Europe’s existential crisis follows the economics profession wherever it travels — even while the region’s troubles simmer without major incident for now.
Hans Werner-Sinn, the head of Ifo, an influential German economic research group, said at a recent conference in Philadelphia that the euro-zone crisis is primarily the fault of Southern laggards that have failed to maintain their competitiveness. He disagreed with the idea that European governments were imposing austerity policies on the so-called periphery.
“Austerity comes from markets only. It doesn’t come from local policy makers. Actually policy in Europe has mitigated austerity because the countries can’t borrow in the markets any more they borrow from other countries,” said Mr. Werner-Sinn, whose monthly business sentiment survey is closely watched in financial markets.
In particular, he accused Greece of milking the benefits of European integration — namely lower interest rates at the start of the currency union — to pay outsized public-sector salaries.
In an email interview, George Zestos, an economics professor at Christopher Newport University in Virginia who is originally from Greece and was present at Mr. Werner-Sinn’s American Economic Association presentation, took issue with his analysis.
“He is a firm believer that the European monetary union is a transfer union, i.e., it shifts funds from some countries to others. He is wrong although he tried in so many of his articles to prove that the EMU is hurting his country,” Mr. Zestos said. “The fact is Germany is the country that benefited more than any other EU member.
This is the case because Germany has generated larger trade balances than any other country in the world.” During the question-and-answer session, Mr. Werner-Sinn resorted to a cultural comparison that did not seem to go down too well in the room of around 200 economists, students and reporters. A few gasps were audible in the audience.
“Compare Greece with Turkey – same country, uh? Same product set, same water, same food, same temples, everything’s the same. But, Greece is 60% more expensive then Turkey. How can you be 60% more expensive than Turkey whose market price has been determined through market forces?”
To this statement, Mr. Zestos had this response: “I found the closing comments of Mr. Hans-Werner Sinn insulting and disrespectful towards Greece and the Greek people. He stated that Greece is just like Turkey, as both countries have the same temples etc., but Greece has about two-and-a-half-times higher prices than Turkey.
This comparison cannot be received well by some people as the Ottoman Empire the [predecessor of modern Turkey] occupied Greece for 400 years which committed many atrocities against Greece and many other neighboring countries.
Even if we put Mr. Hans-Werner Sinn’s insensitivity aside, there still exists a difference between Greece and Turkey and this difference is that Greece has adopted the Euro but Turkey has not.”
wsj.com
Hans Werner-Sinn, the head of Ifo, an influential German economic research group, said at a recent conference in Philadelphia that the euro-zone crisis is primarily the fault of Southern laggards that have failed to maintain their competitiveness. He disagreed with the idea that European governments were imposing austerity policies on the so-called periphery.
“Austerity comes from markets only. It doesn’t come from local policy makers. Actually policy in Europe has mitigated austerity because the countries can’t borrow in the markets any more they borrow from other countries,” said Mr. Werner-Sinn, whose monthly business sentiment survey is closely watched in financial markets.
In particular, he accused Greece of milking the benefits of European integration — namely lower interest rates at the start of the currency union — to pay outsized public-sector salaries.
In an email interview, George Zestos, an economics professor at Christopher Newport University in Virginia who is originally from Greece and was present at Mr. Werner-Sinn’s American Economic Association presentation, took issue with his analysis.
“He is a firm believer that the European monetary union is a transfer union, i.e., it shifts funds from some countries to others. He is wrong although he tried in so many of his articles to prove that the EMU is hurting his country,” Mr. Zestos said. “The fact is Germany is the country that benefited more than any other EU member.
This is the case because Germany has generated larger trade balances than any other country in the world.” During the question-and-answer session, Mr. Werner-Sinn resorted to a cultural comparison that did not seem to go down too well in the room of around 200 economists, students and reporters. A few gasps were audible in the audience.
“Compare Greece with Turkey – same country, uh? Same product set, same water, same food, same temples, everything’s the same. But, Greece is 60% more expensive then Turkey. How can you be 60% more expensive than Turkey whose market price has been determined through market forces?”
To this statement, Mr. Zestos had this response: “I found the closing comments of Mr. Hans-Werner Sinn insulting and disrespectful towards Greece and the Greek people. He stated that Greece is just like Turkey, as both countries have the same temples etc., but Greece has about two-and-a-half-times higher prices than Turkey.
This comparison cannot be received well by some people as the Ottoman Empire the [predecessor of modern Turkey] occupied Greece for 400 years which committed many atrocities against Greece and many other neighboring countries.
Even if we put Mr. Hans-Werner Sinn’s insensitivity aside, there still exists a difference between Greece and Turkey and this difference is that Greece has adopted the Euro but Turkey has not.”
wsj.com
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