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Anorak | A hearty well done to the European Union for boosting unemployment to Sub-Saharan levels

A hearty well done to the European Union for boosting unemployment to Sub-Saharan levels

by | 13th, May 2013

Greece Financial Crisis

THE skill with which the EU has been managing the wider economy is shown delightfully in these new figures from Greece :

Overall unemployment has risen to an all-time high of 27 per cent, data showed on Thursday, while joblessness in the 15-to-24 age group jumped to 64.2 per cent in February from 59.3 per cent in January.

A 27% unemployment rate is higher than the United States had at the worst level of the Great Depression. And a 64% youth unemployment rate: that’s more like some godawful shanty town in the wilds of sub-Saharan Africa than anything else.

So how did this actually happen?

Essentially, because the politicians ignored all the economists. Yes, Germany, France, war, never again, continent of peace. But when they first started to discuss the euro the economists did point out (Robert Mundell and Milton Friedman among them) that it would only work if it was an “optimal currency area”. In this case, perhaps Germany, Austria and Benelux. Trying to add in places like Greece and Spain etc just wasn’t going to work.

The reason being that an optimal currency are reacts pretty much the same way to some external change in the economy. Doesn’t really matter what that change is: a change in the price of oil, in interest rates, whatever. For example, a country that lives by exporting wheat will have a different reaction

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Posted: 13th, May 2013 | In: Money Comments (3) | Follow the Comments on our RSS feed: RSS 2.0 | TrackBack | Permalink