I like Shillers' unorthodox approach. But he is wrong in a fundamental point. We don't count debts in GDP per year, because our thinking is "in years", but because interest capitalizes after 365 days. So a year has "a particular economic significance".
I agree, that the 100%-threshold is - to a certain extent -irrational. But is Mr. Shiller willing to lend his money to an economy, which is not competive and which has already accumulated a huge debt-burden ?
I am convinced, that the EU and the Euro are the right strategy for all European countries. However, when I read the words from Mr. Trichet about how many jobs the EU created over the last decade, I'm getting doubts, that we have had the right leaders on board of this project. Under the leadership of Mr. Trichet, billions of cheap ECB money was pumped into the Spanish real-estate market and "created jobs". Today the world is in trouble, because we have difficulties to find a way out of this mess.
The longterm solution for Europe and particularly for the countries in the periphery is, to become more competitive. In these days we can read a lot of wise articles about higher inflation and similar "artificial" solutions. But as long as the "product" is not competitive in terms of quality, price,.... there will be no real solution.
The article from Mr. Walter is encouraging. As one of the brightest economists in Germany and Europe he doesn't line up with the pessimistic views of Mr. Sinn and the likes. He decided to give a positive, but still realistic answer to the challenges we are facing in Europe. He is right in many ways and I want to remind all Euro-pessimists, that the income/productivity/..-gaps between Maryland and Mississippi (who are both in one Currency-zone) are wider than between Greece and Germany.
Europe needs to drive for stronger integration, improve competitiveness through structural reforms, etc. The current process is a tough one, but we will become the best-performing regions in the world.
The man who threw stones on policemen in the seventiees, now wants to throw German money upon the European crisis. Will this help anyone ?
Some fourty years ago, many policemen were injured seriously, but the taxi-driver made a great career by surfing the wave of the Green-party movement. He named himself the last rockstar-politician, what describes very well his provoking style.
Fischer was Vice-Chancellor in the Schröder-government, which made important labour-market and pension-reforms. These reforms together with the wage restraint of the unions (German real wages and salaries were flat to negative during 2003 – 2009) are important fundaments of the current strength of the German economy.
However, it was the Red-Green Government, which had Germany break the so called Maastrich-criteria (EU-Budget-deficit restrictions, price-stability,...), once “imposed” by Germans. The repeated violation of the Maastricht-criteria by a German government from 2002 through 2005, had no consequences other than the effect of the “bursting of a dam”. Who should care, if the Germans don´t care anymore ? And the criteria were broken in times when there was no need, but rather the opportunity to reduce deficits.
To a high extent driven by the above mentioned reforms, the productivity of the Germany economy soured during the last decade, whilst the one of the countries in the periphery dropped significantly. The German real wages and salaries remained unchanged, but the Greeks, Italians, Spanish became richer and richer or in other words less and less competitive. Since the introduction of the Euro, the Southern-European not only enjoyed raising incomes, but interest rates were so low as never seen before. Who will travel to Greece, when comparable seaside-tourism costs so much less in Turkey ?
And now Germany (I guess with other “Northern European countries”) should pay the price for this lost paradise ?
In Europe we are at the Cross-roads: Either we learn from this crises, strengthen ourselves or all of us will end up in a disaster. The answer to the rather complex situation is not as easy as the EU-romantic Mr. Fischer believes: You can´t resolve deep structural and demografic problems, which we have in many European countries, by simply pouring German money into the system. When my kids are sick, I first and foremost believe in the strength of their nature, the sickness will mobilize their immun systems. But sometimes this is not sufficient and you need some medicine. The economy works in a similar way and comes in combination with the Schumpeter law of “creative distruction”. Thus, it will be important to find a good combination of reducing the costs of government, finding good answers for demografic problems and to reduce labour-market rigidities and at the same time strenghten innovation !
Of the countries currently in focus of the markets, particularly the Italian and Spanish governments are working seriously to move their countries into the right direction. It is a difficult uphill battle for Monti and Rajoy, but I´m certain if Europe works together more closely, the European Union can still become a great success.
I just don´t see Mr. Barrosos´and Mr. Rompuys´ passivity to vanish soon, Therefore, the European nations have to make a big step forward into more integration if we want to have a common future. Germany as the todays´ powerhouse of Europe can and will lead this process.
We have to leave the distructive forces (Anti-German reflex vs the German superiority-complex, the Mafia and Berlusconism in Italy,..) behind us and release our common spirit of innovation. Europes´ future should be built on the long history of its´ inventitve talent (da Vinci, Galilei, Marconi, Siemens, Kepler, Watt, Newton, etc). We have to stop pouring our monies into rotten banks, inefficient governments, etc. but instead push for better education and more innovation and make Europe the most competitve continent in this world.
Let´s build our future on our strenghts, we still have the best pre-conditions !
I´d have expected the (former) green politician Fischer to push for green-investments to get Europe up to speed for the future, but dumping German money upon paralized countries, would be very stupid and would make the situation even worse.