21. Economist Maria-Carmen Guisan in New York Times. Room for Debate: Austerity Policies are not working in Europe, 12th November of 2012.

Economist Maria-Carmen Guisan in NY Times: Room for Debate, 2012

Should Germany abandon the Euro?. Room for Debate NY Times 12th November 2012

 An interesting debate about Euro and EU economic policies appears at the NY Times Foro "Room for Debate".

Contributions by

Charles Dumas, Lombard Street Research

Aristides N. Hatzis, University of Athens

Stefan Homburg, University of Hannover

John Cotter, University College Dublin

Maria-Carmen Guisan, University of Santiago de Compostela, Spain

Veronique de Rugy, George Mason University

 Contribution by Maria-Carmen Guisan to NY Times Foro 2012:

http://www.nytimes.com/roomfordebate/2012/11/12/should-germany-leave-the-euro-zone/germany-should-focus-less-on-austerity-in-the-eu

Austerity Measures Are Not Working

Maria-Carmen Guisan, University of Santiago de Compostela, Spain

Loans from countries with a trade surplus, like Germany, to countries with trade deficits, like Spain, are necessary to keep the E.U. functioning.

E.U. policies should address increasing development throughout the entire E.U. instead of pushing excessive austerity, which only results in stagnation and recession. The E.U. should foster industrial development particularly in countries with low levels of industrial value-added per capita, and avoid the industrial stagnation that the E.U. has experienced over the last seven years (2005-2012). Such policies would improve the quality of life in every country and increase German sales.

LINKS TO Maria-Carmen Guisan contributions to OTHER INTERESTING DEBATES ON EUROPEAN ECONOMY

Year 2012: Friends of Europe.

The Future of Europe - European Policy Summit, Roundtable  11/10/2012

The State of Europe: Escaping thedoldrums

 There was also direct input from Europe's citizens through Debating Europe, our online platform that enables citizens to talk directly to decisionmakers. Please find below questions from EU citizens that were put to the roundtable during the debates.

Session I - Questions from Christos and Remi via Debating Europe:	Session I - Questions from Lluis and Rui via Debating Europe:
Session II - Questions from Maria Carmen and Pedro via Debating Europe:	Session III - Questions from Karsten and Martin via Debating Europe:

Video of Maria-Carmen Guisan in the Debate of FRIENDS OF EUROPE

The Video of que questions to that Session of Debating Europe  in year 2012 were  at: http://vimeo.com/51444369 but in the update of year 2020 we have found a "broken link".

Year 2013: Maria Carmen Guisan about Chipre: Voice of Galicia/Voz de Galicia 22nd March of 2013. Article in Spanish at the journal Website
Article in English here:
Europe must solve the Cyprus problem without taxing bank deposits
It is not good news that the European Union, with the banking crisis in a small country like Cyprus, revealed an overreaction of immediate discipline that induces fear for the confiscation of part of bank deposits in the country, since apart from the damage to Cyprus citizens therefore causes concern in other countries may fear similar measures.
The alarmist language (rescue, insolvency, sequestration, etc.) With which EU currently deal with the financial problems of the European Union, is absurd and exaggerated. Much of the EU countries, including Cyprus and Spain which have a very similar per capita production, are well above world average income and therefore have a reasonable ability to deal with their problems without resorting to such language or excessive austerity measures. Almost 5 billion people in the world have a per capita income that is less than 1/3 of which are Cyprus and Spain, and do not reach the 1 billion those developed countries with  an income per capita above these two countries, therefore adopt standard measures that can solve the problems effectively and without twitching.
Retrieves the confidence of depositors in savings banks is very important to overcome this economic crisis, so taxing savings is a totally undesirable measure that generate uncertainty about the integrity of bank deposits.
Solving the problem of Cyprus banking, which accounts for less than 0.2 per cent of the European economy, does not seem to be a task too complicated, so the EU bodies should be able to adopt normal measures, postponed reasonable periods, without aggressive interventions which generate fears for citizens. If the cause of the banking problems of Cyprus comes from its exposure to Greek bonds devalued, it is clear that is not the fault of its citizens but of poor design of European regulations concerning the safety of bonds of its member countries.
The costs of resolving a problem of insufficient financial capacity must be allocated appropriately, and in reasonable time, among the actors that have generated this lack of capacity. The part that has to be assumed by all the citizens of a country should be integrated into the general tax policy principles of equity and  moderation, and not applied in an arbitrary and unfair way to savings depositors.
The dream of a united Europe to cooperate amicably for the economic development of their countries appears, every day, more broken. It seems advisable that the policies of the European Union should be more prudent and effective measures to overcome the crisis, instead of causing concern and distrust of citizens.
Source: Maria-Carmen Guisan. Professor of Economics. Voz de Galicia 22nd March 2013.

