October 7, 2006
Centre-Left discusses the future of the Eurozone
While the conservatives and liberals in the Eurozone seem to continue to neglect issues of macro-economic management of the currency area (Daniela had an excellent post on this problem - let us know if we have missed something), the centre-left is busy discussing its own view in a number of conferences and working papers.
One interesting conference is coming up in Berlin on October 27 and 28, sponsored by the Hans-Böckler-Stiftung (which has close ties to the trade unions). Under the title “European Integration in Crisis”, a number of issues of macro-economic management will be mentioned, according to the program. While a few years back, the conferences of the Hans-Böckler-Stiftung were not always intellectually challenging, this has changed over the past years. The program and the audience provide hope that this trend will continue this year and there will be a number of highly stimulating and interesting presentations.
Personally, I look forward to Charles Goodhart’s presentation on “Currency unions: lessons from the euro-zone”. Given Prof. Goodhart’s long experience in the bank of England (he worked for the institution 17 years as a monetary policy advisor prior to 1980 and was on the monetary policy committee from 1997 to 2000) and his highly original research in monetary policy over the past years, I am really anxious to get to hear to what his assessment of current developments in the eurozone are.
In addition, together with my colleague Ulrich Fritsche (from the Deutsches Institut für Wirtschaftsforschung and the Hamburg University), I will give a presentation at the conference, providing some lessons for the eurozone from regional adjustment in Germany and the United States. We are still working on some details, but I will put a synopsis online at this blog in due time. Let me tell you in advance that the results are quite interesting and Italy’s situation does not look as dire as some might think (and has been claimed in some blogs).
Besides this conference, there have been a number of papers and events lately. The Friedrich-Ebert-Stiftung (a think-tank with close ties to the conservative part of the German Social Democratic party in Germany) has been busy asking how quick the eurozone should be enlarged (criticising the recent strict application of the convergence criteria in the case of Lithuania) and how convergence of incomes in the poorer EMU members could be achieved (a conference on this topic was held in Brussels which I was originally invited to but could not go to as I fell sick).
Is it only that we receive more material from the center-left think-tanks or are the more conservative think-tanks really rather silent on the issue? (Please send us a message to info[at]euro-area.org should we have missed important publications.)
Thanks for pointing that out. I suppose the deeper reason for your described divide is that a lot of conservatives tended to be in the anti-euro camp prior to its introduction. Take Manfred J.M. Neumann and Jürgen Siebke for example. Well, actually the thing is playing out as they predicted with regard to divergences (though not the increased inflation in Germany) so they might well lean back and look. Apart from that at least the coming crunch if things get from critical to bad in some member states, it might well suit their policy aims (or what better reason to call for “structural reforms”, aka wage deflation, than a crisis).
But I would definitely deny that you could say there are no conservatives interested in these topics and macroeconomic solutions to them. Take John H. Makin from the American Enterprise Institute for example. He’s hardly what you could call centre-left but he is definitely stating that Europe’s monetary arrangements have to change if the euro is to survive. Also, I would not really call Adair Turner centre-left though he did some very interesting stuff concerning the policy-mix in continental Europe.
So maybe it’s just that in continental Europe the political backside geography of left and right just happens to coincide more with the preferred choice of political tools (macro vs. structural reform) than in Anglo-Saxon countries.
As I had already written in a comment to Mrs Dahn’s text, the more interesting debate in left of centre and trade union circles might be due to “material interest” as Marx might have put it. Furthermore, the economic governance of the European Union is a dream for real neo-liberals and a practical advantage for huge export oriented enterprises - especially in Germany.
Hayek and his fellows from the new classical school of rational expectatoins did argue from the beginning on: No active fiscal or monetary policy. Only inflation and public debt will ensue, there is no effect on employment. It is better to liberalize the market, so equilibrium will fall in place automatically. High unemployment? Look for rigidities. That is what the EU and the ECB is doing.
Raise interest rates because labour markets might be to rigid and only inflation would result from lower rates. Care for your budget no matter what - because otherwise our children will pay our debts.
The practical implication of all that is a shift in growth stemming from internal demand to growth stemming from external demand and export led growth by real devaluation. This is actually happening in Germany and was also the strategy the Washington Consensus prescribed to Latin America in the early nineties.
So liberals say yeah to european economic governance for ideological motives, big export business says year to european economic governance because exports and profits go up and up, while wages go down.
No wonder then that the trade unions and those with a more sense for equity (what the left might distinguish from the right) are more interested in growth and active policy - also in the European sphere.
“Let me tell you in advance that the results are quite interesting and Italy’s situation does not look as dire as some might think (and has been claimed in some blogs).”
Well I look forward to seeing the arguments.
Incidentally, what will be interesting is to see the extent to which demographic asymmetries are addressed, since, IMHO, this is the biggest weakness I have noticed in the centre left approaches to eurozone economic problems.
[...] A few weeks ago, Eurozone Watch had a little curtain raiser on a conference from the Institut für Makroökonomie und Konjunkturforschung on “European integration in crisis”. Though it has been two weeks since that conference, I would still like to give a short account of that conference. [...]