Macroeconomic policy in the eurozone are there alternatives to slow growth and high unemployment
This presentation is the property of its rightful owner.
Sponsored Links
1 / 32

Macroeconomic Policy in the Eurozone: Are There Alternatives to Slow Growth and High Unemployment? PowerPoint PPT Presentation


  • 75 Views
  • Uploaded on
  • Presentation posted in: General

Macroeconomic Policy in the Eurozone: Are There Alternatives to Slow Growth and High Unemployment?. Mark Weisbrot , Co-Director Center for Economic and Policy Research September 24, 2011 . Europe’s crisis, stagnation, and unemployment are not the result of unsustainable borrowing

Download Presentation

Macroeconomic Policy in the Eurozone: Are There Alternatives to Slow Growth and High Unemployment?

An Image/Link below is provided (as is) to download presentation

Download Policy: Content on the Website is provided to you AS IS for your information and personal use and may not be sold / licensed / shared on other websites without getting consent from its author.While downloading, if for some reason you are not able to download a presentation, the publisher may have deleted the file from their server.


- - - - - - - - - - - - - - - - - - - - - - - - - - E N D - - - - - - - - - - - - - - - - - - - - - - - - - -

Presentation Transcript


Macroeconomic policy in the eurozone are there alternatives to slow growth and high unemployment

Macroeconomic Policy in the Eurozone: Are There Alternatives to Slow Growth and High Unemployment?

Mark Weisbrot, Co-Director

Center for Economic and Policy Research

September 24, 2011


Macroeconomic policy in the eurozone are there alternatives to slow growth and high unemployment

  • Europe’s crisis, stagnation, and unemployment are not the result of unsustainable borrowing

  • It is the result of bad macroeconomic policies from the European authorities:

  • The “Troika” – European Central Bank, European Commission, IMF


Macroeconomic policy in the eurozone are there alternatives to slow growth and high unemployment

  • Three most important macroeconomic policies: Fiscal, monetary, and exchange rate

  • Not helping, or actively causing damage, in troubled eurozone economies (Greece, Ireland, Portugal, Spain, Italy)


Macroeconomic policy in the eurozone are there alternatives to slow growth and high unemployment

  • Troika, especially ECB has played game of brinksmanship with troubled economies since early 2010

  • Repeatedly pushing Europe, and now much of the world economy, to the edge of serious crisis

  • Why?


Macroeconomic policy in the eurozone are there alternatives to slow growth and high unemployment

What policy failure looks like


Macroeconomic policy in the eurozone are there alternatives to slow growth and high unemployment

Real GDP (Index: 2007=100)

Italy

Trend vs. Actual and Projected GDP (percent)


Macroeconomic policy in the eurozone are there alternatives to slow growth and high unemployment

Real GDP (Index: 2007=100)

Ireland

Trend vs. Actual and Projected GDP (percent)


Macroeconomic policy in the eurozone are there alternatives to slow growth and high unemployment

Real GDP (Index: 2008=100)

Greece

Trend vs. Actual and Projected GDP (percent)


Macroeconomic policy in the eurozone are there alternatives to slow growth and high unemployment

Real GDP (Index: 2008=100)

Portugal

Trend vs. Actual and Projected GDP (percent)


Macroeconomic policy in the eurozone are there alternatives to slow growth and high unemployment

Real GDP (Index: 2008=100)

Spain

Trend vs. Actual and Projected GDP (percent)


Macroeconomic policy in the eurozone are there alternatives to slow growth and high unemployment

Real GDP (Index: 1998=100)

Argentina

Trend vs. Actual GDP (percent)


Macroeconomic policy in the eurozone are there alternatives to slow growth and high unemployment

Lessons from Argentina:

  • Despite chaotic default, financial collapse, and no outside help, Argentine economy begins to recover just one quarter after default

  • Argentina reaches pre-recession GDP within 3 years, despite much deeper recession – compare to more than a decade in Greece.


