The southern eurozone countries seem to want to blame all the economic ills on Germany and northern eurozone economies, the ECB and IMF in response for their strict austerity reforms. Yes the eurozone is largely in recession, as is most of the world economy, but southern European countries have been playing a clever game since joining the euro since joining at its birth. Basically promising Brussels domestic structural and public sector reforms, but in essence doing very little to change their old habits and open up there restricted domestic markets to real competition.
Everyone got away with this clever ruse of foot dragging and excuses, but now the music as stopped in a game of musical chairs and there is no where to sit. Budgets, national accounts are being scrutinized by the so called ‘trokia’, no more imaginative Greek accounting, making the numbers look rosy when in fact they are bleak. The question is why as southern European countries fallen so far behind northern countries in terms of real GDP growth?
The simple truth is northern eurozone economies are much more open minded in their approach to open markets, while southern eurozone countries are much more protectionist in their domestic markets. Example, Portugal still as one dominant electric company in its energy market called EDP, while for years telling Brussels it will allow more competition in its energy market, but doing very little to change its favoured old state run dinosaur.
This is the same story in the telecoms, banking, and energy markets right across southern Europe from Lisbon to Athens, and this is the reason why now lack of any real growth is coming home to roost for Italy, Portugal, Greece, and Spain. Spain only grew through a hyper hot property boom, not real liberalization of there economy.
Instead of southern economies blaming Germany for all their economic ills, southern eurozone countries have to embrace real economic reforms. Pharmacists still blocking the sale of headache tablets in supermarkets, why because they can charge 6X’s as much. Taxi drivers and lawyers blocking reforms to the cosy high prices and all in the name of protecting their professions? The long list goes on and on, but the biggest problem is in bloated public sector, being over staffed, and an ever shrinking private sector, a recipe for contraction and no growth for any one to see, not just economists.
We live in an age of information technology, but try walking into a local government office in Italy, or Portugal and asking if you can access or apply online for anything, and you will receive a puzzled confused expression; their obsession with form filling and red tape is almost a national sport, and takes immense stamina of patience.
I think the best solution would be a so called ‘hard’ northern euro currency, and a ‘soft’ southern euro to solve the euro crisis, though this would be politically high risk. If the eurozone does not grow it will stagnate and contract compared to Asia and the USA, its that simple.