3.5 Economic cooperation between EU countries Stop damaging competition between EU countries, promote economic cooperation: the Macroeconomic Imbalances Procedure should be revised and in the current context work to stimulate demand and reduce the current account imbalances. votes Further information: A) Much of the reasoning behind the political response to the economic crisis in
Europe is based on the questionable idea that countries are in economic competi-
tion with each other in a zero-sum game. The idea is that countries are much the
same as corporations, and when one wins the other loses. This leads to a fixation on ‘competitiveness’. However, there are very few reasons to think that countries are
in this kind of zero-sum competition or are the same as corporations: the economic success of one country does not necessarily come at the expense of another. Europe
should lead in showing that cooperation between countries is actually much more productive that attempts at competition.
B) In aggregate, the EU does not face a competitiveness problem; rather there is a big
shortfall of aggregate demand inside the EU, as a result of austerity measures, and growing macroeconomic imbalances between the ‘centre’ and ‘periphery’:
Germany notably has a large current account surplus, and countries on the periphery have current account deficits. Macroeconomic imbalances do need to be addressed in the Eurozone, and the idea of a ‘macroeconomic imbalances procedure’
is therefore a good one. Unfortunately, the current procedure is doing the opposite of what is currently needed (see the In Depth Review on Avoiding Macroeconomic Imbalances, No 1176/2011): currently Germany’s current account surplus as well
as artificially low wages in the Eurozone core are not considered as problems, and
there is little acknowledgement of the effects of austerity in reducing output in the
periphery. An obsession with a competitive understanding of Europe’s economy is largely at root of these mistaken policies. Continuing on this path will most likely 49
FINANCIAL REFORMS
V. The policy proposals