Macroeconomic policy in the eurozone are there alternatives to slow growth and high unemployment

  • Passes trend GDP in 2006 (compare to eurozone – when?)

  • Real GDP growth more than 90 percent 2002-2011

  • There are ALWAYS alternatives to the years of recession, stagnation, and high unemployment that the Troika is offering to the troubled eurozone economies


Macroeconomic policy in the eurozone are there alternatives to slow growth and high unemployment

The human cost of economic mismanagement


Macroeconomic policy in the eurozone are there alternatives to slow growth and high unemployment

Unemployment Rate

(Seasonally Adjusted)

Ireland

(percent)

Source: Eurostat


Macroeconomic policy in the eurozone are there alternatives to slow growth and high unemployment

Unemployment Rate

(Seasonally Adjusted)

Greece

(percent)

Source: Eurostat


Macroeconomic policy in the eurozone are there alternatives to slow growth and high unemployment

Unemployment Rate

(Seasonally Adjusted)

Italy

(percent)

Source: Eurostat


Macroeconomic policy in the eurozone are there alternatives to slow growth and high unemployment

Unemployment Rate

(Seasonally Adjusted)

Portugal

(percent)

Source: Eurostat


Macroeconomic policy in the eurozone are there alternatives to slow growth and high unemployment

Unemployment Rate

(Seasonally Adjusted)

Spain

(percent)

Source: Eurostat


Macroeconomic policy in the eurozone are there alternatives to slow growth and high unemployment

  • Low inflation implies there is plenty of room for expansionary monetary and fiscal policies – but eurozone countries that need it can’t implement these policies


Macroeconomic policy in the eurozone are there alternatives to slow growth and high unemployment

Inflation

(Seasonally-Adjusted, year over year)

Ireland

(percent)

Source: Eurostat


Macroeconomic policy in the eurozone are there alternatives to slow growth and high unemployment

Inflation

(Seasonally-Adjusted, year over year)

Greece

(percent)

Source: Eurostat


Macroeconomic policy in the eurozone are there alternatives to slow growth and high unemployment

Inflation

(Seasonally-Adjusted, year over year)

Spain

(percent)

Source: Eurostat


Macroeconomic policy in the eurozone are there alternatives to slow growth and high unemployment

Inflation

(Seasonally-Adjusted, year over year)

Italy

(percent)

Source: Eurostat


Macroeconomic policy in the eurozone are there alternatives to slow growth and high unemployment

Inflation

(Seasonally-Adjusted, year over year)

Portugal

(percent)

Source: Eurostat


Macroeconomic policy in the eurozone are there alternatives to slow growth and high unemployment

“Internal Devaluation” doesn’t work


Macroeconomic policy in the eurozone are there alternatives to slow growth and high unemployment

Real Effective Exchange Rate

(Based on Unit Labor Costs of 27 Trading Partners)

(Index: 2008QI=100)

Source: Eurostat


Macroeconomic policy in the eurozone are there alternatives to slow growth and high unemployment

More fiscal consolidation


Macroeconomic policy in the eurozone are there alternatives to slow growth and high unemployment

Total Projected Fiscal Consolidation 2010-2016

(percentage points of GDP)

*Note: 2010 overall balance in Ireland excludes 21% of GDP in financial sector assistance.

Source: IMF


Macroeconomic policy in the eurozone are there alternatives to slow growth and high unemployment

Projected Net Interest Payments

(% of GDP)

Greece

(% of GDP)

Source: IMF


Macroeconomic policy in the eurozone are there alternatives to slow growth and high unemployment

Conclusion

  • Euro zone crisis primarily a result of wrong macroeconomic policies

  • European authorities will probably resolve current crisis with bigger EFSF or other rescue mechanisms, interventions in bond markets, bank bailouts, even Greek debt restructuring


Macroeconomic policy in the eurozone are there alternatives to slow growth and high unemployment

Conclusion

  • But continued wrong macroeconomic policies will cause unnecessary unemployment and suffering; cuts to health care, pensions, education; trillions of dollars in lost output, and possibly more crises


  • Login