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Tuesday, November 24, 2015

'Economists and the Eurozone: Wake Up Calls and Political Capture'

Simon Wren-Lewis:

Economists and the Eurozone: wake up calls and political capture: ... It is natural at this point to talk about Germany, and the fact that as a result of low wage increases undercutting Eurozone neighbours before the recession, Germany is not suffering as much from this recession as other countries. But I have often tried to avoid stopping there, and instead to ask whether Germany's strange stance on these macro issues simply reflects this different conjunctural position. I think the answer is no.

I'm increasingly drawn to the view that Germany's stance reflects similar political economy pressures as you will find in other OECD economies: there is no German exceptionalism, but rather that the forces that everywhere are pushing austerity and tighter monetary policy happen for various reasons to be stronger in Germany. From this perspective, this post from Frances Coppola is particularly interesting. Perhaps the problem at the heart of the Eurozone is that economic policy advice in Germany has been effectively captured by employers' interests, and perhaps the interests of banks in particular.

 Economic policy effectively captured by business and financial interests? That could never happen here...

    Posted by on Tuesday, November 24, 2015 at 10:11 AM in Economics, Politics | Permalink  Comments (130)


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