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The problem in Europe isn't about debt, says economist Simon Johnson, it's about trade...

  • Thursday, September 29, 2011, 7:03 PM ET
    The problem in Europe isn't about debt, says economist Simon Johnson, it's about trade imbalances. For the past decade, the eurozone countries with the largest current account shortfalls have been the deficit-spending PIIGS. Any plan to fix this crisis must address some form of meaningful export-oriented policy change, or it's destined to fail.
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This news story has 17 comments:

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    If Johnson is correct then the present austerity drive for Greece is the wrong diagnosis and the wrong medication for a sick child.
    29 Sep 2011, 07:11 PM Reply Like
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    Since when is the IMF and their blood-letting economic quackery ever right? I am with the market watchers who say there will be a relief rally if/when Greece defaults. slow death worse than quick death.
    29 Sep 2011, 10:42 PM Reply Like
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    Exactly. If these countries are going to maintain negative trade balances in real terms the countries are just unsustainable. Somethings gotta give
    29 Sep 2011, 07:15 PM Reply Like
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    No American ever worries about potential trade imbalances between California and Texas.

    If Europe is really well integrated, why should they worry, too?

    So the question boils down to whether Euro zone can ever become as integrated as the USA. Given the gigantic differences in culture, economies, and language, it will be a very very difficult thing to achieve. But if Europe succeeds, it bodes well for the future of humanity.
    29 Sep 2011, 07:18 PM Reply Like
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    "No American ever worries about potential trade imbalances between California and Texas."
    No, that's not the right analogy - it would be California and the rest of the world.
    29 Sep 2011, 10:43 PM Reply Like
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    The problem is the lack of a common bond-ie Treasuries. I believe it was back in 1790, that the US said it would back states debt and this was resolved for us.
    29 Sep 2011, 11:44 PM Reply Like
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    California contributes more in Fed dollars than they get back in Fed programs and spending.

    Germans don't like the idea of that.
    30 Sep 2011, 12:41 PM Reply Like
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    The current malady seems to be largely about excess, unsustainable debt that no quantity of exports can remedy.
    29 Sep 2011, 07:19 PM Reply Like
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    Trade imbalances are okay, as long as they are balanced by inflow of capital from other sources. I think in this case, trade imbalances are fueled by borrowing, hence the problem. So yes, this is ultimately about debt.
    29 Sep 2011, 07:26 PM Reply Like
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    Bingo. They also are not a reserve currency, so a trade imbalance or debt inflows in one country does not effect the Euro much.
    29 Sep 2011, 11:46 PM Reply Like
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    Greeks live beyond their means,plain and simple. A bailout today will cure nothing if the spendthrift habits don't change. Just like the US
    29 Sep 2011, 07:30 PM Reply Like
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    Simon is a fool. Plenty of what they import is to sell to rich European tourists.

    The problem is spending, lying about it, hiding it and failing to deal with it.
    29 Sep 2011, 07:45 PM Reply Like
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    and a tax system that was infamous for it's cheating.
    29 Sep 2011, 11:47 PM Reply Like
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    The problem with the Euro-Trash is the same problem we have here; the Socialists, Environmentalists, Fascists, Communists, Marxists and Liberals, you know, the Democrats.

    "A government which robs Peter to pay Paul can always depend on the support of Paul". -- George Bernard Shaw
    29 Sep 2011, 07:53 PM Reply Like
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    Until they find out Paul blew it on coke and hookers.
    29 Sep 2011, 08:12 PM Reply Like
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    That's a pathetic effort to opine.
    29 Sep 2011, 08:57 PM Reply Like
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    Tell that to Germany, the benefactor of a cheap Euro and the #2 exporter in the world. They are everybit as "Socialist, Environmental, and Liberal" the difference is they BALANCE their budget.
    Not paying your bills is not a viable party opinion in Germany, nor is trying to say a strong currency is in the National good or some how patriotic.
    29 Sep 2011, 11:53 PM Reply Like
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