Other selected articles on criticisms to EU excessive austerity policies:

The Guardian:

Europe's austerity: big worries, small thinking

Plan A is now acknowledged to be a failure; yet it remains the default option, just extended far into the future

• Editorial
• The Guardian, Wednesday 29 May 2013 21.20 BST

http://www.guardian.co.uk/commentisfree/2013/may/29/europes-austerity-big-worries-editorial

NY times Paul Krugman on 15h April of 2012:

Europe’s Economic Suicide

http://www.nytimes.com/2012/04/16/opinion/krugman-europes-economic-suicide.html?_r=0

 

18. Impact of Trade Deficit on crisis and drop of Industrial production in the USA and 5 European major countries: France, Germany Italy, Spain and UK

Graph 1. Real Value-Added of Industry per capita in France, Germany, Italy, Spain, the United Kingdom and the United States. Source: Elaborated by Guisan(2011) from OECD statistics.

Graph 2. Trade Balance of EU27 and industrial real value-added of EU5. Source: Elaborated by Guisan(2011) from Eurostat Statistics. Left axis for Extra-EU27 Trade Balance. Right axis for Value-Added of Industry. Source: Elaborated by Guisan(2011) from Eurostat and OECD statistics.

Industrial production in the Europea Union for 2000-2010: The lack of enough european policies of support to industrial production have led to decreasing real Value-Added of industry and increasing trade deficits in the balance of goods of EU27, as it is shown in the graph 2 above.

The impact of wrong policies on industrail development of many European countries has been very strong for the period 2008-2010, and some politicians and citizens are showing concern and disagreement with the EU policies in this regard. Diminution of industrial production implies negative consequences for the European Union such as lower production in other sectors, more unemployment and increse of international debt.

Graph 1 shows the evolution of real Value-Added of industry per capita in the 5 major European Union countries (those with highest levels of Gross Domestic Product and Population) for the period 1985-2010.

European Union problems: The European Union documents usually assumes that "The EU´s external trade policiy contributes to Europe´s competitiveness in foreign markets" and includes declaration as the following one: "The EU has a common trade policy whereby the European Commission negotiates trade agreements and represents the EU´s interest on behalf of its 27 Member States. The European Commission consults Member States through an advisory committee which discusses the full range of trade policy issues affecting the Community including multilateral, bilateral and unilateral instruments". In spite of these declarations many people think that policies for industrial development and less deficit should be addressed.

It is clear that the European public opinion and many leaders do not agree with those trade policies that have led to increase indebtness and diminution of industrial development. Some reactions are active in France and the United Kingdom, and surely in other countries, which may be of interest to recover industrial development and favor a balanced trade of the European Union with extra-UE partners, or at least to diminish the trade deficit.

Trade deficit in EU27: In fact in year 2009 the trade balance was negative in 17 countries, positive in 10, and negative for EU27 as a whole.

Countries with positive trade balance of goods in 2009: Belgium, Czec Rep., Denmark, Finland, Germany, Hungary, Ireland, Netherlands, Slovakia and Sweden.

Countries with negative trade balance of goods in 2009: Austria, Bulgaria, Cyprus, Estonia, France, Greece, Italy, Latvia, Lithuania, Luxembourg, Malta, Portugal, Romania, Slovakia, Spain and the United Kingdom.

The most positive balance in Euros per capita, more than 1000 € in year 2009, corresponded to Belgium (1194), Denmark (1465), Germany (1644), Ireland (8568), Netherlands (2380).

The most negative balance in Euros per capita, less than -1000 € in year 2009, corresponded to Cyprus (-5918), Greece (-2531), Luxembourg (-4940), Malta (-3283), Portugal (-1787), Spain (-1081) and the United Kingdom (-1513).

