone leaders are attempting to thrash out at their latest summit will be sufficient in itself to restore confidence is cloud cuckoo land. He cannot sincerely believe it. The problem in the eurozone is not fiscal indiscipline, though there has certainly been a lot of it, but current account imbalances entrenched by big differences in competitiveness. These cannot be made to go away with repeated rounds of growth stifling austerity, and as for Mr Draghi's claim that it is possible to have both fiscal austerity and decent growth provided competitiveness is improved, it's simply naive to believe that's what is going to happen in practice. In fact, most of the evidence from the eurozone periphery is that it is continuing to lose competitiveness against the surplus north, with Germany progressively improving its share of an ever-shrinking market. As long as that goes on, the debt problem is going to get worse, not better. This weekend's summit will do little to solve the fundamentals of this crisis. Only a fully functioning fiscal and political union, with tax and spending decisions centralised in one authority across all 17 nations can do that. Even turbo-charged by financial and economic crisis, that's a very long road indeed."
"Draghi's insistence that the fiscal contract eurozone leaders are attempting to thrash out at their latest summit will be sufficient in itself to restore confidence is cloud cuckoo land. He cannot sincerely believe it. The problem in the eurozone is not fiscal indiscipline, though there has certainly been a lot of it, but current account imbalances entrenched by big differences in competitiveness. These cannot be made to go away with repeated rounds of growth stifling austerity, and as for Mr Draghi's claim that it is possible to have both fiscal austerity and decent growth provided competitiveness is improved, it's simply naive to believe that's what is going to happen in practice. In fact, most of the evidence from the eurozone periphery is that it is continuing to lose competitiveness against the surplus north, with Germany progressively improving its share of an ever-shrinking market. As long as that goes on, the debt problem is going to get worse, not better. This weekend's summit will do little to solve the fundamentals of this crisis. Only a fully functioning fiscal and political union, with tax and spending decisions centralised in one authority across all 17 nations can do that. Even turbo-charged by financial and economic crisis, that's a very long road indeed."
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