Antonio Fatas is Professor of
Economics at INSEAD, a business school
with campuses in Singapore and Fontainebleau
A quarter of the population is at risk of
poverty or social exclusion, says Eurostat. What is wrong with the EU?
The
statistic you mentioned is a consequence of the financial crisis. Europe
suffered from a deep recession caused by the large imbalances built before 2008
that was then followed by an inappropriate policy response that translated a
recession into a depression.
Why
this has happened is the result of a weak institutional setting to make
appropriate and coordinated policy decisions within the EU but also because of
the ideological bias that European governments (especially those making
decisions) displayed during the crisis.
It has been five years since the outbreak of
the finance crisis. There is still no return in sight to normality. Can the
European project be saved?
As much
as the outcome of the crisis has been a disaster, I remain optimistic about the
European project, partly because there is no alternative. For many historical
and political reasons there is enough support for the European project.
Even in
the periphery, despite the suffering and the overall loss of credibility of
politicians and governments, I do not see strong forces towards moving away
from Europe. Radical parties become popular but so far they tend to lose their
momentum when they get to power or close enough to power.
Why does ideology dominate the macroeconomic
analysis? Don’t we have the knowledge and the tools to get out of the
depression?
I am
not sure I have a good answer here. To be honest I have been surprised during
this crisis about how much ideology and priors about what works and does not
has dominated the political and economic debate.
I am not naive and I
understand that we all come to these debates with our own biases, but what we
have seen during this crisis goes beyond what I expected.
There
are some basic economic principles that I thought were accepted by most because
they are either logical or have been proven right by the accumulated evidence.
And the crisis has, in my mind, provided even more evidence to support certain
economic arguments.
But
this evidence has been ignored. As someone who teaches this basic concepts
often in a classroom, it is hard to understand why they are not understood or
used by European policy makers.
Thank you very much.
Antonio Fatas is the
Portuguese Council Chaired Professor of European Studies and Professor of
Economics at INSEAD, a business school with campuses in Singapore and
Fontainebleau (France).
He is a
Senior Policy Scholar at the Center for Business and Public Policy at the
McDonough School of Business (George Town University, USA) and a Research
Fellow at the Center for Economic PolicyResearch (London, UK).
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