His points are well foundered and can be summarized as follows:
- 18 million people still remain unemployed in the euro zone.
- Markets incorrectly believe that European Central Bank President Mario Draghi's emphatic promise that the ECB will buy the bonds of troubled countries has all but eliminated the risk of a collapse.
- The risk of relapses triggered by domestic rifts or an external economic shocks will remain high.
- The euro zone can fail even if the single currency survives.
- Application of "boiling frog" allegory: If you put a frog in scalding water, he said, it will jump out. But if you place it in cold water and slowly raise the heat, it will stay put, eventually being boiled to death.
- Instead of a region of shared and uniform prosperity, the euro zone has become a study in internal divergence.
- Unemployment is at 26.8% in Greece, 26.6% in Spain, 16.3% in Portugal, 14.6% in Ireland, 11.1% in Italy—and joblessness is still rising in all of these countries. Meanwhile, the unemployment rate is 5.4% in Germany and 7.8% in the U.S.
- Italy's gross domestic product has fallen by 6% since the pre-crisis peak in 2007, whereas Germany's is up 8%. In the U.S., where the world financial crisis began, GDP has surpassed its pre-crisis peak by 7%. By comparison, Europe's GDP is only 2% above its pre-crisis level.
- The fiscal stance in Europe remains contractionary, reflecting the inexistence of a large central government, the inability of the periphery countries to borrow, and a fiscally conservative government in Germany, where the effect of the crisis has been felt much less.
- The limited monetary-policy response, which is now changing belatedly, was also the result of a conservative approach by the core, especially Germany.
- Falling interest-rate spreads and improving financial markets are not enough to reignite growth and competitiveness.
- In Brussels, plans for a banking union are advancing, but at a snail's pace. Proposals for forgiving official-sector debt holdings are dead on arrival. Fiscal union is not on the table.
|EURO ZONE UNEMPLOYMENT|