Daily Management Review

Stiglitz: the Eurozone is not working


10/07/2016


According to Joseph Stiglitz, one of the greatest economists of the world, there is a collapse waiting for the European Monetary Union. The Nobel laureate said that the euro zone could be divided into northern and southern parts.



World Economic Forum
World Economic Forum
Winner of the Nobel Prize in Economics Joseph Stiglitz believes that the euro zone may fall apart in the coming years due to a lack of determination and solidarity of the member countries. "I am concerned about the speed with which Europe's decisions are carried out," - said the American economist in an interview with Die Welt, published on Thursday, 6 October. According to him, politicians make arrangements on what to do, but then their solutions are blocked, execution delayed, and time is lost.

Stiglitz believes that it is necessary to carry out radical reforms, for example, to create a banking union and a single deposit protection system. However, he does not think that politicians can keep the monetary union afloat in the long run. "The euro zone will still exist in ten years, but the question is in what form. It is highly unlikely that it will still consist of 19 members," - predicted the former chief economist of the World Bank.

In his opinion, only separation the single European currency on the northern and southern euro can give new impetus to paralyzed economy of the continent.

Stiglitz takes Italy as an example. "When I talk with the Italians, I feel that people there are more and more disillusioned with the euro". Scientists and politicians in the country are also increasingly recognizing that Italy is unable to function with euro, according to the economist. 

Future of the European Union has long been a subject of debates - ever since the economic crisis began. In particular, there were too many questions in recent years, when Greece almost went out of the euro zone and Britain voted for a complete rejection of EU membership. Euro sceptics claim that the main question is not whether the EU will collapse, but rather when it will occur. In turn, Europhiles argue that the Union simply cannot be refused.

Be that as it may, the European Union, as well as any political structure is a great episode of history. One day it will disappear (and replaced by something else), or will change so dramatically that only its name will last. It is impossible now to say exactly when this transformation will happen and how long it will take.

Fate of the block will depend on those who decide to leave the European Union or its structures. The organization is likely to endure Croatia’s leave - but not that of France. Number of escaped countries will also mean something. The union would still do pretty well without one small economy, but a coordinated exit of several such economies would certainly cause a great damage.

Probability of losing certain members of the continental block depends on particular political and geographical factors. Eurosceptical population may force governments to refuse membership in the European Union. Indeed, politicians themselves can take such a decision in an attempt to gain popularity. Countries with strong economies and a convenient strategic location can use these levers to achieve favorable conditions of exit, or to obtain concessions from Brussels in exchange for staying in the bloc. At the same time, countries with weak economies seem to have less room for choice, especially since they are likely to be the first victims of any future European crisis.

source: stratfor.com, cnbc.com






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