TCD Public Lecture: “How to Fix the Eurozone”

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Charles Wyplosz will give a public talk at noon this Wednesday in the Long Room Hub.  This is part of a TCD LRH/IIIS series running during Ireland’s EU Presidency.  Details here.

Wyplosz will also give a research seminar 9am-10.30am on Wednesday in IIIS seminar room on “Eurozone Crisis: It’s About Public Debts, not Competitiveness

27 Responses to “TCD Public Lecture: “How to Fix the Eurozone””

  1. Kevin Donoghue Says:

    “Eurozone Crisis: It’s About Public Debts, not Competitiveness” does invite invite the question, just what ‘It’ may be. Any explanation of why the Euro doesn’t seem to be working as planned ought to address the problem of how uncompetitive members are supposed to cope when exchange rate adjustments are impossible. Does Wyplosz really think that internal devaluation is still a viable solution?

  2. Michael Hennigan - Finfacts Says:

    Maybe when the choice is two factors. However, success or failure of an economy can seldom be distilled into a simple choice.

    The price can be right but others can sell a range of products and services that are more in demand.

    Greece’s FDI record is dismal compared with neighbours Turkey, Bulgaria and Romania.

    Factors like governance, ease of doing business, corruption and so on are all in play when choices are made.

    Greece does have modern ports and high quality infrastructure compared with its neighbours.

    Try and put all these factors into a model!

  3. OMF Says:

    Since the emergence of this crisis, anyone and everyone has jumped in with their own pet theory about what went wrong. A crisis of capitalism, the welfare state, globalisation, politics, competitiveness, etc, etc. But the author is right; this really is all about debt, and how our society deals with it.

    I’m tired of listening to older people going on and on about cold war shibboleths, and how we must all make whatever sacrifices are necessary to protect (their) pension funds. Anything to avoid the reality of how badly their generation has managed the world, and how much wealth has been destroyed by their incompetence.

    I believe the solution to debt is default. Bankruptcy, on both personal, corporate, and national levels will end this interminable debacle. States must default, banks and corporations must fail, individuals must declare bankruptcy and give up their house, and above all creditors must once and for all be forced to accept their losses. And I don’t care what happens to your pensions funds as a result.

    Bankruptcy is difficult; but Bankruptcy Ends. Can the same be said of present “solutions”?

  4. Brian Woods Says:

    @ OMF: “I believe the solution to debt is default.”

    This is so obvious that it will NEVER be implemented. it would make the current policy-makers and their academic advisors look like a bunch of ignorant twits. 8-)

    “I’m tired of listening to older people going on and on …”

    Er, some of us older folk have sufficient experience of previous heroic and successful economic failures that we recognize a resurrected, re-cycled, refurbished one straight off! Its not doom, gloom nor cynicism – just a weary resignation to reality! “Its f**king deja vu, – again! ”

    The Eurozone Crisis is about neither public debt nor competitiveness – but who cares? “When truth collides with fantasy – slay the truth!”

  5. Values at Risk Says:

    Really accessible paper. Thanks

    Herr Hans and himself are certainly not “sinning” from the same hymn sheet.

  6. DOCM Says:

    Wolfgang Munchau has a rather more topical take on the situation in today’s FT, with Italy as the demonstration case.

    http://www.ft.com/intl/cms/s/0/882bb27a-6166-11e2-957e-00144feab49a.html#axzz2IXg71bNh

    Notably;

    “Like the other countries on the eurozone’s southern rim, Italy faces three options. The first is to stay in the euro and take on alone the burden of full adjustment. By this I mean both economic adjustment, in terms of unit labour costs and inflation; and fiscal adjustment. The second is to stay in the eurozone, contingent on shared adjustment between creditor and debtor nations. The third is to leave the euro. Successive Italian governments have tried a fourth option – stay in the euro, focus on short-term fiscal adjustment only and wait.”

    He goes on to make the assumption that there has not been, and will not be, any “shared adjustment between creditor and debtor nations”.
    It depends, of course, on how one views the concept of adjustment. There is little evidence that there exists any form of economic policy adjustment in the creditor countries that would complement and offset the required adjustment in the periphery o, at least, Berlin does not think so.

