Nouriel Roubini did it again
Another unhelpful op-ed from the chairman of Roubini Global Economics, as he calls himself.(Guardian, 3 April). Again, he delved into European economics, a sector notoriously difficult to understand for Anglo-Saxon economists. After a nice but hardly original description of the economic situation in the Eurozone, Roubini concludes: "Germany needs to adopt policies – fiscal stimulus, higher spending on infrastructure and public investment, and more rapid wage growth – that would boost domestic spending and reduce the country’s external surplus. Unless, and until, Germany moves in this direction, no one should bet the farm on a more robust and sustained eurozone recovery. "
The idea behind this advice is that Germany's lavish spending would compensate thrift in Italy and Greece in order to combat deflationary tendencies in the Eurozone which block the growth needed to "grow" out of the heavy public and private debt load. Funnily, Roubini seems to recommend a SYRIZA-style government for Germany, raising wages, pensions, stopping privatizing, helping tax dodgers to get clean at almost no cost.... Maybe, Greece and Germany should swap governments in order to save the Eurozone: Merkel to Athens, Tsipras to Berlin.
Seriously, Roubini should think a bit harder before doling out advice. Germany's economy is running at full speed and employment. Where would it find the manpower for additional "spending on infrastructure and public investment" ? Import a few hundred thousands idle Italians or Greeks to repair Autobahns and modernize school buildings? Apart from such technical trivia, Roubini's advice boils down to inflating the Eurozone economy by making the "healthy" countries in the North as indebted as the "sick" countries in the South.
Mario Draghi's quantitative easing is already an important step toward "southernizing" the Eurozone. His scheme of flooding the eocnomy with cheap money is possibly counter-productive as it started at a moment when the Eurozone had already begun growing. Even without Draghi's scheme, credit is already dirt cheap in Euroland; any serious and trustworthy borrower has already been served. Hopefully, Draghi recognizes that he started the scheme too late and stops it before it can do serious harm. Italians are already suspiciously jubilant about the record low "spread" they owe to their co-national Draghi.