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Europe's economist-statesmen cannot fire a silver bullet

By Sun Lijian: 0 Comment(s)Print E-mail Shanghai Daily, December 6, 2011

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[By Zhou Tao/Shanghai Daily ]

There have been a series of high-profile personnel reshuffles in the governments of some indebted eurozone countries.

In Italy, for example, Mario Monti, renowned economist and ex-EU commissioner for competition, was appointed by President Giorgio Napolitano as Italy's new prime minister on November 13.

Three days earlier, Greek economist and former deputy director of European Central Bank (ECB) Lucas Papademos was sworn in as the prime minister of Greece to form a coalition government.

And in Portugal, finance minister Vitor Gaspar was at certain points of his career a chief adviser to EU policy making circles, a key drafter of EU economic policy and ECB's head researcher.

Why are the indebted EU members so keen on assigning economists to clean up the debt mess? I think the reasons are threefold.

First, economists are relatively aloof from politicking. Their neutrality is conducive to cooling off rising tension between debtor and creditor nations.

Increasingly skeptical about the PIIGS (Portugal, Italy, Ireland, Greece and Spain) club's ability and willingness to pay off debts, domestic voters of creditor nations openly object to a bailout package, accusing their politicians of wasting taxpayers' money on people who expect someone else to watch their back, instead of undertaking the necessary austerity measures that compromise their well-being.

By contrast, people in debtor nations think their better-off neighbors are exploiting their weakness with harsh demands on fiscal discipline and public spending. In this rancorous atmosphere of finger-pointing, how to heal the rift between EU members becomes key to resolving the debt crisis.

Second, the economists-turned-politicians in PIIGS nations share a similar background. They have worked for international organizations and have wide connections.

Third, their professional expertise on the debt issue is welcomed by creditor nations. For instance, Italian prime minister Monti said at a press briefing shortly after he assumed office that Italy is both a founding member and core member of EU, and because of this, it ought to drive EU's growth, not slow it down.

Monti's Greek counterpart Papademos, meanwhile, pledged that he would lead the coalition government to seek rescue funds, prevent a debt default and take on the intractable fiscal restructuring - all of which were precisely what Greece's creditors had anticipated.

Portuguese finance minister Gaspar, for his part, stressed the need to strengthen budget oversight and reduce Portugal's reliance on the outside world. His statement urging more independence provided some consolation for German, French and British creditors. However, since the sovereign debt crisis is unlikely to be defused anytime soon, we would be disappointed quickly if we pinned high hopes on these economist-statesmen.

There are many reasons for not being too sanguine about sending economists to the rescue.

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