    If. on the other hand, the issue is how the financial burden of the adjustment in the debtor countries is being distributed, it is simply not true to say that it is not being shared; very grudgingly admittedly but in a very substantial way nonetheless. If the argument is that the two debtor countries playing in the big league – Italy and Spain – are being left on their own, this also does not stand up to serious examination.

    Munchau rightly credits Draghi with the turn-around of the fortunes of Italy and Spain in the markets. Draghi’s success surely suggests that the EA has created de facto a LOLR through his solo run which no member state dare undermine!

    The politician most likley to try to do so – Merkel – has been shown by the results of the Lower Saxony elections once again to be incapable of translating her personal popularity into positive election outcomes for her party.

    Which way will she now hop?

  7. DOCM Says:

    FYI

    http://online.wsj.com/article/SB10001424127887324624404578253742994674914.html

  8. Fiatluxjnr Says:

    @DOCM
    “Munchau rightly credits Draghi with the turn-around of the fortunes of Italy and Spain in the markets. Draghi’s success surely suggests that the EA has created de facto a LOLR through his solo run which no member state dare undermine!

    The politician most likley to try to do so – Merkel – has been shown by the results of the Lower Saxony elections once again to be incapable of translating her personal popularity into positive election outcomes for her party.”

    Methinks you are reading too much into Draghi’s success…it could yet be derailed by Merkel and that Finnish guy…I note Jens is again criticizing the ECB. And didn’t the Free Democrats 9.9% share represent a huge miscalculation by that Scottish chap.

  9. Fiatluxjnr Says:

    @DOCM
    The perils of forecasting ……
    http://www.ekathimerini.com/4dcgi/_w_articles_wsite2_1_21/01/2013_479528

  10. DOCM Says:

    @ Flj

    As I have been informed by other contributors to this blog, the study of politics and economics parted company, apparently, some considerable time ago.

    I posed a question with regard to Merkel. She must be rather familiar with her opponents as Steinbrueck was her finance minister and his party colleague, the leader of the opposition, Steinmeier, was her foreign minister in the last German grand coalition government.

    Such a constellation can occur because of the corporatism inherent in the structure of the German economy (ably illustrated by Joerg Bibow).

    https://www.economist.com/user/3660236/comments

    The inevitable result of such a policy is the growing isolation of Germany in the international arena. This is something Merkel – a power-hungry political tactician and little more – can live easily with. I doubt if the majority of the (West) German electorate can. They have longer memories. (Steinmeier, for example, has been one of Merkel’s strongest domestic critics.) The question is whether this has anything to do with the outcome of the Lower Saxony election.

    The real test will come in the run-up to the federal elections if, as anticipated, there is a slackening in the German economy. How will the body politic react?

  11. David O'Donnell Says:

    @Our Man in Dubrovnik [aka Colm McCarthy – CYPRUS

    Troika Travails: Split Emerges Over Cyprus Bailout Package
    By Christoph Pauly, Christian Reiermann and Christoph Schult

    Cyprus is in urgent need of money from the euro rescue fund, but the troika responsible for the bailouts is split over how it should be structured. The IMF is worried that the country’s debt load is not sustainable.

    …’The IMF is demanding that the ESM step in to save Cypriot banks. Such a scenario would mean that Cyprus would no longer be solely responsible for paying back the €10.8 billion that has been earmarked for the country’s banks. Instead, the European bailout fund would have to share the risk. This would make it possible to put a more positive spin on Cyprus’ debt sustainability figures.’

    http://www.spiegel.de/international/europe/imf-and-europe-disagreement-could-delay-cyprus-bailout-package-a-878773.html

  12. David O'Donnell Says:

    @Lower Saxony

    Nice one!


