♠ Posted by Emmanuel in Credit Crisis,Europe
at 6/01/2010 12:16:00 AM
Merriam-Webster defines "catatonic" this way: of, relating to, being, resembling, or affected by schizophrenia characterized especially by a marked psychomotor disturbance that may involve stupor or mutism, negativism, rigidity, purposeless excitement, and inappropriate or bizarre posturing. Certainly, the Cato Institute is no stranger to accusations of being any of the above through its own faults. While Cato occasionally comes out with useful material, other times it's not quite so credible. It is a longstanding global warming denier despite the overwhelming evidence to the contrary. It also uses reports in a tendentious manner to uphold its preferred viewpoints.Today, we feature yet another fine example of bizarre Cato-tonic posturing. I have previously talked about Euroskeptic President Vaclav Klaus in his failed quest to subvert the passing of the Lisbon Treaty [1, 2]. Now, though, he is back with another episode of bellyaching concerning various Eastern European countries' efforts to join the Eurozone. From the folks at Cato comes this rant from Klaus on...When Will the Euro Collapse? Here are some excerpts:
Of greater interest to non-experts and politicians (rather than economists) is the question of the collapse of the eurozone as an institution. To that question, my answer is no, it will not collapse [so why did you even bother with your Daily Telegraph-inspired title, Klaus?]. So much political capital had been invested in the existence of the euro and its role as a "cement" that binds the EU on its way to supra-nationality that in the foreseeable future the eurozone will surely not be abandoned. It will continue, but at an extremely high price that will be paid by the citizens of the eurozone countries (and, indirectly by those Europeans who have kept their own currencies)...Unfortunately for Klaus, some of us have bothered to read the FT op-ed of the late Slawomir Skrzypek. Like those who looked up the report the Cato-tonic crew cited above, we find that what was left out is telling. The continuation of what Skrzypek said sensibly doesn't lay blame for a loss of competitiveness at the Eurozone's doorstep but at domestic conditions. Here is the missing part:
To summarize, the European monetary union is not at risk of being abolished. The price of maintaining it will, however, continue to grow.
The Czech Republic has not made a mistake by avoiding membership in the eurozone so far. And we are not the only country taking that view. On April 13, 2010, the Financial Times published an article by the late Governor of the Polish Central Bank Slawomir Skrzypek — a man whom I had the honor of knowing very well. Skrzypek wrote that article shortly before his tragic death in the airplane crash that carried a number of Polish dignitaries near Smolensk, Russia. In that article, Skrzypek wrote, "As a non-member of the euro, Poland has been able to profit from flexibility of the zloty exchange rate in a way that has helped growth and lowered the current account deficit without importing inflation." He added that "the decade-long story of peripheral euro members drastically losing competitiveness has been a salutary lesson." There is no need to add anything more.
...Another conclusion from the Greek imbroglio is that there is no substitute for countries’ own efforts to improve competitiveness, boost fiscal discipline and increase labour and product market flexibility – whether or not they are in the eurozone. Hard work brings its own reward. Interest rates on 10-year government debt issued in zloty are now 5.6 per cent – compared with about 7 per cent on 10-year Greek debt.And here is the crux of the matter: for obvious reasons, Skrzypek didn't say that joining the Eurozone was a mistake like Klaus. Rather, Skrzypek advocated sorting out the domestic situation in Poland to make it readier to join the Eurozone in the future:
The necessary structural reforms will, over the longer term, improve Poland’s ability to meet euro entry criteria. But we must temper the wish to adopt the euro with necessary prudence. We should not tie ourselves to timetables that may prove counterproductive. Solid economic growth and sensible policies on debt and deficits are possible both within and outside the eurozone. Nations in a hurry to join the euro may end up missing their overriding objectives. Those such as Poland that do their homework and take their time may end up with a more sustainable economic structure that will make them better equipped for the euro in the long run.So there you have it in plain English. Vaclav Klaus, you sir are Cato-tonic. Ideologically blinded like the rest of them, this disingenuous commentary is sad but not entirely unexpected. As I hope to write about in a future post, there are many, many countries lined up to enter the Eurozone and none wanting to get out for very sensible reasons.
It should be of no surprise to you that Klaus is a global warming denier as well since these Jurassic instincts tend to run together.
UPDATE: This same commentary has appeared in the Wall Street Journal op-ed pages.
