EMU går i graven.

Det är bättre att bryta upp eurosamarbetet än att låta det fortsätta på inslagen väg. Det sade Nobelpristagaren Joseph Stiglitz i en intervju med Bloomberg TV.

Han anser att det skulle behövas en bankunion men är oroad för att det nog inte finns tillräckligt med politiskt stöd för att få eurosamarbetet att fungera.

..Stiglitz contends that our depression at the end of the 19th century was linked to the gold standard - with no new large discoveries of gold, its scarcity led to a fall in the prices of ordinary goods in terms of gold.
..The gold standard is also widely blamed for deepening and prolonging the Great Depression - those that abandoned the gold standard early recovered more quickly.

...In spite of this, Europe decided to tie itself together with a single currency, creating within Europe the same kind of rigidity that the gold standard had inflicted on the world. Worse yet, the structure of the Eurozone built in certain ideas about what was required for economic success - that the central bank should focus on inflation, ignoring unemployment, growth, and stability as well, as does the Federal Reserve.

...Stiglitz also contends that the European Central Bank's monetary policy and the macroeconomic policies imposed by the official creditors on crisis countries have been largely responsible for the economic damages done. Tightening monetary policy during the credit crunch following the 2008 crisis, along with the imposition of sharp fiscal deficit cuts threw the Eurozone into a self-inflected second recession in 2011-12. In Greece, for example, measures intended to lower the debt burden have left it more burdened than in 2010 - the debt-to-GDP ratio has increased from 117% when the crisis began to 177% today. Many Germans insist it was hyperinflation that led to Hitler, and so tend to support central bank policies that guard against that problem rather than the more worrisome spector of joblessness - thus, Germany is the problem, not Greece.

..Bottom-Line, per Stiglitz: The Euro has failed to achieve either of its two principal goals of prosperity and political integration. European countries now view each other with distrust and anger.

Paul Krugman Is Entirely Right About The Disaster That Is The Euro

It is, of course, entirely possible to take different positions upon the euro and the eurozone. People do take different positions so obviously it is possible. However, when you look at the economics of matters it’s very difficult indeed to take any position than just the one: that it’s a complete disaster which never should have been done. Paul Krugman points this out very nicely here:

There are two narratives about the euro crisis.
One – favored by English-speaking economists, including yours truly – sees it all through the lens of optimum currency area theory. Basically, shocks happen, and when you establish a common currency without a shared government, you give countries no good way, fiscal or monetary, to respond to these shocks.

The other narrative, however, favored by Berlin and Brussels, sees the whole thing as the wages of sin. Southern European countries behaved irresponsibly, and now they’re paying the price. What everyone needs to do, they say, is institute a reign of virtue, of fiscal responsibility with structural reform, and all will be well.

..the reason for the eurozone crisis is not that the Greek government spent like sailors on an endless run ashore, although they did. That’s just the specific example of a much more general case. As Krugman points out, Finland has done absolutely nothing wrong at all, it’s just been a bit unlucky. Nokia imploded at about the same time that the forestry business went a little out of fashion. Now it has a good position as the number two sick man of Europe and it doesn’t have the fiscal or monetary tools to get out of it.The Netherlands similarly hasn’t done anything wrong in an economic sense but looks as if it’s about to get into trouble.

..as long as the currency area is too large to be optimal there will always be candidates for the sort of economic disaster being suffered by Greece, which Spain has been through, and Finland might be just starting.

Or, as we might put it, the euro itself was a ghastly mistake and needs to be unravelled as soon as possible.

The Euro: How a Common Currency Threatens the Future of Europe

..THOSE in search of an antidote to the anxieties that arise from Britain’s vote to leave the European Union should avoid the latest book from Joseph Stiglitz

..on its current course, the euro is certain to fail—and indeed, that it was fatally flawed from birth. It entails a fixed exchange rate and a single interest rate for its members, which means countries must forgo the option to devalue in times of economic weakness. To make up for that loss, the euro’s architects should have created institutions, such as jointly issued bonds, mutual backing of bank deposits and a common fund for unemployment insurance, so the costs of righting each economy are shared. Instead the burden falls on individual countries through austerity policies, such as tax rises and wage cuts.

