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Friday, May 23, 2014

Paul Krugman: Crisis of the Eurocrats

"The European project is in deep trouble":

Crisis of the Eurocrats, by Paul Krugman, Commentary, NY Times: ...It’s hard to imagine war in today’s Europe, which has coalesced around democratic values and even taken its first steps toward political union. Indeed, as I write this, elections are being held all across Europe ... to select members of the European Parliament. ... But here’s the thing: An alarmingly high fraction of the vote is expected to go to right-wing extremists hostile to the very values that made the election possible. ... The truth is that the European project — peace guaranteed by democracy and prosperity — is in deep trouble...
Why is Europe in trouble?
The immediate problem is poor economic performance. ... The inherent problems of the euro have been aggravated by bad policy. European leaders ... continue to insist, in the teeth of the evidence, that the crisis is all about fiscal irresponsibility, and have imposed savage austerity that makes a terrible situation worse.
The good news, sort of, is that despite all these missteps the euro is still holding together, surprising many analysts... Why this resilience? Part of the answer is that the European Central Bank has calmed markets by promising to do “whatever it takes” to save the euro... Beyond that, however, the European elite remains deeply committed to the project, and, so far, no government has been willing to break ranks.
But... By closing ranks, the elite has in effect ensured that there are no moderate voices dissenting from policy orthodoxy. And this lack of moderate dissent has empowered groups like the National Front in France...
So far,... the elite has been able to hold things together. But we don’t know how long this can last, and there are some very scary people waiting in the wings.
If we’re lucky — and if officials at the European Central Bank ... act boldly enough against the growing threat of deflation — we may see some real economic recovery over the next few years. This could, in turn, offer a breathing space, a chance to get the European project ... back on track.
But economic recovery by itself won’t be enough; Europe’s elite needs to recall what the project is really about. It’s terrifying to see so many Europeans rejecting democratic values, but at least part of the blame rests with officials who seem more interested in price stability and fiscal probity than in democracy. Modern Europe is built on a noble idea, but that idea needs more defenders.

    Posted by on Friday, May 23, 2014 at 10:40 AM in Economics | Permalink  Comments (52)


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