Comments 7

Das falsche Versprechen eines Eurozonen-Haushalts

Dec 6, 2012 Daniel Gros

BRÜSSEL – Für die vier Präsidenten der wichtigsten europäischen Institutionen (der Europäischen Kommission, des Europäischen Rats, der Europäischen Zentralbank und der Eurogruppe), die derzeit ihren Bericht vorbereiten, wie die Gemeinschaftswährung reformiert werden kann, stellt sich eine Schlüsselfrage: Braucht die Eurozone einen eigenen Haushalt?

Ihnen wird das Argument entgegengehalten, dass die Währungsunion in den Vereinigten Staaten viel besser funktioniert, weil es dort einen großen Bundeshaushalt gibt, der die Auswirkungen von asymmetrischen Schocks ausgleicht, das heißt von Schocks, die einzelne Bundesstaaten betreffen. Die Eurozone, so wird behauptet, sollte ihren eigenen Haushalt haben, um ihren Mitgliedern eine ähnliche automatische Versicherung zu bieten.

Dieses Argument stellt die Erfahrungen in den USA jedoch falsch dar.

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Daniel Gros

Writing for PS since 2005
106 Commentaries

Daniel Gros is Director of the Brussels-based Center for European Policy Studies. He has worked for the International Monetary Fund, and served as an economic adviser to the European Commission, the European Parliament, and the French prime minister and finance minister. He is the editor of Economie Internationale and International Finance.

0 Comments on this paragraph, 8 in all 8 Comments on this article

andrea naldini Dec 11, 2012

who has said that a EU budget should reduce asymmetric shocks? Can not it redistribute income? Can not increase demand, employment and living conditions? can not reinforce green economy?
Other instruments target asymmetric shocks (coordination of iscal policy, monetary policy)-
What strict thinking!
- Jose araujo Dec 12, 2012
  
  Its because of people like Daniel Gros, that we are in the situation we are, they are so blind with their Dogmas that they refuse to see even the simple things.
  
  If unemployment and health benefits comes from a "federal Budget" how can Daniel Gros claim that federal expenditure has low sensitivity to business cycles.... ABSURD and a LIE
  
  For sure if, like in the US unemployment and health is private, the federal budget won't react, but that because US economy lacks automatic stabilizers.
Jose araujo Dec 10, 2012

Yes the New Deal and the auto industry bail-out were big fat liberal lies, and yes what causes structural unemployment in Spain are rigid labor laws.....

Its because of people that think like this that we are in the situation we are.

Yes expansionary austerity was the way to go, with some luck maybe Santa Claus will help us Europeans, well Daniel Gross probably doesn't believe in Santa, but for sure he believes in magical creatures like confidence fairies and full employment
Jose araujo Dec 10, 2012

So lets see if I got this right, an Pan European unemployment fund, wouldn't work because it doesn't work in the US?

And it doesn't work in the US because its at federal level, or because US don't have unemployment benefits just like we do?

The author forgets US economy lacks most of the "shock" absorvers we Europeans have in place, and that's why federal budgets have lower impact, yet they do impact, specially in historical episodes like the new deal and others.

Off-course for supply sidders and neoclassics, the Eurozone Budget ould have no impact, but for Keynesians, this would be a major tool not only to get us out of this crisis, but to ensure sustainable Europe.

Unfortunatly we have been living, and are a product of this dogmatic doctrines, who although having been proved wrong ad nausea still are the major doctrine in European policy.

Just a final note so say the natural adjusters in US economy and by design much more of a private nature then in Europe. In the US health plans and retirement plans are mostly private, while here they are public, so before saying this model is of no good because it doesn't work in the US, I would want to see how did the insurance companies and banks behaved from state to state.
Carlos Trujillo Dec 8, 2012

