Is Europe Too Much Like Republicans?
Posted on Mon Mar 16, 2009 at 07:50:59 AM EST
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Paul Krugman sort of poses this question:
The clear and present danger to Europe right now comes from a different direction — the continent’s failure to respond effectively to the financial crisis. Europe has fallen short in terms of both fiscal and monetary policy: it’s facing at least as severe a slump as the United States, yet it’s doing far less to combat the downturn.
Why is Europe falling short? Poor leadership is part of the story. European banking officials, who completely missed the depth of the crisis, still seem weirdly complacent. And to hear anything in America comparable to the know-nothing diatribes of Germany’s finance minister you have to listen to, well, Republicans.
But Europe's biggest failure is in its powerless continental institutions. Krugman writes:
Europe’s economic and monetary integration has run too far ahead of its political institutions. The economies of Europe’s many nations are almost as tightly linked as the economies of America’s many states — and most of Europe shares a common currency. But unlike America, Europe doesn’t have the kind of continentwide institutions needed to deal with a continentwide crisis.
Krugman posits that without political integration, the creation of a single European currency was premature:
Europe, in other words, is turning out to be structurally weak in a time of crisis. . . . In the past, Spain would have sought improved competitiveness by devaluing its currency. But now it’s on the euro — and the only way forward seems to be a grinding process of wage cuts. This process would have been difficult in the best of times; it will be almost inconceivably painful if, as seems all too likely, the European economy as a whole is depressed and tending toward deflation for years to come.
Does all this mean that Europe was wrong to let itself become so tightly integrated? Does it mean, in particular, that the creation of the euro was a mistake? Maybe.
Republican governors like Sanford of South Carolina and Perry of Texas are, thankfully, merely poseurs, with no real power to influence national fiscal and monetary policy. Europe, on the other hand, is hamstrung by its Perrys and Sanfords. In short, Europe is too Republican when it comes to the current economic crisis.
Speaking for me only
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