Lessons from Africa for the Eurozone

Economists agree that countries should only have a monetary union if there is also a fiscal, economic, and political union. If you have a single currency, governments cannot print money to cover their debts, nor can they devalue their currency to regain competitiveness. Arguably, the EMU and European Union are unions with economic, political, and even fiscal elements. They, however, miserably fail to offer the necessary mechanisms to compensate for not having monetary sovereignty. Continue reading

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Krugman’s Own Hubris

As a follower of Paul Krugman’s blog, I noticed that the lion’s share of his posts contains either of the following two messages:

1) Republicans are idiots

2) Austerity economists are idiots

Yesterday, Krugman wrote once again that economically Europe is not recovering as it potentially could, because it insists on policies of austerity – that is to say, to cut on government spending. He even argues that austerity measures caused that Mario Monti had to step down, whereas I think we should not underestimate the influence of Mr Berlusconi in this matter. Continue reading

Austerity: It’s About Time

A discussion rages with regard to the austerity measures implemented by European countries. Paul Krugman, a notable opponent of austerity measures, even refers to it as “Europe’s Austerity Madness“. If one believes Krugman’s and some other populistic outbursts, one might actually believe that governments did not take on addional debt in past years. But the graph below tells you an entirely different story, I hope!

Government consolidated gross debt as a % of GDP. Data is retrieved from Eurostat.

Government consolidated gross debt as a % of GDP. Data is retrieved from Eurostat.

Continue reading