Rogoff y Issing. Dos escuelas

En el Financial Times de hoy, destaco dos artículos sobre la crisis extrema que estamos viviendo, que representan dos culturas económicas diferentes: la escuela americana (Rogoff) y la Alemana en estado puro (Otmar Issing). Los dos dicen cosas distintas, pero los dos tiene razón ¿Cómo puede ser eso? Porque parten de premisas distintas, y los dos desarrollan sus razones y llegan a conclusiones distintas, pero veraces dentro de la premisas que han elegido. Para Rogoff, ya lo vimos hace poco, no hay más remedio que aceptar unos años de inflación superior a la del 2% para acelerar el trasvase de recursos de acreedores a deudores, para que estos, a su vez, puedan pagar a aquellos.
Para Otmar Issing, el problema de euro es que fue un error como se montó, pues debería haber sido precedido de una unión política auténtica. Y los intentos de ahora de unificación fiscal y emitir un bono único no van a favorecer una unión política, todo lo contrario: van a llevar al fracaso porque los costes de los países frugales (Alemania) aumentarán, y los países endeudados tendrán más incentivos para eludir sus responsabilidades. Lo que dice del papel original del BCE y en lo que puede convertirse es muy interesante. El BCE fue fundado mediante tratados internacionales, Y tenemos una larga experiencia en conculcarlos. El BCE, creo, fue creado con una reserva mental de los fundadores: Alemania, Holanda y cía deseaba un Bundesbank II, sin fisuras, Y Francia y los demás querían simplemente una ganancia de credibilidad para que bajara el tipo de interés. Ahora que esos dos ideales están crudamente enfrentados, podemos hacer caso a la predicción de Simmon Johnson  ( nuevo-cambio-de-rumbo.html) de una división creciente en el seno del Consejo del BCE.

FT1 Kenneth Roggoff

The most direct remedy, of course, would be to find expeditious approaches to cleaning up balance sheets whilst maintaining the integrity of the financial system. In the case of Europe, this involves very large debt writedowns in the smaller periphery countries, combined with a German guarantee of central government debt in the rest. In return, Germany will have to receive a disproportionate share of fiscal power in a more deeply integrated union, for at least as long as it is making substantial transfers. In the case of the US, policymakers need to offer schemes to write down underwater mortgages, perhaps in return for other concessions such as giving the lender a share of any future home price appreciation.

If direct approaches to debt reduction are ruled out by political obstacles, there is still the option of trying to achieve some modest deleveraging through moderate inflation of, say, 4 to 6 per cent for several years. Any inflation above 2 per cent may seem anathema to those who still remember the anti-inflation wars of the 1970s and 1980s, but a once-in-75-year crisis calls for outside-the-box measures. Ideally, both the ECB and the Fed would engage in expansionary policy, as otherwise there could be profound exchange rate consequences. Of course, simply trying to stabilise exchange rates without overall monetary expansion – as the G7 seems to have proposed – is far less helpful.

Last but not least, monetary and financial solutions must be buttressed by structural reforms, including to unsustainable old-age pension and healthcare funds.

If policymakers can at least get the diagnosis right, it would be a major step on the road to recovery. After a long series of half-steps and mis-steps, policymakers’ options are narrowing, but they are not out of bullets. Debt writedown schemes, temporarily elevated inflation and meaningful structural reform can still substantially shorten the normally long window of slow post-financial crisis growth.

At this critical juncture, leaders must not only get off the sidelines, but must finally address the problems of a Great Contraction – not a large but otherwise conventional recession.

The writer is professor of economics at Harvard University and co-author, with Carmen Reinhart, of ‘This Time is Different: Eight Centuries of Financial Folly’

FT2 Otmar Issing 

The crisis of European economic and monetary union seems to confirm a long-standing belief that monetary union cannot survive without political union. I belonged to a group that argued that the euro should have been preceded – or at least accompanied – by political union. Many observers are now interpreting the European Union’s manifold financial rescue measures to support Greece as a step in the direction of political union. Therefore, should people like me not be happy with this development?

In fact, the opposite is true. Connecting the initial idea of a political union with developments currently under way is both logically flawed and politically dangerous. In short: a consistent concept of a political union should be based on a constitution, and imply a European government controlled by a European Parliament, elected according to democratic principles.

for help – conditions which imply a kind of European control over elements of member state governments.

If these conditions do trigger reforms – which in many countries is long overdue – that would be welcome. However, the fact that a member country can be assured that its membership of the euro – even in the case of permanent violations of the rules – will be saved at any price causes moral hazard and creates an obvious potential for blackmail.

The decisions taken at the last European crisis summit on July 21 greatly extended the powers of the European Financial Stability Facility and brought new help for Greece. This increase European involvement in domestic policymaking. But this is not a move in the direction of a true political union. It is a dangerous step, and one which will end up dividing Europe.

Most observers rightly interpret this increasing shared fiscal liability as a step in the direction of a European common bond. The idea of issuing bonds which all member states of the eurozone guarantee insofar seems sensible, as it would immediately lower interest rates for the highly indebted countries. However, there is a problem too, given it would also lead to higher interest rates for those countries that enjoyed credibility with financial markets in the past. Those who claim that this effect would be small succumb either to an illusion or deliberately underestimate this risk. Considering the amount of debt which over time would become “common” for each country, it is hard to overestimate the interest risk for the hitherto responsible debtors.

A common bond would also immediately relieve some countries of their burden of a record of fiscal irresponsibility. A stronger case of free riding can hardly be imagined. Lack of fiscal discipline is rewarded, while fiscal solidity is punished. The implied transfer of taxpayers’ money would also take place without the involvement of national parliaments – a clear violation of the fundamental democratic principle of “no taxation without representation”.

Suggestions as to how one might control and limit the issuance of such bonds are unconvincing. Almost all treaties promising European fiscal discipline have been broken time and again. The worst example was delivered by France and Germany in 2002-03, when they violated the Stability and Growth Pact, and even organised a political majority against the application of its rules.

All efforts to strengthen the pact are of course highly welcome. However, the bad experience since the start of Emu, but also any analysis of the implied incentives in the political process, deliver a clear message: political control of national fiscal policies from the European level will always be compromised by different interests. The idea that a new European process to transfer taxpayers’ money that is neither democratic nor governed by principles that support fiscal solidity would move in the direction of political union is totally misleading.

Emu is based on rules enshrined in international treaties. The euro was created as a “depoliticised currency” – its stability entrusted to an independent central bank with a clear mandate to maintain price stability. Any attempt to “save” monetary union via agreements which transfer sovereignty to a European level, where violations of fundamental treaties have become a regular event, lacks any logic. In the end it will only further alienate the people from Europe itself.

A monetary union with a stable euro can only survive if central bank independence is fully respected. This implies that the European Central Bank abstains from fiscal policy actions. Yet to change the “no bail-out” clause ever more in the direction of a bail-out regime is not a step towards a democratically-legitimised political union. It is a move on a slippery road to a regime of fiscal indiscipline drowning hitherto solid countries in the morass of over-indebtedness.

This type of political union would not survive. Its collapse would be brought by resistance from the people. In the past cries of “no taxation without representation” have brought war. This time the consequence would be to threaten the collapse of the most successful project of economic integration in the history of mankind.

The writer is president of the Centre for Financial Studies and a former member of the European Central Bank’s executive board