Norbert Häring is an economist and journalist. Since 2002 he has reported on finance and economics for the German business newspaper Handelsblatt. He is a co-founder and co-director of the World Economics Association (12,000 economists as members worldwide) and co-editor of the journal World Economic Review, both of which aim to promote a pluralistic approach to economic research. In 2014 he was awarded the Keynes Prize for Economic Writing for his contributions to Handelsblatt.
Norbert Häring
FMi: What is your opinion on the current status of economy in Greece?For years, the prevailing view in Greece was to stay focused on European Union and particularly in Eurozone. Greek people were not asked neither informed about EU and Euro and are still not informed.
Norbert Häring: Well, hardly anybody was asked. If countries had to do referendums on the Euro and the treaties, a majority tended to say no. They were routinely made to vote again, until they did it right, or their vote was simply ignored, as was done recently with the no of the Dutch to the EU-cooperation treaty with Ukraine.
FM: Nowadays, there is an increasing trend of a double/parallel currency supporters which resembles Mr Schauble's view on the matter. This involves Greece staying in the Eurozone, paying its debts in hard currency whereas salaries and pensions will be paid in this "parallel" currency. What is your opinion about it? Is this policy contradictory to EU rules which state that only one currency i.e. Euro can circulate in the Eurozone?
Norbert Häring: The rules of the Eurozone have been bent in all directions already, that would not matter much, I think. However, for Greeks it would be terrible, if they had to still pay the debt in hard currency and earn so much less. There is no way these debts could be paid back, because GDP in hard currency terms would be very much lower.
FM: Why follow such currency (parallel) and not having instead a national currency with the respective sovereignty?
NH: Because is much better for the creditor countries. They keep all the power that way.
FM: Is currency change enough for boosting economy in the globalized environment? What else is needed? How can an economy fully destroyed by EU such as Greek can recover and be competitive in the globalized environment?
NH: That will be very hard. A devaluation will not help recover the living standard that Greeks have gotten used to. It would only help to bring down unemployment. With no help and debt relief, wages and living standards in Greece will sink towards the levels of countries like Bulgaria and Romania. Greece does not have a significant industrial base any more, which could benefit a lot from the devaluation. The whole problem for Greece, Spain and Portugal started when the EU was massively enlarged by many eastern countries with much lower wages. They are a competition mostly for the Mediterranean countries.
FM: Do you mean a devaluation as is implemented now, the so called internal devaluation within Euro or the devaluation that a return to a Greek national currency may cause? How can it bring down unemployment rates? By attracting foreign investment by offering, as incentive, cheap labor?
NH: An internal devaluation is not a devaluation. This is just a euphemism for wage cutting program or a program of shrinking into a tighter belt. Wage cuts hurt domestic demand. That is a terrible program. A devaluation of the currency is not hurting domestic demand, but it is still going to be very hard to succeed and nearly impossible without debt relief.
FM: You have mentioned that the Greek government was obliged to commit to the creditors to provide incentives for payments without cash. In Greece, they promote this idea (electronic payments) as a way to reduce tax evasion. On the other hand, there are certain economists that promote this idea as a way to increase liquidity in the Greek market since a lot of businesses struggle for money. What is your opinion about it?
There are indeed particularly many good reasons for the Greek governments to move from cash to digital payment, because the ECB has been using the need for cash against them,because they are still keeping tight lid on cash and because banks are particularly troubled in Greece. This is why Greece is such a good place for the warriors against cash to push is through and create an example, which they are then using to impress the German population, for example. They say, and I am not making it up:"Look all those countries have already introduced all these rules against cash, putting themselves at the forefront of the war against terror and tax evasion. We cannot stay behind." On a European level, or for a Greek government that is not being strangled, these particluar arguments against cash that apply for Greece today, would not apply.
FM: EU has become a territory with huge peripheral differences whereas the states of Southern Europe and in particular Greece have become modern colonies. Is this a plan of EU to have cheap labor to compete Chinese economy? A plan which is further enhanced by the uncontrolled masses of immigrants?
NH: Where is no EU-plan, where are different national interests. I am not sure if anybody in Germany is following a plan like this, but it looks a bit like they are at least not working against a scenario in which the South eventually drops out of the Eurozone, devalues, and provides cheap raw materials, labour and migrant laborers to an industrialized Northern-Euro-Zone. There is a book by Albert O. Hirschman from the early 1940s, in which he describes German trade policy of the 30s. The description is not unlike what we are observing now, though there is of course no declared policy in that direction.
FM: It seems that Greece is in a dead end. What do you suggest it would be better for restructuring its economy? Is it possible to restructure its economy within the Eurozone? Can an indebted country acquire a competitive advantage in a globalized environment?
NH: I would think the only hope is for many countries suffering from the euro together, to leave the Eurozone. This would mean that the individual countries would not be battered by markets and the EU one by one, as they inevitably leave the Eurozone in their own time. This is just a very uncertain guess. I am really glad I do not have to make this decision. And it is very hard for the weak countries to coordinate against the German dictates, because there is immediately enormous pressure on them, if they try. When Berlusconi and Papandreou tried, they were removed from power within weeks.
FM: Thank you, Norbert, for your very valuable insight!
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