By LSE Blog Euro Crisis in the Press.
Euro Crisis in the Press has asked the views of influential analysts and commentators throughout Europe on the multifaceted crisis facing the European Union. In today’s interview, deputy editor of the English language edition of mainstream Greek daily ‘Kathimerini’, Nick Malkoutzis, talks to our Managing Editors, Vassilis Paipais and Roberto Orsi. Mr. Malkoutzis argues that the idea of convergence of the Eurozone economies did not work nor does strict austerity now and that, in the long run, fiscal transfers will be inevitable. He notes that journalists were forced to do a crash course in economics to keep up with the intricacies of the crisis and that despite some patchy reporting and use of populist stereotypes across national and international media, poor coverage was mixed with some excellent analysis. Finally, he admonishes about the dangers of growing Euroscepticism should the alienating tendencies of the crisis are not addressed.
Mr. Malkoutzis, there is little doubt that Europe is undergoing an unprecedented crisis. The crisis itself can be seen as having multiple dimensions: a financial crisis of the Eurozone and the Euro as a common currency, an institutional EU-wide crisis, a crisis of the European post-war social and economic model or even a European identity crisis. From your point of view, what is the most important aspect of the crisis?
To a great extent, this crisis is about hubris. It seems to me that Europe thought it had made it when the euro was launched, that the European project had entered its final phase or had even been completed. We perhaps felt that economically, politically, socially and even culturally we had reached a higher plane than the rest of the world. While there is much to admire about the European project, this feeling of accomplishment simply covered up the cracks in the architecture of the EU and euro as well as the chasms between its member states. The idea that we had attained convergence was wrong as was the idea that Europe had a divine right to prosperity.
This is why addressing the current crisis is about more than just rectifying economic weaknesses. Yes, a banking union, for instance, would help but there is much more to it than that. Unless we develop a much clearer and more coherent picture of what we are trying to achieve, apart from making the EU more competitive in the global economy, then we are certain to fail. Our differences need to complement each other, our cultural diversity should be a cause for celebration rather than division, our long and sometimes bloody history must serve as a guarantee for cooperation and understanding, while our respect for human rights and the social model born in Europe have to be held up as a beacon in these challenging times. Ultimately, we need to discover who we are and where we want to go and the answers don’t lie just in our economies.
Is the Eurozone architecture the sole cause of the crisis? What are the potential policy responses that you think would be most effective?
In terms of the euro, the idea of convergence was a sham. Rather than economies coming together to form a powerful, competitive block, they became unequal pieces against each other. To some extent this was caused by the lack of fiscal, economic and political union to back up a single currency.
But there were also serious failings on a national level. The Germans understood what lay ahead much better than others and Gerhard Schroeder’s Agenda 2010 put the country’s economy on a favourable footing. Unfortunately, other Eurozone members, particularly in southern Europe, closed their eyes, hoped for the best and were left foundering in Germany’s wake. Too many Eurozone economies became unproductive, uncompetitive and unresponsive to the needs of the global market. The euro, meanwhile, lacked the tools to address these weaknesses. Some of these deficiencies are being addressed.
As painful as the process is, public finances need to come under control. The role and effectiveness of our public sectors also need to be scrutinised. Furthermore, structural reforms to allow our economies to be nimbler and responsive cannot be avoided. The key element to all this, though, is balance. I fear that in the Eurozone, we have got the balance totally wrong. Destroying economies, and with that people’s trust and hope, through excessive levels of austerity is no way of rebuilding. Austerity needs to be balanced with reform and then both have to be weighed up against investment and growth strategies. The Eurozone has to rediscover production and must innovate more. One element to this is creating a vision for the future; the other is finding the capital to support it. The former requires a serious upgrade in the quality of our decision makers at a national and European level and I don’t see how the latter can happen without greater economic union in the Eurozone, the introduction of Eurobonds and, ultimately, fiscal transfers.
Nick Malkoutzis is the deputy editor of Kathimerini English Edition in Greece. He has written about Greece for BusinessWeek, The Guardian and Foreign Policy. Nick has also authored several policy papers and analyses about the Greek crisis for the Friedrich Ebert Foundation.
Read the full interview here.