    Opinion: Merkel’s Nightmare

    Things couldn’t be going worse for Angela Merkel’s Christian Democrats. The slim center-left victory in Lower Saxony bodes poorly for the conservative coalition in federal elections this autumn. Now the fight for the Chancellery will get more brutal than the incumbent German leader had imagined.

    http://www.spiegel.de/international/germany/spd-and-green-victory-in-lower-saxony-foretells-tough-fight-for-chancellery-a-878740.html

    :lol:

  13. Fiatluxjnr Says:

    Franco-German relations…..
    http://www.reuters.com/article/2013/01/20/us-germany-france-treaty-idUSBRE90J0CJ20130120

  14. Fiatluxjnr Says:

    @DOD
    Looks like Cyprus is not getting money anytime soon…
    http://www.guardian.co.uk/business/2013/jan/21/cyprus-bailout-delayed-eurogroup-juncker-dijsselbloem

  15. tullmcadoo Says:

    Grumpy Lab experiment may soon come to pass. If the FANGS insist on burning (Russian) deposits in Cyprus, we could have a crisis on our hands with the Bund below 1% and the Dax at 4000.

    That would be a real pity after all Draghi has done to buy space and time for the East German to drop the ball.

  16. Fiatluxjnr Says:

    So much for exiting the bailout.
    News tonight that we may extend the maturities of funds supplied from various mechanisms such as the EFSF…
    http://www.rte.ie/news/2013/0121/eurozone-esm.html

    Is this an admission?

  17. DOCM Says:

    @ Flj

    If it is an admission, it can only be that it is not possible to have glaringly varying loan conditions for beneficiaries from the EFSF/EFSM.

    Such a development has been on the cards since the most recent Greek bailout. You may recall that Schaeuble pushed the rather nonsensical line that it would not be in the interests of the two countries concerned – Ireland and Portugal – for them to push for similar terms.

    The EFSF is strictly the business of EA ministers as it is based on an arrangement outside the treaties. The monies under the EFSM, on the other hand, are raised by the Commission under the powers it has in respect of the EU budget. Changes require the endorsement of all 27 countries.

    It hardly matters in what area the Irish budgetary burden is eased. Fixation on individual aspects seems to have obscured this fact.

  18. DOCM Says:

    @ Flj

    The IT picks up on the Greek point, if indirectly.

    http://www.irishtimes.com/newspaper/breaking/2013/0122/breaking10.html

    The roadblock hitherto has, of course, been Germany. While one can only speculate, the outcome of the Lower Saxony elections may be being read as indicating that there is no real constituency in Germany for the sack-cloth and issues approach of Merkel.

  19. DOCM Says:

    Monti’s response to the Munchau article.

    http://www.ft.com/intl/cms/s/0/c421dcd4-60d3-11e2-a31a-00144feab49a.html#axzz2IXg71bNh

  20. David O'Donnell Says:

    fyi
    ‘Enough Sauerkraut and Beer’: France and Germany Celebrate 50 Years of Friendship
    In a SPIEGEL interview, French politician Jacques Delors and former German Foreign Minister Joschka Fischer discuss tight, but sometimes complicated, relations between their countries on the 50th anniversary of the Franco-German friendship treaty.

    On Tuesday, the 50th anniversary of the Elysée Treaty that normalized relations between Germany and France after World War II, will be celebrated with great pomp and circumstance in Berlin. The treaty was signed on Jan. 22, 1963, by then-German Chancellor Konrad Adenauer and General Charles de Gaulle. The German-French friendship treaty laid the cornerstone for rapprochement after the war as well as the foundations for European unification.

    http://www.spiegel.de/international/europe/jacques-delors-and-joschka-fischer-discuss-50-years-of-the-elysee-treaty-a-878755.html

  21. Fiatluxjnr Says:

    Minister Hayes is not going to speculate….but he does anyway..
    http://www.irishexaminer.com/breakingnews/ireland/tanaiste-time-running-out-to-agree-promissory-note-deal-582040.html

    I’m wondering how we will save billions if we extend the loan period for, say, 10 years and pay interest even at a reduced rate.

    And can extending the bailout be classified as “exiting”.

  22. Michael Hennigan - Finfacts Says:

    @ DOCM

    As regards Monti and Manchau, it should be acknowledged that the most comfortable position is that of the hurler on the ditch.

    Manchau’s game of public chicken assumes that Merkel would have folded.

    There is a current such game in the East China Sea, even though both countries risk huge economic damage from a war and wish to avoid one.

    As regards elections, the most likely development from an SPD-Green win in Germany would be marginal change.

    Where are all the people who thought Hollande could restore growth in Europe — even though he likely expected that he would have a bigger impact?

