Commentary by Roger Erickson
Hope it's not too late to revive the patient-electorate. If they recover, surely they'll sue for malpractice?
Italy's new Prime Minister Enrico Letta pledged to push for a change to the European Union's focus on austerity and pursue growth and jobs in an inaugural speech on Monday laying out the priorities for his coalition government.
(Hat tip Edward Harrison, @edwardnh )
Get rid of austerity in the Euro periphery? Brilliant idea! Why didn’t I think of that?
ReplyDeleteI’m afraid the blunt reality is that when a country in a common currency becomes uncompetitive, it just s*dding well has to get its costs down. And that is currently done in a thoroughly ham fisted way in the EZ, i.e. via austerity. So Enrico Letta’s idea is pie in the sky (unless he’s got some brilliant solution not mentioned in the Telegraph article).
My guess is he knows it’s pie in the sky, in which case he is smart but dishonest. Alternatively he doesn’t realise it’s pie in the sky, in which case he is dumb.
There ARE ALTERNATIVES to austerity: one is proper fiscal union including German subsidies for Italy, etc. But German taxpayers just won’t wear that. Another alternative is a short sharp burst of central economic planning during which wages, profits and prices in a periphery are FORCED DOWN by administrative fiat. But there are obvious problems there.
Another solution or at least partial solution is to adjust sundry taxes in periphery countries. More details here:
http://ralphanomics.blogspot.co.uk/2013/04/euro-periphery-competitiveness-can-be.html
But frankly I doubts about all the above solutions, austerity included. I.e. Italy might just as well leave the Euro.