The European Magazine: Conversations, Interview with Philippe Legrain, “Germany is undermining future growth”, 20 Σεπτεμβρίου 2014.
Europe is experiencing one of its biggest crises ever. As former chief economic adviser to Manuel Barroso, Philippe Legrain was right at the heart of it. He told Christoph Hosang why the policy response to the eurozone crisis has been catastrophic and what kind of alternative approach is needed.
© Private Photo
The European: Mr. Legrain, the eurozone has grown by just 0.7 percent over the past 12 months, compared with 3.2 percent in the UK and 2.4 percent in the U.S. None of the bloc’s three largest economies recorded growth: France stagnated, Germany contracted, and Italy fell back into recession. Have the crisis policies failed?
Legrain: Yes. The catastrophic policy mistakes of eurozone policymakers, largely driven by Merkel and Schäuble, caused an unnecessarily long and deep recession – and now the eurozone is stagnating. The eurozone is performing worse than the United States, which has been growing since 2010, and worse than Europe was at this point in the 1930s. It’s tragic.
The European: German Finance Minister Schäuble heavily contests this view.
Legrain: He would do. Schäuble is one of the main engineers of the EU crisis response and therefore has a vested interest in claiming that those policies are successful.
“Drained of life by zombie banks”
The European: How would you then assess the current situation of the eurozone?
Legrain: The eurozone is nowhere near achieving its pre-crisis GDP, employment, and real wage levels. Relative to the 2% a year growth one might have expected in normal times, the shortfall since 2008 is even greater. Instead of growing by roughly six times 2%, so 12%, some economies are down by 10% and in the case of Greece by 25%. Germany’s performance isn’t that impressive either: it has grown by only 3.6% since early 2008, whereas Sweden, Switzerland, and the United States have all managed to double that.
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