Montesquieu Institute: from science to society

The euro is not in crisis

Thursday, November 22 2012, 11:31

THE HAGUE (PDC) - 'The euro crisis is an inappropiate name for the European sovereign debt crisis.' This argued Frans van Nispen tot Pannerden, Associate Professor of Public Administration during the third lecture of the series of lectures of the Montesquieu Institute. The crisis we are facing is a debt crisis in the euro zone, but the currency of the euro itself is not in crisis. The exchange rate of the European currency is in fact fairly stable and inflation the euro area is not out of control, stated Van Nispen.

Van Nispen mentioned that the current sovereign debt crisis has begun with the colapse of the housing market in The United States. Which has spilled over to the private and public sector in Europe. However, in each instable EU-member state the crisis is of other terms: member states Greece and Ialy both have to contend with a public debt. In Spain, nonetheless, there is both a public and a private debt. In addition, the sovereign debt crisis has spread over other euro zone- members due to the state bonds of instable members of the euro zone. The monetary situation in the euro area escalated due to the fact that euro countries did not meet up with the fiscal and budgetary rules of the Stability and Growth Pact.

To prevent this in the future, the EU institutions have been working since 2010 on measures to enstrengthen the euro zone. Examples are the Europe 2020 strategy, the European Semester, the Sixpack,the Euro Plus Pact and the bail-out funds EFSF and ESM. A 'preventive arm' and a 'corrective arm', two new concepts to the Stability and Growth Pact, should ensure that the euro zone-members will meet up to restore their debt and budget in order.

In response to questions from the audience, Frans van Nispen tot Pannerden clearafied the complex political, economic and fiscal choices of political actors in times of economic misery.