Europe’s Orphan: The Future of the Euro and the Politics of Debt; Between Debt and the Devil: Money, Credit, and Fixing Global Finance

In This Review

Europe’s Orphan: The Future of the Euro and the Politics of Debt
By Martin Sandbu
Princeton University Press, 2015
336 pp.
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Between Debt and the Devil: Money, Credit, and Fixing Global Finance
By Adair Turner
Princeton University Press, 2015
320 pp.
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These two books, the first by a noted Financial Times commentator and the second by a former British business leader and financial regulator, challenge two pillars of conventional wisdom about Europe. First, they deny that the so-called euro crisis had anything to with the euro itself. Sandbu goes so far as to view the euro as a sound currency that even the British should adopt. Rather, they argue, the debt crisis resulted from the bad macroeconomic policy choices of eu member states, namely, a focus on fiscal austerity, high interest rates, and debt repayment. Second, both authors reject the view that the eu will need to establish a fiscal and economic union to fully recover. Rather, they claim, EU governments simply need to spend more, loosen their monetary policies, and restructure their debts. This would be good news for Europe, because the solution would be so simple, even pleasant, to implement. It would be bad news for utopian technocrats in Brussels, who for five years have tried to convince everyone that the only solution to the shortfalls of European federalism is more federalism. 

These provocative and insightful arguments are particularly valuable at a time when austerity retains its intellectual luster despite its manifest failures. Yet Sandbu’s and Turner’s analyses both omit the politics behind EU decision-making. Saying that governments should pursue different fiscal and monetary policies is tantamount to blaming the crisis, albeit indirectly, on Germany, for not wanting to change course, and on the eurozone institutions that Berlin deliberately helped create in its image, for not letting any other countries adopt alternative policies, either. As Turner states more clearly than Sandbu, if Germany will not budge, it would be better to break up the eurozone than to tolerate permanent stagnation in the EU.

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