Social Europe
The seeds of the current crisis were sown nearly twenty years ago
when European leaders agreed to create a currency without a country.
Now, the Eurozone is split in two, with the creditor countries of the
north able to borrow at next to zero interest rates, and those of the
south facing massive deficits and economic instability. But both face a
prescription of heavy austerity from the European Commission. Paul De Grauwe argues
that the ECB and the European Commission can no longer afford to sit on
the sidelines while the stability Eurozone continues to be undermined
by those who fear for its future. The ECB must step in to guarantee the
bonds of solvent but illiquid countries, such as Ireland, Spain,
Portugal and Italy, the European Commission must encourage surplus
countries to spend to offset the southern countries’ deficits, and the
Eurozone must take steps towards budgetary union.
*Professor Paul De Grauwe is the John Paulson Chair in European Political
Economy at the LSE’s European Institute. Prior to joining LSE, he was
Professor of International Economics at the University of Leuven,
Belgium. He was a member of the Belgian parliament from 1991 to 2003.
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