Crafts, N., (2013), “The Eurozone: If only it were the 1930s”, VoxEU, 13 December.
This column argues that the legacy of public debt resulting from the crisis in the Eurozone is a serious threat. Both the size of the problem and the options to address it make life much more difficult for policymakers than was the case in the late 1930s after the collapse of the gold standard. For some countries, a ‘subservient’ central bank might be preferable to the ECB.
The 1930s deservedly have a bad name. It is hard to imagine that a decade that included the Great Depression and a major de-globalisation of the world economy, and culminated in WWII could be other than notorious. And yet, compared with struggling Eurozone economies today, the economic situation in Europe in the later 1930s was in many ways more promising. This is particularly true of the aftermath of public debt and the difficulty of dealing with it.
As is reported in Table 1, to modern eyes, public-debt-to-GDP ratios in European countries were remarkably low at the end of the 1930s. There were several reasons for this. These include low pre-crisis debt levels, the weakness of the automatic stabilisers and the eschewing of fiscal stimulus in the crisis, and the collapse of the gold standard.
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Σχετικές Αναρτήσεις
- Mody, A., (2013), “The looming lost decade”, Bruegel, 18 December.
- De Bromhead, A., Eichengreen, B. and O’Rourke, K., (2012), “Right Wing Political Extremism in the Great Depression”, University of Oxford, Discussion Paper no. 95, February.
- Bennhold, Katrin, (2012), ‘What History Can Explain About Greek Crisis’, The New York Times, 6 June.