Macroeconomics & the euro

The broad orientation of the Commission's economic policy is unlikely to change. It will continue to defend the single market, free trade and a tough competition policy.

There is no doubt that governments had to take exceptional steps in response to the financial crisis. Without such unprecedented action, many economies would have slipped into slump and probably deflation.

The Greek economy is on a very dangerous course. Unless the government takes steps to boost productivity and strengthen public finances, Greece faces a bleak future. 

Disasters often provoke unseemly bouts of finger-pointing. This has certainly been true of the global financial crisis. In the Anglo-Saxon world, libertarians have blamed it on governments, and governments on ‘bankers’. 

Since the 1980s, many of the largest economies in the EU have developed unenviable reputations for protracted economic downturns followed by sluggish recoveries.

Christine Lagarde, the French finance minister, threatens to walk out of the London G20 summit unless France gets its way on tougher financial regulation. The toppled Czech Prime Minister, Mirek Topolanek, who happens to hold the EU presidency, describes the US fiscal stimulus as “the road to hell”. Not one EU leader deems it necessary to support Gordon Brown publicly when he tries to drum up support for a more concerted international effort to revive the global economy. 

The future of the euro may not be secure, warned the CER’s Simon Tilford in a January 2009 essay. The current economic crisis threatens to exacerbate the tensions within the eurozone, and an insolvent member-state... could default and leave the eurozone. Since January, the economic crisis has deepened further, and the eurozone’s weakest economies have come under even greater strain.