Joseph E. Stiglitz writes: At long last, the United States is showing signs of recovery from the crisis that erupted at the end of President George W. Bush\u2019s administration, when the near-implosion of its financial system sent shock waves around the world. But it is not a strong recovery; at best, the gap between where the economy would have been and where it is today is not widening. If it is closing, it is doing so very slowly; the damage wrought by the crisis appears to be long term.<\/p>\n
Then again, it could be worse. Across the Atlantic, there are few signs of even a modest US-style recovery: The gap between where Europe is and where it would have been in the absence of the crisis continues to grow. In most European Union countries, per capita GDP is less than it was before the crisis. A lost half-decade is quickly turning into a whole one. Behind the cold statistics, lives are being ruined, dreams are being dashed, and families are falling apart (or not being formed) as stagnation \u2013 depression in some places \u2013 runs on year after year.<\/p>\n
The EU has highly talented, highly educated people. Its member countries have strong legal frameworks and well-functioning societies. Before the crisis, most even had well-functioning economies. In some places, productivity per hour \u2013 or the rate of its growth \u2013 was among the highest in the world.<\/p>\n
The EU\u2019s malaise is self-inflicted, owing to an unprecedented succession of bad economic decisions, beginning with the creation of the euro. Though intended to unite Europe, in the end the euro has divided it; and, in the absence of the political will to create the institutions that would enable a single currency to work, the damage is not being undone.<\/p>\n
The current mess stems partly from adherence to a long-discredited belief in well-functioning markets without imperfections of information and competition. Hubris has also played a role. How else to explain the fact that, year after year, European officials\u2019 forecasts of their policies\u2019 consequences have been consistently wrong?<\/p>\n
The models upon which those policies relied were badly flawed. In Greece, for example, measures intended to lower the debt burden have in fact left the country more burdened than it was in 2010: the debt-to-GDP ratio has increased, owing to the bruising impact of fiscal austerity on output. At least the International Monetary Fund has owned up to these intellectual and policy failures.<\/p>\n
Europe\u2019s leaders remain convinced that structural reform must be their top priority. But the problems they point to were apparent in the years before the crisis, and they were not stopping growth then. What Europe needs more than structural reform within member countries is reform of the structure of the eurozone itself, and a reversal of austerity policies, which have failed time and again to reignite economic growth.
\nThose who thought that the euro could not survive have been repeatedly proven wrong.<\/p>\n
But the critics have been right about one thing: unless the structure of the eurozone is reformed, and austerity reversed, Europe will not recover.<\/p>\n
Greece is posing yet another test for Europe. The decline in Greek GDP since 2010 is far worse than that which confronted America during the Great Depression of the 1930s. Youth unemployment is over 50%. Prime Minister Antonis Samaras\u2019s government has failed, and now, owing to the parliament\u2019s inability to choose a new Greek president, an early general election will be held on January 25.<\/p>\n
The left opposition Syriza party, which is committed to renegotiating the terms of Greece\u2019s EU bailout, is ahead in opinion polls. If Syriza wins but does not take power, a principal reason will be fear of how the EU will respond.<\/p>\n
If Europe does not change its ways \u2013 if it does not reform the eurozone and repeal austerity \u2013 a popular backlash will become inevitable. Greece may stay the course this time. But this economic madness cannot continue forever. Democracy will not permit it. But how much more pain will Europe have to endure before reason is restored?<\/p>\n
<\/p>\n <\/p>\n","protected":false},"excerpt":{"rendered":" Joseph E. Stiglitz writes: At long last, the United States is showing signs of recovery from the crisis that erupted at the end of President George W. Bush\u2019s administration, when the near-implosion of its financial system sent shock waves around … Continue reading ![\"Greek](\"http:\/\/www.w-t-w.org\/en\/wp-content\/uploads\/2015\/01\/Greek-Debt.jpg\")
<\/a><\/p>\n