tag:blogger.com,1999:blog-36227136.post6187891754534500411..comments2024-01-16T08:40:53.682+00:00Comments on <a href="http://www.openeurope.org.uk">Open Europe</a>: Eurozone inflation hits its lowest levels for three yearsOEhttp://www.blogger.com/profile/00556463374230498875noreply@blogger.comBlogger3125tag:blogger.com,1999:blog-36227136.post-73416286638152157532013-10-18T11:09:15.698+01:002013-10-18T11:09:15.698+01:00Deceptive to talk of Eurozone inflation or growth....Deceptive to talk of Eurozone inflation or growth. Some parts are in deflation, other parts inflating; some parts are in recession and others growing. It is not an entity but a collection of highly divergent states.Rollohttps://www.blogger.com/profile/18255460090580758354noreply@blogger.comtag:blogger.com,1999:blog-36227136.post-75037046762609791432013-10-18T06:33:36.307+01:002013-10-18T06:33:36.307+01:00Tinbergen already said it probably half a century ...Tinbergen already said it probably half a century ago if you want to influence the economy you need a simple case. With measures you should only try (and are able to) influence one thing. Try to influence more things and it gets a mess.<br /><br />What we have here is Europe being in such a mess that only in your post already three unbalances are mentioned that are interconnected:<br />-inflation;<br />-restoring competitiveness;<br />-stimulate lending for investments.<br /><br />Next to the differences between the different countries.<br /><br />And these 3 bite each other.<br />Competitiveness is a worldwide issue (not an internal EZ one). It simply does hardly matter to whom you export. From there you donot want measures that makes the things you make more expensive (which inflation basically does).<br />Deflate (effectively) yourself into competitiveness simply doesnot go together with measures that increase inflation, like lower rates.<br /><br />However at the same time you need lower rates to kick start lending, borrowing and investment. This simply bites as well with inflation.<br /><br />If things bite each other you have to prioritise. But the standard policies have in a situation with unbalances galore limited effect. Overall that is reduce one unbalance by creating a new one (or a larger one) elsewhere is hardly helpful.<br />As said priority setting as far as the standard stuff goes. Combined possibly with structural measures for the rest of the things. Especially seen the fact that this crisis looks mainly structural and not cyclical this could work. However is a tough political sell.<br /><br />And find a way to make it possible to uncouple countries as far as certain policies go.<br />From a pure economic pov hardly helpful if you have solved the problems in the South (wishful thinking) and created all sort of new unbalances (RE prices, pensionfunding) in the North as a consequence of the measures taken.<br />And from a political pov messing up things up North to save the South will erode the platform in the North even faster than it already does at the moment.<br /><br />And we are pretty close to that already tbh.<br />Germany has the advantage that its strong industrial base obscures things for the electorate. <br />But in Finland and Holland it will be a very hard sell if say Sweden, Danemark and the UK get back to some growth and they not. As it is pretty obvious that the EZ and its problems will be a major cause of that. If such a disparity becomes structural (as it looks it will be) you have a problem at hand.Riknoreply@blogger.comtag:blogger.com,1999:blog-36227136.post-60311684038516428692013-10-17T19:50:25.841+01:002013-10-17T19:50:25.841+01:00I think you could add that the periphery doesn'...I think you could add that the periphery doesn't only need "reductions in prices and wages to help boost their competitiveness"<br /><br />They also need fundamental economic reforms, more flexible labour markets, improved post-secondary education, reduced Government ownership of the economy, and public sectors reduced in size.<br /><br />I don't see current eurozone policies helping with any of that. Current policies for the periphery are focused on a small set of financial metrics, and not on fundamental reforms of the real economy.<br /><br />People talk about the eurozone as if it's something radical and new. It isn't. Before the Great War Europe had free trade, free movement of labour and a common currency in the shape of the Gold Standard. It didn't help. The core countries got richer and the periphery stagnated.<br /><br />The eurozone is to a large extent simply missing the point. Financial problems are just symptoms of underlying economic problems.jon liveseynoreply@blogger.com