Magazine article Management Today

Books: Can the Eurozone Be Kept Alive?

Magazine article Management Today

Books: Can the Eurozone Be Kept Alive?

Article excerpt

Stiglitz blames the single currency for the continent's financial ills, but also offers some bold remedies to save the euro experiment, says Jeremy Cook

The Euro: And its Threat to the Future of Europe

Joseph E Stiglitz

Allen Lane, pounds 20

Reading a book on Europe and its economic issues in a post-Brexit world was certainly an interesting experiment in cognitive dissonance.

One cannot really overstate the trauma that Europe has felt since the advent of the global financial crisis, for while it may have started in the US mortgage market and spread around the world on a wave of panic, it is the Eurozone that has been at the epicentre of economic pain While the initial skirmishes of the crisis may have been dealt with in a whimsical fashion by the film The Big Short, there is little joy or caprice in this assessment of the issues currently befalling Europe.

In his latest book, Joseph Stiglitz, winner of a Nobel Memorial Prize in Economics, adviser to former President Bill Clinton and professor of economics at Columbia University, lays the majority of the blame for the depression in Greece and the resulting swathes of unemployment, inequality and misery squarely at the door of the European single currency - and I must say it is a convincing argument.

The euro had always been pictured as an instrument of convergence; through greater cooperation and a shared currency, a continent that has so often split apart would become as one. However, as we all know it's the loftiest dreams that crash and burn the quickest.

Stiglitz's arguments fall into two issues with the euro; firstly, that the implementation of a single currency was wrong and, secondly, that the response to the global financial crisis exacerbated the issues enormously and risk tearing down the project entirely. Indeed, he posits that of all the crises the Eurozone has faced, the ones in Spain and Ireland were ones of inequality that could have only come to pass as a result of the euro. The convergence criteria that the countries had to adhere to were seemingly simple, all they needed to do was keep their fiscal deficit below 3% of GDP and maintain a debt to GDP level of 60% Both countries however ended up with large deficits and high debt to GDP ratios despite having entered the euro with surpluses and low debt levels.

It is in the reaction of the Eurozone and European authorities once the crisis hit where you can tell that Stiglitz is almost incandescent in his criticism of austerity, rules-based central banking, the IMF and Germany.

Indeed, I wonder how well this book will go down in the halls of power in Berlin. …

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