Mr. Obstfeld said in 2012 that, should Berlin agree to backstop the debt of European countries, the eurozone as a whole would be better off if the bailout was unconditional, rather than requiring labor market reforms and budget controls. If Germany failed to bailout out weak southern eurozone members, he believed it would hurt Germany’s economy more than an unconditional bailout.
…The currency union requires stronger integration to overcome its vulnerabilities, Mr. Obstfeld wrote in a study of the lessons from the euro crisis. That means member governments would have to sacrifice far more of their economic sovereignty than they currently allow.
I believe that he said something along the lines of the second paragraph. The first paragraph sounds too extreme for any mainstream economist. I have made a few attempts to find a citation, but without success. Note that the first paragraph also strikes me as somewhat inconsistent with the second paragraph, because the latter seems to imply that he would expect bailed-out countries to have to give up some sovereignty.
In any event, Maury is a nice guy who subscribes to a technocratic view of the world that is quite different from mine. There is a group of economists, heavily represented at the International Monetary Fund, who will tell you that the world’s economic problems are caused by “global financial imbalances” (some countries save too much, others save too little) and that more management by the IMF is the solution. I, on the other hand, am among those economists who think that the IMF logically should have been abolished in 1971, when President Nixon ended the regime of fixed exchange rates.
It is easy to understand why the IMF did not consider me for chief economist.
I just don’t buy this argument. Did our banks have too much sovereignty when The Fed and the Feds pushed them into too much housing debt?
As in, you’ll still get the next crisis. Just that time you’ll add moral hazard and less ability to opt out, in exchange for a loss of sovereignty that won’t head anything off anyway. Is Germany going to lose its sovereignty to lend foolishly?
I always catch myself assuming it is not supposed to be a,non sequitur.
Maybe it is just what the centralists want in exchange for the money with no correlation to preventing a repeat cycle. If that is true then they could even want a,repeat cycle.