A tale of two gaps – A Comment on the European Solidarity Manifesto

Piergiorgio Gawronski
Additional contact information
Piergiorgio Gawronski: Scuola Nazionale dell'Amministrazione

No 1403, a/ Policy Briefs Series from Italian Association for the Study of Economic Asymmetries, Rome (Italy)

Abstract: The paper by Kawalec and Pytlarczyk (2012) (henceforth, K-P), and the shorter “European Solidarity Manifesto” (http://european-solidarity.eu/; henceforth, ESMA), address two different set of questions. (1) Should the Euro be dismantled? What is the origin of the Eurozone (EZ) depression? Is it temporary or curable? In their view, the ‘key problem’ is the loss of international competitiveness of the weakest EZ countries; the competitiveness gap is “very difficult or even impossible to correct without a devaluation” (given the price/wage downward stickiness, and the limits to austerity posed by democracy); and if corrected, it may easily arise again in the future. Hence the Euro should be dismantled. (2) How should the Euro be dismantled? Their view is that it should start with a German exit, and should be managed in a cooperative way. K-P describe their preferred procedure. I will here discuss only the first, more fundamental set of issues. I will argue that in principle the Euro is curable, but won’t be cured. The economic problems of the EZ periphery – unemployment, public debt, banks weakness, etc. – all arise from a lack of economic growth. I will therefore start by asking what is, and is going to be in the next 10 years, the main constraint in the EZ on growth. I will also discuss the role of the ‘competitiveness gap’ in this respect. I will end with some thoughts on the optimal political strategy to solve the Euro conundrum. Italy will be used as a case study to illustrate some more general points.

Keywords: Inflation; Policy coordination; Eurozone crisis; Fiscal policy; Economic integration (search for similar items in EconPapers)
JEL-codes: E31 E61 E62 F15 (search for similar items in EconPapers)
Pages: 9 pages
Date: 2014-10
New Economics Papers: this item is included in nep-mac
References: View references in EconPapers View complete reference list from CitEc
Citations:

Downloads: (external link)
http://www.asimmetrie.org/wp-content/uploads/2014/10/APB2014-03.pdf First version, 2014 (application/pdf)

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:ais:pbrief:1403

Access Statistics for this paper

More papers in a/ Policy Briefs Series from Italian Association for the Study of Economic Asymmetries, Rome (Italy) Contact information at EDIRC.
Bibliographic data for series maintained by Alberto Bagnai ().