...There is still time to put in place better policies, thinks Mr Stiglitz. But an amicable divorce would be preferable to the current situation, which puts the considerable achievement of European integration at risk.

.. Mr Stiglitz rightly takes issue with the blame-the-victim analysis of the euro’s failings that is commonly heard in Germany. The persistent trade surpluses of Germany and the vast deficits of boomtime Spain, Portugal and Greece are two sides of the same coin. Indeed, in a world short of aggregate demand, German thrift is the bigger failing, argues Mr Stiglitz

...on the essentials, he is surely right. Without a radical overhaul of its workings, the euro seems all but certain to fail.

..There is an argument that even if the euro was a mistake, the costs of breaking it up may be so severe that it is worth pushing for a reformed euro rather than pursuing what you call an ‘amicable divorce’. Are the benefits of a properly functioning euro worth the costs to get there?

You are right. The question of whether you should form the union is different from whether you should break it up: history matters. I think it’s pretty clear now that it was a mistake to start the euro at that time, with those institutions. There will be a cost to breaking it up, but whichever way you look at it, over the last 8 years the euro has generated enormous costs for Europe. And I think that one could manage the cost of breaking it up and that under the current course, the cost of keeping the Eurozone together probably exceeds the cost of breaking it up.

..If we accept that the euro was a failure, was this primarily a political or an economic failure?

It’s clearly a political failure in the following sense: it was motivated by politics. There was no economic imperative to create the euro. It was motivated by politics, but the politics were not strong enough to finish the job

...You’ve had really big jobs, you’re around influential people. People whose opinions matter. How do ideas like this that are not backed by theory or practice, how do they get stuck in people’s heads?

That’s a good question. And one that I’ve puzzled a lot about. The first thing that really struck me when I went from academia to the White House was that there was almost no one with a scientific background. They were lawyers. And very, very few of the lawyers had majored in any science.

... in the White House my buddies were the people from the White House office of science and technology policy. But a lot of the people were lawyers. They like winning an argument, but science-based, evidence-based reasoning was just sort of not in their framework.

...Let’s turn to Brexit. In the context of the intransigence you see from European leadership with regard to the euro zone crisis, how does it fit in?

It fits in several ways. First, obviously, they’re very interdependent. If the Brexit leads to a weaker UK economically, it’s going to lead to a weaker EU and vice versa.
But the way the euro zone handled Greece and Spain was not a manner which would lead one to say, “I want to be a part of that club.” Do I want to be tethered to an economic club where Germany seems to be dominant and so insensitive to democracy and democratic processes in other countries?
That also fed into a perception that the Conservatives have fostered in the UK, of European bureaucrats being very rigid. I think an example of that kind of rigidity that we saw after was European Commission president Jean-Claude Juncker’s response to the question of what kind of negotiated agreement [would occur.]
His response was in part, “We’re going to be very, very, very tough with the UK, because we want to make sure that no one else leaves.” But [member states] should believe that the EU and the euro zone are bringing such benefits that no one would want to leave! If the only way you can get people to stay in is to say, “If you leave things will be so miserable. We caught you in a cage and we’re not going to let you out,” that’s not a way you sell.
Especially a project that was supposed to be about democracy.
About democracy, about prosperity, and about solidity. It says, “We have no solidarity. We don’t pay attention to democracy. And we know our system is not working and the only way we can keep you in is by threatening you.”
To me, that response was symbolic of why the EU is not working.

Det är en tidsfråga innan eurosystemet kollapsar, varnar Joseph Stiglitz, som för 15 år sedan fick ekonomipriset till Nobels minne. Han varnar samtidigt för sänkta lägstalöner för att få in nyanlända på den svenska arbetsmarknaden.