The fiscal irresponsibility of Greece was not the cause of the 2010 crisis, write Prof Philip Arestis and Dr Yiannis Kitromilides, while Prof Mary Mellor argues for greater state spendingProfessor Jeffrey Frankel (Why Germany must not make the same fiscal mistakes as the US, 1 October) claims that `the 2010 euro crisis would not have happened had Greece, after joining the euro, maintained the fiscal discipline called for under the stability and growth pact`. This narrative of the eurozone crisis is very familiar but also very misleading. If fiscal indiscipline by Greece was the cause of the eurozone crisis in 2010, why, at the same time, did the fiscally prudent governments of Ireland, Spain and Portugal find themselves in the same sinking boat as Greece, in need of international rescue? The fiscal irresponsibility of Greece caused the bankruptcy of Greece, but the 2010 eurozone crisis was caused primarily by misbehaviour and indiscipline in the private sectors of the economies of the eurozone periphery. Professor Frankelīs sympathy for `Germansī much-maligned attitude toward debts and deficits` is misplaced. The German attitude to - some would say obsession with - fiscal discipline and balanced budgets was certainly not sufficient to prevent the eurozone crisis. A strong case can be made that this attitude is also not necessary.Prof Philip Arestis Department of land economy, University of CambridgeDr Yiannis Kitromilides Associate member, Cambridge Centre for Economic and Public Policyo Your editorial (Populism can be met by a bazooka, not a peashooter, of a eurozone budget, 2 October) is quite right to say that monetary policy has failed to reinvigorate market economies and that the public sector needs to play a more active part. This is envisaged as a fiscal process of raising taxes and/or borrowing money from the market to put `idle money` back into circulation. Continue reading...
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