Wednesday, September 25, 2013

German Finance Minister Wolfgang Schauble Claims Success in Economic Policy in Europe – And the Telegraph Takes Him Down

Don’tcha Just Hate It When Someone Elses Does What You Do and Does It Better

Thanks to Paul Krugman we have a link to a commentary in the British newspaper The Telegraph, a commentary on the extraordinary (in every sense of the word) article in the Financial Times by German Finance minister Wolfgang Schauble on the great success of the German imposed austerity on Europe. 

It is tempting to just repost the entire article, it is that good, but in the interests of time here is just a delicious sampling. 

My grovelling apology to Herr Schäuble

By Ambrose Evans-Pritchard Economics Last updated: September 17th

Mr Schäuble says Germany pulled it off the old-fashioned way earlier this decade, with root-and-branch reform. The UK did it in the 1980s, Sweden and Finland in the early 1990s, Asia in the late 1990s:

The recipe worked then and it is working now, somewhat to the chagrin and bemusement of its numerous critics in the media, academia, international organisations and politics.

In just three years, public deficits in Europe have halved, unit labour costs and competitiveness are rapidly adjusting, bank balance sheets are on the mend and current account deficits are disappearing. In the second quarter the recession in the eurozone came to an end.

Systems adapt, downturns bottom out, trends turn. In other words, what is broken can be repaired. Europe today is the proof.

So there we have it. The problem is solved. How can I not have seen it? How can any of us on this blog thread have missed it?

I apologise for mentioning that unemployment is 27.8pc in Greece, 26.3pc in Spain, 17.3pc in Cyprus, and 16.5pc in Portugal, or for pointing that it would be far worse had it not been for a mass exodus of EMU refugees. Nor was is proper to mention that Greek youth unemployment in 62.9pc. These are trivial details.

I apologise for pointing out that the EU-IMF Troika originally said the Greek economy would contract by 2.6pc in 2010 and then recover briskly, when in fact it contracted by roughly 23pc from peak-to-trough, and will shrink another 5pc this year according to the think-tank IOBE. This slippage is well within the normal margin of error.

And here is the dessert, the even more delicious conclusion.

 I apologise personally to Mr Schäuble for calling him a dangerous mediocrity: arrogant, shallow, narrow-minded, provincial, and unscientific in equal degree. This was shockingly rude. It brings shame to Fleet Street.

I should not have questioned his wisdom in thinking it is possible to harmlessly enforce contractionary policies on the South of a single currency zone without offsetting expansion in the North. Events have shown that he has the finest mind in Europe, and a superb grasp of European politics. Moreover, people have seen the light even in Greece, where he is now adored.

The only complaint about all this , when someone does what this Forum attempts to do, and does it so much better the motivation here begins to wane.

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