Europe (and America), allow your small businesses and entrepreneurs to compete with "The Infallible" for bank credit on equal terms
Sir, Wolfgang Münchau in “Competitiveness is good but it will not save the euro” July 12, basically begs Europe to set aside all mumbo jumbo on “institutional reforms and structural reforms” and first solve what is “ultimately a balance-of-payments crisis”.
Mentioning “intellectual muddle”, and the “distraction of the nebulous concept of competitiveness”, Münchau suggests “reforms that serve a specific and well defined purpose”, and to “separate these from reforms with unproven effects” and even “from those that stem from pure rightwing ideology”. And, “With youth unemployment at 52 per cent in Spain”, and “a fragmented labour market which protects workers with a permanent labour contract but discriminates against outsiders and the young… this should be the priority for economic reform”.
Of course, sounds reasonable, but, what has “the balance of payment crisis” to do with youth unemployment? I did not really get that.
For me, again, the primary cause of a balance of payment crisis in Europe is bank regulations that kept banks from allocating economic resources efficiently within Europe, and instead made them allocated these mostly to “The Infallible”, based on something as nebulous as what was officially perceived as absolutely not risky.
Before the odious discriminatory regulation of capital requirements for banks, based on ex ante perceived risk is completely eliminated, neither Europe’s balance of payment problems, nor its high youth-unemployment problem, stand a chance of being solved in any sustainable way.
Mr. Münchau some type of competitiveness matters a lot! For instance Europe (and America) should allow their small businesses and entrepreneurs “The Risky” to be able to compete with "The Infallible" for bank credit on equal terms.
But, if you absolutely can’t stop your regulators from distorting, a genetic condition, beg them at least to set the capital requirements for the banks based of potential-for-job-creation-for-youth ratings?
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