  23. Tim O'Halloran Says:

    @OMF
    “I’m tired of listening to older people going on and on about cold war shibboleths, and how we must all make whatever sacrifices are necessary to protect (their) pension funds. Anything to avoid the reality of how badly their generation has managed the world, and how much wealth has been destroyed by their incompetence.”

    You are right that younger people will be the main victims of neo-liberalism but wrong in blaming the pension age generation. That generation are least likely to have embraced the lunacy of Thatcherism.

    You are wrong if you think the present crisis is about preserving the pension pots of ordinary people. If you want to give a euro to a pensioner you give a euro to a pensioner, you don’t give a euro to a pensioner and 10 euros to George Soros. When the elite say they saved the banks to save pensioners that was all spin. Most of the investmants ‘saved’ by the taxpayer belonged to very rich people, not ordinary pension funds.

    It is younger people who have been like turkeys voting for Christmas for decades now. Even now , when the few that are clued in are staring at the abyss of a dismal economic future for themslves, they will not return to post-war values, to social democracy. They will not join trade unions, though its clear that employers will shortly return to pre-trade union practice of shedding people when they reached their mid-forties.

    Despite generations of peace, unparalelled scientific and technical advances, people under 35 face living standards far below their parents, without proper jobs, without any rights against their employers, basically without any self respect. And yet they cannot bring themselves to admit that it is their own craven subservience that has handed their futures over to sociopathic kleptocrats.

    Still young people (like yourself I suspect) cling to their hero worship of Bill Gates and his likes. Can any decent person look at Enda Kenny fawning over Gates in todays IT without heaving? This is what neo-liberalism has brought us to . This is the result of the bilge dished out to students by the academic members of this forum.

  24. bazza Says:

    @MH

    It seems that whenever someone has an opinion that is inconvenient you brand them as a hurler from the ditch.

    Munchau has been consistent and (in my view) correct in his assessment of Monti. Just because you don’t agree with his assessment doesn’t mean you can dismiss him as being a hurler from the ditch. That’s from the Bertie Ahern school of debate – tell them all to go and commit suicide.

    I know you usually defend your position with a barrage of facts and figures in insignificant detail e.g. on the sales of bicycles in Italy. Yes, facts are important, but just because something is a fact does not mean that it is relevant.

  25. Michael Hennigan - Finfacts Says:

    @ bazza

    I used the term ‘hurler on the ditch’ just to make the contrast with the more difficult role of being in the arena.

    The comparison with the abuse using a serious subject such as suicide, is simply stupid — excuse the alliteration.

    Münchau’s argument that Monto should have made ‘euro membership conditional on symmetrical adjustment’ assumes that Merkel was in a position to deliver on the threat.

    Keep an eye on the Tea Party Republicans’ games of chicken in Washington.

    How interesting that you have kept that past reference to the sales of bicycles in Italy in your little brain — even though insignificant!

  26. John Corcoran Says:

    http://www2.lse.ac.uk/newsAndMedia/videoAndAudio/channels/publicLecturesAndEvents/player.aspx?id=1716

    In the above LSE podcast titled “European Deadlock-Finding a path out of the crisis” Professor Luis Garicano,Professor Wouter Denhaan,Professor Paul de Grauwe and Profesor John Van Reenan discuss.

  27. Brian Woods Snr Says:

    TO’H: “Despite generations of peace, unparalelled scientific and technical advances, people under 35 face living standards far below their parents, without proper jobs, without any rights against their employers, basically without any self respect.”

    ” … people under 35 face living standards far below their parents …”

    Correct. Unfortunately this was apparent (if one thought carefully enough about it) about two decades ago. Seriously! – I recall having at least two longish conversations about it. The concern is that ‘they’ will lash-out at our existing political parties (and with justifiable cause) and end up supporting the even more conservative Irish National Socialist party (aka: SF) in the mistaken belief that this party will ‘save’ them. I shudder to think what they might do once they realize their second mistake.

    The Eurozone reminds me of a hybrid machine – whose components, fixings and tolerances are part imperial, part metric, part left-hand tread, part right-hand. Maintenance is a maddening affair. And as for replacement parts …. !!! – though the machine does appear to have considerable scrap value. 8-)

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