Dealing with North-South asymmetries within the Eurozone – Interview with Professor David A. Vines

Jun 25th, 2010 | Category: Interviews

David A. Vines, (Prof.), University of Oxford

June 11 2010


ELIAMEP: Professor Vines thank you very much and let me welcome you once again to ELIAMEP’S 7th annual European Seminar. I would like to ask you one question. How would you realistically expect the Eurozone to confront the internal imbalances between the north and the south?D

David Vines: Well it’s a really urgent question and there are two issues that are necessary to deal with. First of all, there needs to be some clearer rules as to how countries in the periphery, in the south, deal with their positions of un-competitiveness. So that countries, like Greece, do not spend too much to the point that they end up in a crisis. This is true of Greece, different for Spain. But still, there is a need for understanding what the necessary policies are. For the surplus countries, it’s very different. These countries, particularly Germany, are deliberately organizing a cutting of their costs (…)and then are spending too little. And if this continues, Europe will end-up with too little demand, structurally going forward, and that doesn’t make up for a well designed system.

ELIAMEP: No that’s not good. But then, so do you see, a risk of a two currency blocks developing in the EU? And if so what is needed in your opinion to avoid this?

David Vines: I don’t see this. Certainly [this is] not something that we should prepare for. The whole structure of the European Union was to bring North and South Europe together, France and Germany, and it would be a real tragedy if we ended up in Europe with two currency blocks. But the two things I described a moment ago, are what is necessary to ensure that this doesn’t happen.