1. March 16, 2012 at 3:54 pm

    Really good summaries. It’s a shame countries are just bundled together into winners or losers, everyone has to take responsibly for the massive imbalances in Europe.

    As a student myself, I think your students should love it.


  2. March 16, 2012 at 7:42 pm

    “What makes it sad, besides scary, is that behind these curves there are people’s lives.” Yes, indeed, lives that are getting harder and harder to live.


  3. Artyom
    March 23, 2012 at 8:36 pm

    Really nice piece of analysis! I am do completely share your opinion on the fact that current EU measures are pushing Greece into a debt pit it might not be able to get out for the next decade.

    On the other side, I am not quite sure that I can agree on your statement that there was no macro political mismanagement:

    1) The first graph, in fact doesn’t show a clear correlation between not sticking to Maastricht criteria and being considered a troubled economy (PIIGS). Though, it misses one very important factor, which is countries’s competitive strength. All of countries in question had major internal deficiencies ( be it strong dependence on one sector as in Greece, chronicle cronism coming from Berlusconi times as in Italy, or huge unemployment rates as in Spain.

    2) The second chart is very illustrative of this, as lack of monetary mechanisms to support countries’ competitiveness on external markets (e.g. through weaker exchange rate) results in significant trade deficits.

    So, in my opinion, considering it as “partners who help each other” is pretty much comparable to old socialist dream: “From each according to his ability, to each according to his need”. Which basically cannot function in market place.

    Just to wrap up my comment. I think the bad guys are those, who running a small open economy such as Greece with major trade deficit continued to pile up debt to support internal consumption and private well being of citizens without thinking about the consequences. Unfortunately, they are not the ones who are getting punished right now by the measures taken!


  4. March 24, 2012 at 10:37 pm

    @Artyom, I am unsure I disagree with you. You have a point; another common feature of troubled countries is the appreciation of their real exchange rate, via inflation. And certainly, bottlenecks and rigidities have played a role. Yet, a major factor is in my opinion the inflow of capitals from core EMU countries that followed the inception of the euro. This led to excess demand, inflation, increase of imports, and hence to the second chart (current account deficits). This helps me making my the point that austerity is crazy because it kills growth, but also because it imposes the burden of adjustment on the periphery alone, when it should also be on surplus countries. Thanks for your comment!


  1. March 19, 2012 at 4:13 pm
  2. April 5, 2012 at 10:40 am
  3. September 5, 2013 at 1:44 pm
  4. February 28, 2014 at 2:45 pm
  5. May 9, 2014 at 6:38 pm

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