'Single currency experiment has been a disaster' admits Nobel Prize-winning economist Joseph Stiglitz in The Euro
By Liam Halligan
"Europe, the source of the Enlightenment, the birthplace of modern science, is in crisis.” So says Joseph Stiglitz, Nobel Prize-winning economist and sometime chairman of President Bill Clinton’s Council of Economic Advisors.
“Large parts of Europe” have endured “a lost decade”; incomes per head are “lower than before the [2008] global financial crisis”. While Germany is doing “relatively well”, there’s “soaring youth unemployment” in France, Italy and Spain. “In a well-functioning economy, there’s rapid growth, the benefits of which are shared widely,” Stiglitz writes, but “in Europe we see the opposite”.
So what, he asks, is the “big policy problem”, Europe’s “one underlying mistake”? To some, his conclusion may be surprising. For
Stiglitz points his finger squarely at “the fatal decision to adopt a single currency, without first providing the institutions to make it work”.
In his highly readable The Euro: How a Common Currency Threatens the Future of Europe,
Stiglitz judges this 17-year-old monetary experiment “an economic and political disaster”. “Flawed at birth,” he argues, the “structure of the euro is to blame for the poor performance of Europe, its successive crises and increased inequality.” Far from promoting European prosperity, peace or influence, it has “tied together” countries with vastly different economic and social backgrounds, denying them the vital ability to manipulate their exchange and interest rates.Stiglitz explains how the dollar operates smoothly across America’s 50 economically diverse states, noting “important adjustment mechanisms” such as large interstate tax and benefit transfers, and the common language, which helps workers find employment in different states. The euro, on the other hand, “was created in a way that sowed the seeds of its own destruction”.
Taking the side of smaller countries like Portugal and Greece, Stiglitz says it’s “impossible” for such nations to thrive under the euro, given “neoliberal, market-driven policies” emanating from Berlin and Brussels. “Germany and others have sought to blame the victims,” he says, “countries that have suffered due to the flawed structure of the eurozone.” Of the ongoing battle between Greece and its eurozone creditors, Stiglitz describes the decision to force Athens to rein in its deficit by increasing taxes and cutting spending as “wrong, destructive and almost unbelievably narrow-minded”.
http://www.telegraph.co.uk/books/what-to-read/single-currency-experiment-has-been-a-disaster-admits-nobel-priz/What's your opinion?
