Konsolidacja finansów publicznych a kryzys strefy euro
Consolidation of Public Finance and the Euro Crisis

Summary/Abstract: The authors see the roots of the present euro-zone crisis in three pillars of market fundamentalism on which the construction of the European Economic and Monetary Union is founded: 1) separation of a common monetary policy from national fiscal policies of individual member countries; 2) the goal of government budget equilibrium which is believed to provide macroeconomic stability of each member country and of the EU as a whole; 3) allowing for a new form of mercantilism by tolerating permanent current account surpluses of some member countries at the expense of current account deficits of other EMU countries. Tight fiscal and monetary policies during business crisis aggravate fiscal disequilibrium. Widespread budget deficits follow mainly from chronic imbalances of private savings exceeding private investments, with all negative consequences for economic dynamics and employment, rather than from loose fiscal policies. Policy measures aimed at reducing taxes, combined with cuts in wage rates and social benefits, stimulate neither investment nor employment, but increase the gap between private savings and private investment. The policy of modern mercantilism consists in keeping inflation rate below the European Central Bank inflation target by keeping the rate of growth of wages below that of labour productivity. This improves the competitive position of countries following such policy against their trading partners and helps the EMU net-export countries solve the problem of their surpluses of private savings over private investments. At the same time, the euro-zone permanent net-import countries cannot defend their competitive position through depreciation of their national currencies. Such a policy turns to be ineffective; in the long run it may be also harmful for net-export countries, undermining the very existence of the EMU, and possibly of the EU as a whole. It is claimed that continued existence of the euro-zone requires not only a common fiscal policy but also measures that would force all EMU member countries to follow the ECB inflation target.

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