Crisis and solutions: The European Union should show concern about high deficits in extra-EU trade, particularly if those deficits lead to diminution of industrial production per capita, particular if dismantling EU´s industry is not accompanied by an increase in the International Investment Position or in other variables that can guarantee sustained development. European Economic Policies should be adressed to diminish deficit in extra-EU balance for the EU as a whole and to make sustainable the intra-EU imbalances among countries. Sustainability presents to options: 1) all EU countries would promote industrial development to a degree enough to guarantee real convergence with the most advanced economies. 2) European Unions would guarantee flows of credit from EU countries with superavit to EU countries with deficit, like among different regions of a single country. European Parliamente and Commission may choose a mix of both options, but they should offer to all EU countries opportunities for sustainable development.

Selected newspaper article on industrial problems in EU countries:

Telegraph: Where will Britaint´s manufacturing revival come from?, by Louisa Peacok, 2nd June 2011.

17 Crisis, Development, Voice of Good Economists in Greece, Portugal and Spain, and comparison with other OECD countries. Euro-American Association Development Report 2011.

Source: Guisan(2011) based on OECD National Accounts Statistics

Greece: beautiful Egina

The graph shows real value-added per capital in industrial sectors. One of the main causes of economic crisis in Greece, Portugal and Spain is their low level of industrial development in comparison with more advanced OECD countries. Countries with low levels of industrial production per head very often experience twin deficits: 1) unbalanced foreign trade, with more imports than exports, and 2) government deficit because, as a result of the low level of industrialization, income from taxes and other sources is below the amount needed to provide satisfactory levels of public services. The attemps to foster production in building and services without a proper development of industry per capita, like it has happened in Spain and other countries for the period 1995-2007, is usually unsustainable and lead to economic crisis as it has happened in Spain for the period 2008-2010.

There are good economists in those countries but unfortuantely policy makers usually do not listen to their good advice. People do not expend too much, but instead most people in those countries work hard and expend little. It is not fair to throw blame on citizens for the causes of the crisis when the main cause is the lack of good economic policies, at national and European Union level, in order to foster industrial development.

Here we will include references to interesting articles and Websites where good economists give useful advice to improve development and avoid economic crises in those countries.

LISTEN TO THE VOICE OF GOOD ECONOMISTS AND GET OUT OF THE CRISIS

Recommended readings about crisis and development in Greece:

"Development is the only solution. Seventeen Proposals for a New Development Stategy", Azariadis, C.(Washington Universitry, MO, USA), Ioannides, Y. (Tufts University,MD,USA), Pissarides, A. (LSE, London UK) (2010).
"Is there a strategy that can free Greece from the grip of today´s unprecedental economic and social crisis and place her on a path of sustainable development and solid prosperity? The signers of this article believe that the answer is yes if the country is willing to go beyond the measures of fiscal austerity and market reform advised by the EU-ECB.IMF "troika". We predict that market reforms will not succeed unles they are supplemented by powerful pro-growth policies. The real choice of Greece is not between solvency and default or between reform and stagnation; it is between prosperity and underdevelopment". See full article

Website on Greek Development: http://greekeconomistsforreform.com/

Recommended readings about the positive impact of manufacturing on development, through intersectoral relationships in Europe, America and other areas:

Guisan, M.C.(2006).”Industry, Foreign Trade and Development: Econometric Models of Europe and North America, 1965-2003” International Journal of Applied Econometrics and International Development, Vol.3-1. Article free on line: click on "Download"" at: http://ideas.repec.org/a/eaa/ijaeqs/v3y2006i1_1.html

Guisan, M.C.(2007).”Industry, Foreign Trade and Development: Econometric Models of Africa, Asia and Latin America, 1965-2003” International Journal of Applied Econometrics and International Development, Vol.4-1. Article free on line: click on the Abstrac page and then on "Download"" at the Web site of Journal IJAEQS.http://ideas.repec.org/s/eaa/ijaeqs.html

GUISAN, M.C. and AGUAYO, E. (2007). "Production by Sector in The European Union: Analysis of France, Germany, Italy, Spain, Poland nnd The United Kingdom, 2000-2005". Regional and Sectoral Economic Studies, Volume 7-1. On line at: http://ideas.repec.org/a/eaa/eerese/v7y2007i7_3.html

Other interesting articles at our journals AEID and RSES