Is Europe Doing Everything Wrong?
Reviving the EU's peripheral economies - Greece, Ireland, Portugal, and Spain - requires euro depreciation, closing the inflation differential between the eurozone's periphery and core, and, in some cases, orderly debt restructuring. But EU policymakers have chosen to do precisely the opposite on each front.
BARCELONA – The countries on the so-called “periphery” of the eurozone (Greece, Spain, Portugal, Ireland, and perhaps some others) need to carry out complementary adjustments that are often discussed separately but actually need to be tackled jointly. Indeed, to restore these economies to health, three distinct types of adjustment are needed: between the eurozone and the world, between the eurozone’s periphery and core, and between debt and income in the heavily indebted peripheral countries, particularly Greece.
The solutions in each case are as clear as their implementation is complex. First, in order to relieve pressure on the peripheral countries (at least in part), the eurozone must export some of the needed adjustments through a significant depreciation of the euro, which is already taking place. This is the adjustment between the eurozone and the world.
BARCELONA – The countries on the so-called “periphery” of the eurozone (Greece, Spain, Portugal, Ireland, and perhaps some others) need to carry out complementary adjustments that are often discussed separately but actually need to be tackled jointly. Indeed, to restore these economies to health, three distinct types of adjustment are needed: between the eurozone and the world, between the eurozone’s periphery and core, and between debt and income in the heavily indebted peripheral countries, particularly Greece.
The solutions in each case are as clear as their implementation is complex. First, in order to relieve pressure on the peripheral countries (at least in part), the eurozone must export some of the needed adjustments through a significant depreciation of the euro, which is already taking place. This is the adjustment between the eurozone and the world.