Skip to main content

Bresser-Pereira calls for the end of the euro

In his recent column on the European crisis Bresser suggests that in the absence of depreciation the Southern countries would be better off by abandoning the euro.
If the Southern countries had their own currencies, the adjustment would be simple: it would be enough to depreciate their currencies in relation to the German currency. Since they have a common currency, the solution is either a concerted discontinuation or the “internal devaluation”, that is, recession, unemployment, and a drop in real wages. It is this policy that is being adopted under the command of Germany, of the European Central Bank and of the IMF.

It is clear that the creation of the euro was a mistake for which European countries are paying dearly. The rational solution is the concerted discontinuation of the euro. Then the European Union will be saved. But for this we need courage in the Southern countries, particularly in their chief country, France, and Germany's willingness to come to an agreement. Neither one seems today available in Europe. The situation of the Eurozone countries reminds me greatly of the Argentinian situation and its “plan de convertibilidad”. A huge crisis was necessary to untie the peso from the dollar. Now we are seeing the euro of the Southern countries tied to the “German euro” and, apparently, only a huge crisis could lead the Europeans to get rid of this curse that is the common European currency.
Note that this is very different than the approach emphasized by Holland, Galbraith, and Varoufakis in their Modest Proposal, who argue for increasing public investment.

Comments

  1. Considering it was the French who initiated the Euro and it is now the peripheral countries who are clinging to it, I find it strange to suggest that an exit from the Euro would be the rational course for said countries to follow. All these countries had flexible exchange rates before the Euro and most were more than glad be rid of them. And while one can cogently argue that the old order had its merits, such as being generally more stable, it is precisely the slow cooking of stable decline relative to the north that the the citizens of these countries hoped to escape with the Euro. Exiting the Euro will do nothing to achieve that goal.

    ReplyDelete
  2. Oliver: Was there relative decline of the periphery before the adoption of the euro?!?

    ReplyDelete

Post a Comment

Popular posts from this blog

A few brief comments on Brexit and the postmortem of the European Union

Another end of the world is possible
There will be a lot of postmortems for the European Union (EU) after Brexit. Many will suggest that this was a victory against the neoliberal policies of the European Union. See, for example, the first three paragraphs of Paul Mason's column here. And it is true, large contingents of working class people, that have suffered with 'free-market' economics, voted for leaving the union. The union, rightly or wrongly, has been seen as undemocratic and responsible for the economics woes of Europe.

The problem is that while it is true that the EU leaders have been part of the problem and have pursued the neoliberal policies within the framework of the union, sometimes with treaties like the Fiscal Compact, it is far from clear that Brexit and the possible demise of the union, if the fever spreads to France, Germany and other countries with their populations demanding their own referenda, will lead to the abandonment of neoliberal policies. Aust…

A brief note on Venezuela and the turn to the right in Latin America

So besides the coup in Brazil (which was all but confirmed by the last revelations, if you had any doubts), and the electoral victory of Macri in Argentina, the crisis in Venezuela is reaching a critical level, and it would not be surprising if the Maduro administration is recalled, even though right now the referendum is not scheduled yet.

The economy in Venezuela has collapsed (GDP has fallen by about 14% or so in the last two years), inflation has accelerated (to three digit levels; 450% or so according to the IMF), there are shortages of essential goods, recurrent energy blackouts, and all of these aggravated by persistent violence. Contrary to what the press suggests, these events are not new or specific to left of center governments. Similar events occurred in the late 1980s, in the infamous Caracazo, when the fall in oil prices caused an external crisis, inflation, and food shortages, which eventually, after the announcement of a neoliberal economic package that included the i…

What is the 'Classical Dichotomy'?