Greeks Bearing Gifts? An Opportunity in the Financial Crisis

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by Gerhard Schick

In his recent blog piece, Mathias Vernengo invokes the Brazilian phrase “The Greek Present” (Presente de Grego) or unwelcome gift, to make his point that the Euro was an unwelcome present for Greece.  Rather than looking back and speculating about whether the Euro was introduced in a timely way in Greece, I want to look ahead and assert that the Greek crisis is an opportunity.  Never waste a crisis.  In a few years, if we succeed in overcoming the current problems, we might say that the progress made in economic governance in the wake of the Greek crisis was a gift.

The European Union is in dire need of new economic government arrangements as a consequence of forming the currency union and learning the lessons of the global financial and economic crisis. Tighter cooperation with regard to the economic policy is needed to ensure the success of the currency union.  But how might stronger cooperation be realized? To answer this question, one needs to scrutinize the prevailing governance of the Euro area in regard to two points: First, the inflation of consumer prices which is controlled by the European Central Bank (ECB) and, second, state expenditures, which are controlled by the European Commission in compliance with the European Stability and Growth Pact.  This governance arrangement creates two blind spots.

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