The Economist writes:
Philippe Legrain, who once worked for The Economist, was another close observer of the euro crisis, as an economic adviser to the European Commission president, José Manuel Barroso. His conclusions are similar to Mr Pisani-Ferry’s, if more stridently expressed. He is particularly good on (and particularly scathing about) the shortcomings of his own institution and the ECB. He is not popular in Brussels or Frankfurt.
Mr Legrain argues that Europe should have tackled its banks’ problems much sooner than mid-2012, when it decided to create a (still incomplete) banking union. A big reason why America has recently grown faster than Europe is that it did more to sort out its banks in 2008-09. Mr Legrain is also right to criticise the ECB for its half-hearted bond purchases before July 2012, when it finally emerged as a proper lender of last resort. Only in the second part of his book, when he moves into broader topics such as education, innovation, climate change and democracy, culminating in his call for a “European spring”, are his arguments sometimes less persuasive.
Both authors agree that the aftermath of the crisis is an unsatisfactory one that may not endure. Even if markets do not turn sour again, most of Europe seems stuck with low growth, high unemployment (especially for young people) and a horrible debt burden. The risk of a “lost decade” similar to Japan’s in the 1990s is worryingly high. Worst of all is the broad disillusion of voters with the entire European project, which will be expressed in this month’s European elections through big gains for populist and extremist parties….
What is striking is how much the authors agree about the failings of the EU and the euro, which is stuck in a half-completed house. Where they differ is in the solutions they propose.Europhiles want deeper integration and more centralised powers. That was proposed this spring by the German-led Glienicker group and by the French-led Eiffel Europe group. It is also backed by Loukas Tsoukalis, a Greek academic, in an essay, “The Unhappy State of the Union”, published by London-based Policy Network.
Yet few voters feel warmly about ever closer union; many would agree with Mr Bootle that this aspiration of the original Treaty of Rome should be formally ditched. Nor do many welcome ever greater intrusion by Brussels and Frankfurt into domestic politics. A more plausible idea, backed by Mr Legrain, is to restore greater freedom to national governments but reinstate the principle that they will not be rescued by the centre if they get into trouble.
The biggest worry may stem from the perception that the crisis is over. This is likely to slow or even stop further reforms. If that happens, the EU and the euro will get into trouble again—and the outcome next time could be even worse.
John Peet, Europe Editor of The Economist, adds:
Philippe Legrain convincingly argues that euro-zone policymakers made several big mistakes: there was too much fiscal austerity, they were too slow in trying to mend the banks and the European Central Bank delayed for too long in becoming a lender of last resort. The euro may have survived, but the system remains unstable and Europe still needs a lot more reform if it is to prosper.