Mending A Bad Marriage In Martin Wolf's The Shift And The Shocks

Mending a Bad Marriage is the title of chapter nine of the book The Shift And The Shocks written by the English economic journalist Martin Wolf. In this chapter Wolf makes an interesting speculation on the future of the European Union. Wolf compares the European condition to a bad marriage, and predicts the different results that will have the possible legacy of the honeymoon, the endurance of the bad marriage, and the divorce. Finally, the author suggests some interesting policies that the EU should implement in order to save the marriage, and give a better future to their kids. From an International Affairs point of view, speculation should be avoided in order to create a more concrete and academic analysis. Nevertheless, it is important
He points out that the EU has failed its economic policy for two main reasons. First, as Paul Krugman also claims, the EU adopted a unitary currency even though it did not have the tools to support a common currency. In order to support his thesis, Wolf compares the EU to its most similar case, the US. Without a doubt, the EU does not present any of the fundamental principles that were able to support the common currency in the US. Second, the EU answered to the depression adopting the Theory of Expansionary Austerity, which has stretched the rout to recovery and worse the effects of the depression.
Wolf is able to prospect the consequences of abandoning the Euro and the resulting adoption of national currencies. He states that without a doubt the process is irreversible; such a case will be a disaster for all European economies and might lead to a world crisis. Most importantly, he admits that the European project is fundamental in order to ensure peace and stability in the European continent and the rest of the world. Since the world was created the European continent has been the theater of the hundreds of conflicts and even lead the world to two World
First, some European countries must adjust their public spending and move to 3-4 % inflation rate. I personally do not agree that a 3-4 % inflation rate would not be a disaster, as Wolf states in his essay. Such an inflation rate can lead to big imbalances and it could be difficult to control the further rise of the inflation when the European economy will finally grow again. Second, the ECB must play an active role in order to lower the interest rates of the sovereign national debt bonds when the spread hits dangerous points. Fortunately, Mario Draghi has already responded to this point and implemented the Quantitative Easing, which will ensure sovereign national debt bonds from market speculation. Third, The GIPSI countries must lower their public debt, and make it more sustainable. For example Italy cannot sustain anymore a public debt that is 130% of its GDP. Fortunately, the percentage will positively adjust when the economy will grow again. Nonetheless, governments should stop to use accounting tricks to adjust their balances. Most importantly, governments must stop to alleviate the symptoms rather than cure the sick economy. What is keeping the GIPSI countries from growing is the widespread corruption and tax evasion. Therefore, these should be the main