Charles Goodhart and Sony Kapoor have a really good article here.
Author: Kevin O’Rourke
If true this is madness. It can’t be true, surely: can it?
Dublin is lobbying Paris against pushing for changes to the core treaty text or anything that could be considered “constitutional” in character and require a second Irish referendum for ratification.
Source: here.
In the Irish Times, Michael Noonan is quoted as saying:
“On next year’s profiles we’re looking at 2.2 per cent of growth in GDP. The uncertainty caused by a No vote will cause that to come down and consequently that would make my job more difficult in planning the next budget. I don’t want to be put in a position where we have to increase the pace of the correction and, simply, the electorate are entitled to that information.”
I am curious. Am I the only one who thinks that plus 2.2 per cent is wildly over-optimistic, unless there is a radical change of direction in Eurozone macroeconomic policy?
When teaching economic history a question that frequently arises in the classroom is: do governments make policy based on interests, or do ideas also matter? Is it the case, as George Stigler once wrote about the UK’s move towards free trade in 1846, that
Economists exert a minor and scarcely detectable influence on the societies in which they live. . . . If Cobden had spoken only Yiddish, and with a stammer, and Peel had been a narrow, stupid man, England would have moved toward free trade in grain as its agricultural classes declined and its manufacturing and commercial classes grew
Or is Keynes’ famous line about ideas, written in the 1930s, and which is now such a cliché that I can’t bring myself to reproduce it here, more accurate?
This distinction between interests and ideas seems to me to be potentially quite important now, in the context of the EMU crisis.
You sometimes hear the argument made that in the final analysis, the Germans will give in on Eurobonds and the like, since the costs to them of allowing EMU to break down would be so enormous. This is an interest-based, rational choice prediction. But what if the Germans are advocating generalized austerity and internal devaluation in the periphery, not just because they don’t want to bail out other countries, or accept a higher rate of inflation in Germany, but because they genuinely believe that this is what is required in order to solve the crisis? What if they genuinely believe that there are no macroeconomic problems, only microeconomic problems? I think that there is plenty of evidence in favour of this view, and the German chapter in this book helps place it in its historical context. In this case, I don’t see any reason to be optimistic about where this crisis is heading: we can expect to see plenty more headlines about collapsing output, rising unemployment, and political radicalization in the months and years ahead, and eventually something will give.
Just because something is a cliché doesn’t mean it isn’t true.
In this interview, Mrs Merkel gives the forthcoming Irish referendum as a reason why the treaty should not be renegotiated.
Almost no-one in Ireland thinks this treaty is a good one, and that includes the people who believe that we have no realistic option but to ratify it. Indeed, almost no-one outside Germany seems to want it, including the governments who signed it. It follows that if M Hollande were to lead a push to have it renegotiated, we should support that effort. If our May referendum is an obstacle in the way of achieving that goal, we should postpone it.