Why does the eurozone crisis continue?

By Vestnik Kavkaza

Recession in the eurozone continues. The EU banking system hasn’t overcome the crisis; the unemployment rate is record-breaking: every third employable citizen of Spain has no job; in Greece it is every fourth citizen. The beginning of July was marked by a government crisis in Portugal where the minister of finance and the foreign minister resigned due to the absence of social support for the austerity strategy.

The head of the Center of European Studies IMEMO of the RAS, Alexei Kuznetsov, thinks that “today the European Union and the eurozone are not under worse conditions than they were several months ago. I am afraid about the long-term prospects of development because situations in certain countries are different in all spheres – the GDP dynamics, the unemployment rate, the state debt. We haven’t seen European unity during the eurozone crisis. Suddenly, semi-domestic conflicts appeared, for example between Germany and southern Europeans. In 2014 new long-term financial prospects start in the EU; one of the major segments is regional policy, and it is not radical again… In words they have done a lot, but nothing has changed radically. And it seems nobody can achieve a smoothing out of existing differences. This is the worst. There will be no collapse, but a wretched existence is guaranteed for several years.”

“The austerity regime which was launched by difficult countries of the eurozone is heavily criticized,” Olga Butorina, the senior scientist of the Institute of Europe of the RAS, says. “Many politicians and populations in the countries are against it. Nobody is happy with Brussels’ and the IMF’s pressure. The problem is that the European Monetary Union unites countries with different traditions of macroeconomic management. When the economic monetary union was founded, it was thought that national differences were not significant and could be overcome due to the reasonable and stable policy of price stabilization which Germany provided, unlike the semi-inflatory policy which was typical for the southern countries. Now it appears that national characteristics are closely connected with not only national production culture, but in general with the whole structure of production. The price stabilization policy of very low inflation, which was provided in Germany in the post-war period, was combined with a high level of industrial and producing culture in the country, a very developed industrial potential and the big export potential of Germany. The southern countries had a different scheme. As the countries were losing competitiveness, their currencies devalued. So, the southern countries actually “tax” their trade partners, including Germany, and it was an instrument of stabilization of their national economies. When the euro was launched as a common currency, the stabilizer turned off.”