I do not know enough about the American system for interstate compensation regarding revenue / expenditure, or federal unemployment aid. However it seems clear that a compensation system has the great advantage of uncoupling expenditures (high or low, it is not the biggest matter) in crisis areas, from revenues from these same areas, which are obviously very deteriorated. Although no increase was done, just the fact of maintaining and securing them is already a great help for a crisis area.
Regarding the risk of compensating guilty high unemployment areas, for which Spain is given as an example, two remarks must be made. The first is that it is in fact true that the Spanish labor market is inflexible, and that this is probably hurting productivity. The second is that there is no evidence that this lack of flexibility has the responsibility for the chronically high unemployment.
Between 2000 and 2007, the Spanish population increased by 11.5%, and its active population by 23.3%. Between those years unemployment went from 13.9 to 8.3% of the active population. Spain suffered two parallel phenomena, massive immigration, and a very significant and simultaneous increase of its active population ratio. It is also clear that the rate of job creation was far superior to these increases, as evidenced by the decline in unemployment. So, we are facing a structural phenomena, but that has nothing to do with labor rigidity, and is probably due to the late arrival of Spain to the usual rates of immigration, and of active population, in Western Europe.
Regarding the regional banking crises, situation is also clear, at least for the Spanish case. The European authorities are trying by all means that what should have been a private bank failure with European implications, be assumed by Spanish taxpayers.
Who was risking his money in the Spanish real estate stupid adventure? Clearly the Spanish “Cajas” (and partially also banks), but do not forget that they were funded by their German colleagues. What would have happened if we left things to go by its natural way? Of course the Spanish government would have had to respond for the Spanish bank deposits, but German banks would have had to take also their share of losses (fully justified, business is business), and perhaps also need the help of the German government. Instead we are seeing how the debts are transferred to Spanish taxpayers, and also, although to a lesser extent, to the Europeans taxpayers.
I fully believe that if we are to build a strong Europe we need a common banking system. But what is most needed nowadays is to stop the great manipulation of the public opinion that is taking place at European level, and whose sole purpose is to maintain an unfair situation that also will prove unsustainable.
Carol Maczinsky Dec 8, 2012

The impression I get depite the cry and hue is that the market bets that Merkel wins, and she is willing to sustain the Euro. So we will see a shift to ordoliberalism in the Union.

"But how can one explain the fact that the global financial crisis led to no regional banking crises in the US"
Lehmann? Actually the governments' countermeasiures are like cortison. Not really healthy. We will see how the ship is going to burn down.
Joshua Ioji Konov Dec 7, 2012

A comprehensive article indeed. The EU 's problems are deeply incremented into a beaurocratical system whereas the governments are these that run the economy... the transmissionability of the EU economy is very limited too - in some countries bottom down. Programs and subsidies are politicized yielding to corruption by the officials. Large corporations are given immense powers by in some EU states intentional lack of consumer protection and labor protection, that basically open the gates for predatory and corruption practices. One word, the EU some governments are managing large parts of their economies that was given by the EU government, whereas the labor market was crashed by the recessionary forces and income has fallen. To suggest that farther EU centralization and power consolidations by Brussel that would allow more liquidity into the system to promote economic growth is incomprehensible... the EU needs some fundamental may say ideological changes to make the system work and lower interest liquidity is just one of them. What about the centralization, it may have a positive effect only if consumer and labor protection apply equally to all parts of EU and local governments are discharged from running the show by using neutral agents such as commercial banks e.g.
John Brian Shannon Dec 6, 2012

Hi Daniel,

I enjoyed reading this article and agree almost completely.

Your question in paragraph 12 has an easy answer;

The reason there were no parallel banking crises in the U.S. is that no serious real-estate bubble burst (when expressed as a percentage of GDP) here in North America, while in Spain, the huge real-estate bubble burst in a spectacular fashion!

This is just a matter of bad timing for Spain and of good timing for the U.S. Also, profoundly, Spain could not print more currency and the U.S. could.

The amount of exposure by Spanish banks on account of unemployed's is very low, even while the unemployment rate is approaching 30% -- not all that far from normal levels in recent years, by the way.

At the same time, the amount of exposure on account of a drastic fall in real-estate prices there, is extremely high. (Higher than Spain could afford to cover -- as it turned out, which required a voluntary Eurozone bailout)

If it ever occurs on a macro-scale, the mother of all depressions will be caused by a burst real-estate bubble -- as the exposure by banks to all mortgages (consumer, commercial & industrial) exceed their assets and could conceivably exceed the ability of governments to cover, in order to prevent default.

Yale University economist Robert Shiller warned us in August, 2007, "The examples we have of past cycles indicate that major declines in real home prices - even 50 per cent declines in some places - are entirely possible going forward from today or from the not-too-distant future."

That amounts to a lot of money, anywhere. Not many nations could survive that.

If this occurred on a global scale, some nations would be able to print their way out of it, or at least print enough money to solve the today problem. But other countries without that ability would require bailout or default -- neither are good choices.

The end of the story is, there is more exposure than assets when a real-estate bubble bursts.

Cheers! JBS
http://jbsnews.com

http://prosyn.org/XN7ax5J/de;

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Das falsche Versprechen eines Eurozonen-Haushalts

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