A Modest Proposal for Resolving the Eurozone Crisis

Yanis Varoufakis, Stuart Holland and James K. Galbraith
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Yanis Varoufakis: University of Athens and the Lyndon B. Johnson School of Public Affairs, University of Texas, at Austin.
Stuart Holland: Faculty of Economics, University of Coimbra, Portugal.
James K. Galbraith: School of Public Affairs, University of Texas at Austin

Notas Económicas, 2015, issue 41, 7-15

Abstract: Europe is fragmenting. While in the past year the European Central Bank has managed to stabilise the bond markets, the economies of the European core and its periphery are drifting apart. As this happens, human costs mount and disintegration becomes an increasing threat. It is not just a matter for the Eurozone. The fallout from a Eurozone breakup would destroy the European Union, except perhaps in name. And Europe’s fragmentation poses a global danger. Following a sequence of errors and avoidable delays Europe’s leadership remains in denial about the nature of the crisis, and continues to pose the false choice between draconian austerity and a federal Europe. By contrast, we propose immediate solutions, feasible within current European law and treaties. There are in this crisis four sub-crises: a banking crisis, a public debt crisis, a crisis of underinvestment, and now a social crisis – the result of five years of policy failure. Our Modest Proposal therefore now has four elements. They deploy existing institutions and require none of the moves that many Europeans oppose, such as national guarantees or fiscal transfers. Nor do they require treaty changes, which many electorates anyway could reject. Thus we propose a European New Deal which, like its American forebear would lead to progress within months, yet through measures that fall entirely within the constitutional framework to which European governments have already agreed.

Date: 2015
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