SAN FRANCISCO: Hidden behind the euro's falling exchange rate is a life-and-death struggle between it and Europe's welfare state. Either the euro subverts the welfare state, or Europe's welfare state will subvert the euro. Despite today's weakness, smart money should bet on the euro.
The euro's disappointing performance - falling from a value of a $1.18 at its inception to a recent low below $.90 - is in large part due to Europe's reluctance to adopt structural reforms to increase economic flexibility. ECB Chief Economist Otmar Issing writes: "Germany and other European Union countries share the blame for the euro's weakness because they failed to make their economies more flexible."
But there is a world of difference between the euro's need to tame the welfare state and its ability to do so. Harvard economist Martin Feldstein, indeed, believes that "the single currency will be a political impediment to reform." "Politicians", writes Feldstein, "can now blame the ECB for high unemployment and complain that it is a powerful force beyond national control."
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It is hard to reconcile the jubilant mood of many business leaders with the uncertainty caused by the war in Ukraine. While there are some positive signs of economic recovery, a sudden escalation could severely destabilize the global economy, cause a stock market crash, and accelerate deglobalization.
warns that the Ukraine war and economic fragmentation are still jeopardizing world growth prospects.
The nation that went to the gates of Moscow in World War II has become as aggressive as a cuddly cat. But with its decision to send Leopard 2 battle tanks to Ukraine, Germany's "culture of reticence," particularly with respect to Russia, may soon be a thing of the past.
examines the origins and implications of the landmark decision to send battle tanks to Ukraine.
SAN FRANCISCO: Hidden behind the euro's falling exchange rate is a life-and-death struggle between it and Europe's welfare state. Either the euro subverts the welfare state, or Europe's welfare state will subvert the euro. Despite today's weakness, smart money should bet on the euro.
The euro's disappointing performance - falling from a value of a $1.18 at its inception to a recent low below $.90 - is in large part due to Europe's reluctance to adopt structural reforms to increase economic flexibility. ECB Chief Economist Otmar Issing writes: "Germany and other European Union countries share the blame for the euro's weakness because they failed to make their economies more flexible."
But there is a world of difference between the euro's need to tame the welfare state and its ability to do so. Harvard economist Martin Feldstein, indeed, believes that "the single currency will be a political impediment to reform." "Politicians", writes Feldstein, "can now blame the ECB for high unemployment and complain that it is a powerful force beyond national control."
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