Newspaper article Pittsburgh Post-Gazette (Pittsburgh, PA)

Europe's Disasters If Greece Votes 'Yes,' the Failed Austerity Mongers Win

Newspaper article Pittsburgh Post-Gazette (Pittsburgh, PA)

Europe's Disasters If Greece Votes 'Yes,' the Failed Austerity Mongers Win

Article excerpt

It's depressing thinking about Greece these days, so let's talk about something else. How about Finland, which couldn't be more different from that corrupt, irresponsible country to the south? Finland is a model European citizen; it has honest government, sound finances and a solid credit rating.

It's also in the eighth year of a slump that has cut real gross domestic product per capita by 10 percent and shows no sign of ending. If it weren't for the nightmare in southern Europe, the troubles facing the Finnish economy might well be seen as an epic disaster.

Finland isn't alone. It's part of an arc of economic decline that extends across northern Europe through Denmark - which isn't on the euro but is managing its money as if it were - to the Netherlands. All of these countries are, by the way, doing much worse than France, whose economy gets terrible press from business journalists who hate its strong social safety net, but it has held up better than almost every other European nation except Germany.

European officials have been hyping the recovery in Spain, which did everything it was supposed to do and whose economy has finally started to grow again. But success, European-style, means an unemployment rate that is still almost 23 percent and real income per capita that is still down 7 percent from its pre-crisis level. Portugal also has obediently implemented harsh austerity - and is 6 percent poorer than it used to be.

Why so many economic disasters in Europe?

Yes, the Greek government borrowed too much. But the Spanish government didn't - Spain's story is all about private lending and a housing bubble. And Finland's story doesn't involve debt at all. It's about weak demand for forest products and the stumbles of Finnish manufacturing, in particular of Nokia.

What all these economies have in common, however, is that by joining the eurozone they put themselves into an economic straitjacket. Finland had a severe economic crisis at the end of the 1980s - much worse, at the beginning, than what it's going through now. But it was able to engineer a fairly quick recovery in large part by sharply devaluing its currency, making its exports more competitive. …

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