Europe, Heal Thyself

Despite sufficient economic resources, EU leaders have failed to come up with a solution to the eurozone debt crisis and are now seeking external aid. But Europe’s policymakers cannot offshore a problem that Europeans can and must address by themselves.

BRUSSELS – European policymakers like to extol the strength of the eurozone: relative to the United States, it has a much lower fiscal deficit (4% of GDP, compared to almost 10% for the US). Moreover, unlike the US, the eurozone does not have an external deficit, which means that the monetary union holds enough savings to finance all of its members’ budget deficits and resolve their debt problems.

But, despite this relative strength, the European Union’s leaders seem incapable of resolving the eurozone’s sovereign-debt crisis. Despite meeting after meeting, heads of state and finance ministers have failed to reassure markets. Now, Europe’s policymakers are appealing for help from the International Monetary Fund and Asian investors.

This appeal for outside help is misguided, given the reasons why the euro crisis has gone from bad to worse, despite the EU’s abundant resources. The key problem is the distribution of savings within the eurozone. The countries north of the Alps have excess savings, but Northern European savers do not want to finance indebted Southern European countries like Italy, Spain, and Greece.

To continue reading, please log in or enter your email address.

To access our archive, please log in or register now and read two articles from our archive every month for free. For unlimited access to our archive, as well as to the unrivaled analysis of PS On Point, subscribe now.

required

By proceeding, you agree to our Terms of Service and Privacy Policy, which describes the personal data we collect and how we use it.

Log in

http://prosyn.org/NAix32H;

Cookies and Privacy

We use cookies to improve your experience on our website. To find out more, read our updated cookie policy and privacy policy.