Tuesday, December 1, 2015

Roubini : Europe's Barbarians inside The Gate

BERLIN – I am on a two-week European tour at a time that could make one either very pessimistic or constructively optimistic about Europe’s prospects.
First the bad news: Paris is somber, if not depressed, after the appalling terrorist attacks earlier this month. France’s economic growth remains anemic, the unemployed and many Muslims are disaffected, and Marine Le Pen’s far-right National Front is likely to do well in the upcoming regional elections. In Brussels, which was semi-deserted and in lockdown, owing to the risk of terrorist attacks, the European Union institutions have yet to devise a unified strategy to manage the influx of migrants and refugees, much less address the instability and violence in the EU’s immediate neighborhood.

Outside the eurozone, in London, there is concern about negative financial and economic spillover effects from the monetary union. And the migration crisis and recent terrorist attacks mean that a referendum on continued EU membership – likely to be held next year – could lead the United Kingdom to withdraw. This would probably be followed by the breakup of the UK itself, as “Brexit” would lead the Scots to declare independence.
In Berlin, meanwhile, German Chancellor Angela Merkel’s leadership is coming under growing pressure. Her decision to keep Greece in the eurozone, her courageous but unpopular choice to allow in a million refugees, the Volkswagen scandal, and flagging economic growth (owing to the slowdown of China and emerging markets) have exposed her to criticism even from her own party.
Frankfurt is a divided city, policy-wise: the Bundesbank opposes quantitative easing and negative policy rates, while the European Central Bank is ready to do more. But Germany’s thrifty savers – households, banks, and insurance companies – are furious about ECB policies that tax them (and others in the eurozone core) to subsidize the eurozone periphery’s alleged reckless spenders and debtors.
In this environment, the full economic, banking, fiscal, and political union that a stable monetary union eventually requires is not viable: The eurozone core opposes more risk sharing, solidarity, and faster integration. And populist parties of the right and left – anti-EU, anti-euro, anti-migrant, anti-trade, and anti-market – are becoming stronger throughout Europe.

Read more at https://www.project-syndicate.org/commentary/european-union-lack-of-unity-by-nouriel-roubini-2015-11#WxHHCY44e5EHZ0PM.99










Nouriel Roubini is an American professor of Economics at New York University`s Stern School of Business and chairman of RGE Roubini Global Economics

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