Európolis

Comentando la inutilidad económica de las grandes reuniones del G7/G8, Wolfgang Munchau critica con relativa severidad, en Financial Times, el sonambulismo de “eurolandia” y da una punzada irónica a las ilusiones españolas.

Follow up:

A juicio de Munchau, tras las apariencias a corto plazo, Alemania e Italia, economías exportadoras pudieran ser víctimas de la relación euro/dólar, corriendo el riesgo de la recesión, dentro de unos meses.

España, por el contrario, continúa, pudiera continuar viviendo en la ilusión de su “burbuja inmobiliaria”, “creyendo que vive en una economía sana”.

Financial Times, 17 jul. 06:

The case for a Group of Four has new urgency
By Wolfgang Munchau

The multiple failures of the St Petersburg summit raise the question whether the Group of Eight leading industrial nations still serves a useful purpose. The reason is not a lack of important issues that require global co-ordination. On the contrary, rarely has there been a greater need for joint action. But no matter whether you want to rescue a failing trade round, improve energy security or influence global financial markets, the G8 is the wrong group.
The G7/G8 and its precursors were set up specifically to address global imbalances after the breakdown in the early 1970s of the Bretton Woods system of global monetary management. By and large, the G7 did a reasonable job in its first 15 years, but its subsequent agenda became too diffuse. Today, the world is still plagued by global imbalances. To address them, we need a Group of Four, consisting of the US, the eurozone, Japan and China. This proposal is far from new, but there is a renewed urgency since the problem of global imbalances has become more acute in the last few years. The G4 is not only the world's four largest economies. Far more important is that an orderly adjustment will require specific action by each of these four.
This is not just a matter for the US and China. Several theories of global imbalances blame the two countries as the main source of global imbalances – because of the fall in US savings, China's exchange rate policy, or a built-up excess capital stock in the 1990s that caused unbalanced economic growth in Asia.
Just as there are different explanations for global imbalances, there are also different scenarios through which they might unwind. Most involve significant devaluation in the dollar's real exchange rate. The question is not how to prevent this adjustment, but how to sustain global economic growth during the adjustment process and afterwards. Without active participation by the eurozone and Japan, the world's second and third largest economies, this would be difficult to achieve.
Unfortunately, this is not obvious to everybody in those countries. Jean-Claude Juncker, prime minister of Luxembourg, and also president of the euro group of finance ministers in the eurozone, said a month ago: "As the eurozone is not at the origin of the global imbalances, it is not up to us to take any initiative." It is difficult to conceive of greater complacency. Mr Juncker is right only in a trivial sense. The eurozone's current account is indeed close to balance. But this is a freak mathematical accident, not a reflection of macroeconomic stability. For 2007, the European Commission forecasts current account surpluses for Germany of 4.1 per cent of gross domestic product, for the Netherlands of 6.7 per cent and for Luxembourg of 9.9 per cent, while Spain is headed for a current account deficit of 9.2 per cent, Portugal of 9.6 per cent and Greece of 7.8 per cent.
A strong appreciation in the euro/dollar exchange rate, a probable consequence of global adjustment, would constitute a huge asymmetric shock for the eurozone. The eurozone's traditional exporters, such as Germany and Italy, would face recession. Spain, by contrast, would continue to enjoy its housing price bubble while pretending to be a fundamentally healthy economy.
If the adjustment in the euro/dollar exchange turns out to be small – say up to 10 per cent from present levels – monetary and fiscal policy might be effectively deployed to stabilise the eurozone economy, no matter how asymmetric the shock. If the adjustment is bigger – say 20 to 40 per cent – the eurozone will almost certainly fall into recession, dragged down by Germany and Italy. This is the kind of crisis the eurozone would want to avoid at all costs.
David Vines, economics professor at Oxford university, made an interesting observation at a conference on global imbalances in Beijing last week, organised by the Asia-Europe Economic Forum, a group of economists. He said it was theoretically possible to think of a scenario under which Europe could afford to be complacent. This would require the US and China not only to adopt the correct policies, but to do so simultaneously. The US would increase its national savings, while China and other emerging economies would allow their currencies to appreciate against the dollar. This would neutralise the effect of the adjustment on the eurozone.
Judging from the tone of Chinese officials, the probability of the US and China doing the right thing at the right time is close to zero. China and other Asian countries may eventually adjust their domestic policies but probably not sufficiently, nor in time.
The main point for policy co-ordination at G4 level would be to prevent a global recession that might result from a disorderly adjustment. This would be in everybody's interest, even though failure to co-ordinate would not hit everybody to the same extent. The eurozone clearly stands to lose the most if the adjustment is large. It is precisely for this reason that the eurozone may want to raise the initiative even if it is not the main source of imbalances itself.