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Questo articolo è stato pubblicato il 14 febbraio 2012 alle ore 16:59.


WASHINGTON, DC – It is now clear that the eurozone crisis will continue well into 2012, despite early February’s recovery in stock markets. Negotiations between Greece and the banks over Greek sovereign debt may yet be concluded, but sufficiently wide participation by banks in the deal remains very much in doubt. Meanwhile, the International Monetary Fund has raised the issue of official-sector debt reduction, possibly even by the European Central Bank, sending the message that a haircut for private bondholders will not be enough to return Greece to financial sustainability.

The IMF’s concerns are valid, but the Fund’s idea is being resisted fiercely, owing to fears of political contagion: other debt-distressed eurozone countries might press for equal treatment. Moreover, the promised increase in IMF resources that would allow it to build a stronger firewall against financial contagion has still not arrived. And all of the changes agreed upon for the European Stabilization Fund (ESF) and the European Stability Mechanism (ESM) have yet to be implemented.

Of course, some positive steps have been taken. The ECB’s generous provision of liquidity to European banks at only 1% interest for up to three years has prevented a banking crisis from piling on top of the sovereign-debt crisis. But that initiative has not succeeded in reducing the problem countries’ longer-term borrowing costs to levels compatible with their projected growth rates: there is just too much long-term uncertainty, and growth prospects are simply too discouraging. Indeed, in mid-January Standard & Poor’s downgraded AAA-rated France and Austria, in addition to seven other eurozone countries – Slovenia, Slovakia, Spain, Malta, Italy, Cyprus, and Portugal.

It now seems clear to almost everyone that one key challenge facing the eurozone stems from the fact that it is a monetary union without being an economic union, an arrangement that has no counterpart anywhere. As a result, divergences in production costs over time cannot be compensated by exchange-rate adjustments.

In the absence of somewhat higher inflation in the surplus countries, say, 4% a year, adjustment requires deflation in the crisis countries to bring about a noticeable relative decline in production costs over time. In practice, such deflation can be achieved only at the cost of high unemployment and social distress. It is therefore unclear whether the current strategy of combining austerity and deflation is politically feasible, which explains the huge uncertainty hanging over the entire eurozone.

Somewhat higher inflation in the surplus countries and larger cross-border resource transfers would give the deficit countries more time, allowing for structural reforms to produce results and reducing the need for deflation. But Northern European surplus countries reject such an approach, fearing that it would weaken the pressure on Southern European debtor countries to undertake structural reforms in the first place.

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