Europe: The Competitiveness Problem

PART 2: Two experts question the eurozone’s response to the debt crisis and wonder whether it’s possible to repair the damage

Ben Johnson 13 March, 2012 | 1:51PM
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Click here to move on to Part 3.

Ben Johnson is director of European ETF research with Morningstar. George Magnus is a senior economic advisor at UBS. Magnus was one of a handful of economists who warned of a pending global financial crisis as early as 2007. Edward Chancellor is a member of the Asset Allocation Team at GMO. Chancellor has written extensively on the topic of the current crisis, specifically examining the ways in which the eurozone’s predicament differs from historical sovereign defaults.

The Competitiveness Problem
Johnson: One of the main motives for leaving the common currency would be to inflate away the value of one’s debt. But as we’ve seen, that is just a near-term and not a long-term solution. A long-term solution is to regain competitiveness. Isn’t it one of the more elemental issues that the eurozone is facing? Certain peripheral members have just fundamentally lost their competitiveness.

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Ben Johnson

Ben Johnson  is director of passive funds research at Morningstar.