Tipo: Articoli Fonte: Financial Times 19 febbraio 2010

Athens must not be left to stand alone

by Tommaso Padoa-Schioppa

For years, Otmar Issing and I worked side by side to make the euro a success, and I think we did. At the European Central Bank we almost always agreed on the stance of policy. When we could not, the hawk was sometimes me. Now comes the Greek debt crisis and the declaration by European leaders that they “will take determined and co-ordinated action, if needed, to safeguard financial stability in the euro area as a whole”. I welcome this statement; Otmar condemns it .

The spectrum of possible outcomes to this crisis is wide. At the best, the Greek government could win full public backing for a package that reduces the deficit and restores creditors’ confidence. At

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the worst, we could see Greece default, with a domino effect knocking down other countries and even leading to a break-up of the eurozone. In-between lie many other, more likely outcomes.

In a climate of fear, markets can become as blind and destructive as a natural catastrophe and fail to distinguish between the errant and the irreproachable, between Greece and the outside. A point could soon be reached where not to act would invite disaster upon all. We are now so close to such a point that the EU leaders’ statement was a wise step. Through inaction, virtuous but myopic countries could deal a blow to their own prosperity and stability. What is needed is not altruism, only enlightened self-interest.

As Mr Issing puts it, the Greek crisis is not a natural catastrophe, it is entirely man-made. To be fair, some of the blame lies outside Greece, because all EU countries bear a responsibility for failing to exert peer pressure and refusing to grant the Commission sufficient power and independence, including the power to establish the right statistics. But the crisis was wrought mainly by Greek hands.

Does it follow that a default would hurt only Greece? Or that “determined and co-ordinated action” would be more harmful to the eurozone than a default? Obviously not; and Mr Issing carefully stops short of stating the contrary. He is too good a scholar to forget that economics, unlike theology, is about pros and cons.

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No one can pretend that in all possible circumstances a Greek default is – for those outside Greece – economically preferable to “determined and co-ordinated action”. Probably there is, once again, little disagreement between us on the economics .

So, why should the EU not help? Because it is not a political union, is the amazing answer – amazing also, note, because it implicitly approves of domestic bail-outs. The disagreement must, therefore, be about the politics. (Remember Schumpeter’s answer to a journalist who asked him what economic policy was about: “politics, politics, politics!”)

True, monetary union came before political union. But it did not come with a promise that there would never be such a union. Quite to the contrary: the founding fathers wanted the euro primarily as a step towards political union, knowing little of the overriding technical arguments in its favour. Those who argued against it then on the grounds that “there can be no monetary union without political union” are precisely those who should welcome political union now that it finally knocks at the door claiming its rights.

Action is required; but what kind of action? It could range from exerting pressure, to providing liquidity assistance, to lending money, to making gifts. Everywhere in this crisis – virtuous countries are no exception – we

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have seen good and bad policy. The bottom line is that Greece should receive support, but no gifts.

The EU has been appropriately vague on the type of action it would take. Any delicate negotiation involves a degree of ambiguity, whether we like it or not. Otherwise, public opinion, labour unions, competing political parties and patriotism can all too easily become inflamed.

What should be made clear to the public is that no country has full sovereignty any longer – not Greece, because of its misbehaviour, and not even Germany, because of its openness (which is a major source of its prosperity).

Some luck is indispensable, but what matters most is enlightened political leadership backed by good economic advice. This is needed primarily in Athens, but also very much in Brussels, Berlin, Paris and every other European capital.

Stampa Stampa
19 febbraio 2010
Financial Times