Thursday, 10 October 2013
The Euro elite is clueless.
Four members of the Euro elite (details below in green) try to write an article in the Wall Street Journal. Get ready for a laugh.
They twice claim that the solution to the EZ’s problems is “competitiveness”. You’ve no doubt noticed politicians the world over continually wittering on about “competitiveness”, which is a good reason for being suspicious of the idea.
Anyway, the above four worthies seem to think that competitiveness for the EZ as a WHOLE is the solution: that is they make no mention of the particularly serious need for improved competitiveness in the EURO PERIPHERY. To put that more bluntly, competitiveness can improve by unprecedented amounts throughout the EZ, but that’ll do precisely nothing for the disaster that is Greece, Spain, etc.
To expand on that, if competitiveness for the EZ as a whole improves, that will create no extra employment in the EZ in the long run because the improved competitiveness boosts the EZ’s balance of payments position, and assuming it started from a balancing balance of payments, that imbalance has to be reversed at some stage: by boosting the value of the Euro relative to other currencies. So the EZ’s external position reverts to balance, destroying the jobs initially created by the above mentioned improved competitiveness.
Put that another way, any lack of competitiveness for the EZ as a WHOLE can be dealt with via a devaluation of the Euro.
Of course, improved productivity is BETTER THAN devaluation: improved productivity brings about a REAL INCREASE in GDP and living standards. But the point I’m making (to repeat) is that improved competitiveness for the EZ as a whole will do nothing for high unemployment rates in Greece and Spain.
The authors of the WSJ article were: Jeroen Dijsselbloem, president of the Eurogroup meeting of euro-zone finance ministers, 2, Olli Rehn, vice president of the European Commission responsible for economic and monetary affairs and the euro, 3, Jorg Asmussen is a member of executive board of the European Central Bank, 4, Klaus Regling, managing director of the European Stability Mechanism, and 4, Werner Hoyer, president of the European Investment Bank.