The presentation I liked the most among the many at the recent fantastic Berlin’s INET was “The Future of Europe – North and South” by Prof. Wendy Carlin of UCL (see here her video).
She divides Eurozone countries into North (Germany, the Benelux, Austria and Finland) and South (Italy, Spain, Greece and Portugal), leaving out France (not fully northern) and Ireland (not fully southern).
She makes many points, all falling under heading that (different) institutions matter to explain the current euro crisis due to (different) performances. Most of all I was amazed to see in her presentation what has happened in terms of indicators of governance of the North and the South in this last, lost decade, where the premises of the current crisis were sown in the fertile field of bank irresponsibility. But one needed the seed. And here it is:
So. Not only has the North always dominated the South in terms of rule of law, corruption control, regulatory quality and government effectiveness but, more importantly, the wedge between the two areas has widened over this past decade. Reforms were missed in this critical time.
How exactly can you enter successfully into a global era without properly functioning public institutions that support, protect and encourage markets in prospering and citizens in investing for the future?
As Amartya Sen said about Europe in his Berlin speech (see video in post below), “We need the role for the State” because “the State has something interesting and important to do” and if you cut this out, “streets get meaner and lives get hollower, and markets suffer too”. It is time the Southern countries of the euro area understand this for good if they want their common project with the North to be saved.