A nice piece by the Guardian’s economics editor Larry Elliott on the seemingly neverending tragedy of the (lack of) progress of the Greek economy. As he describes, Germany is refusing to follow EU rules and reduce its large current account deficit by boosting domestic demand, which would help Greece grow, rebalance and reduce its debt burden alongside its mountain of unemployment.
In the absence of a eurozone fiscal union, which seems unlikely, Greece can only come out of its nightmare, with all the mass human suffering that entails, if the eurozone countries running current account surpluses change course. The current ‘reforms’ in Greece will not do the trick in the absence of changes in the macroeconomic environment created at least in part by the policies of its neighbours. This is not about the lack of economic solutions, but of political and popular will.
Here is what would surely be an appealing narrative for ordinary Germans: how would you like a wage rise, and better public infrastructure, with the knowledge that this would help not only your fellow countrymen but also your southern european neighbours and in the process reduce their debt burden without you having to bail them out any further? Sound good? With support for the right economic policies, this much is possible.