I find it shocking how readily we all seem to be accepting the European Central Bank’s inaction on euro-zone economic weakness. Some perspective is in order. Real euro-area output is at roughly the level of the end of 2006 and it is declining. The euro-area economy hasn’t grown since the third quarter of 2011. Total employment is below the level first attained in the second quarter of 2006 and it is declining. The unemployment rate is of course at a record high 11.8%. And inflation—both core and headline—was virtually nil in the second half of 2012.
I would stress that it is even worse than Ryan is suggesting. Countries such as Greece, Portugal, and Spain have consumed remarkable amounts of political capital. Britain is considering leaving the EU. Credit channels are still either in tatters or on life support, relying on ECB guarantees. More countries are seeing zero or negative growth. Eurogeddon is here, as a variety of countries have situations worse, in relative terms, than the Great Depression of the 1930s. It seems the bailout funds, especially the ESM, have given up on the notion of detaching sovereign and bank liabilities from each other. The so-called banking union is at best a common supervisor rather than real risk-sharing for deposit liabilities. The fact that we don’t have daily bond market crises, filling up my Twitter feed, is certainly welcome but constitutes a remarkable lowering of the bar for what success means. Just how would one, these days, articulate why the eurozone should be considered a success and worth preserving going forward? Is this case no better than the (possibly correct) claim that dissolution would bring economic anarchy? In my rather (currently) unfashionable view, the eurozone crisis is still getting worse, not better.