Barry Eichengreen on the End of the Dollar
Barry Eichengreen is a professor of economics and political science at the University of California, Berkeley and a former senior advisor to the International Monetary Fund. He has researched, and published widely on, the history and current operation of the international monetary and financial system.
Dan Richards spoke with Eichengreen at the annual meeting of the American Economic Association in Chicago in early January.
A video of this interview is available here.
I've been following the Eurozone project and the euro for a long time. A lot of my American friends accuse me of having gone native – having drunk the Kool-Aid – for believing that the Europeans can make this work. I continue to think that that is the case. Saving the euro will be enormously expensive, but not saving it will be even more expensive.
When European leaders confront that fact, and they have begun to, and more importantly when they get their publics to understand that and not to simply view the euro crisis as a morality play involving thrifty Germans and spendthrift Greeks, they will take the hard measures needed to save the euro.
So 2012 will see more pressure on leaders and publics to recognize that and respond. I continue to hope against hope that that's what they'll do.
In Darkness at Noon, you start from the notion that as black and as dire as things look now, there is the potential for a positive outcome in sight. But you don’t subscribe to the view that 2012 will see dramatic fiscal integration in Europe, which is one of the arguments that euro optimists make.
Jean-Claude Trichet, the former president of the European Central Bank, talked about a quantum leap in European integration last year. He was thinking about euro bonds, backed by the full faith and credit of all EU members’ common budget. Those things will come, but they won't come in 2012. It will take time to get there.
There are 27 EU members that all have to agree. Some of them, like the Irish, will have to agree in public referenda. Not all the referenda will pass the first time. It will be a long, complicated process. What we will see in 2012 is an effort to deal with the immediate problem in the context of existing institutions. After that, they will work on the ongoing problem of fiscal integration and political integration. That is what German Chancellor Angela Merkel has basically said; this is a multi-year problem of institutional reform. That's unavoidable.