This lecture
cleared much confusion regarding the current economic and political struggle of
the Eurozone. Professor Luis Garicano presented a concise and plausible
argument for the cause of the crisis and what could possibly be considered to
help the Eurozone thrive once again.
One significant
example that was constantly referred to throughout the lecture, panel
discussion and even questions was the link and perhaps correlation between this
Eurozone crisis and the collapse of Asian economies around 1998. This was often
used to highlight many glaring problems and crises erupting from the Eurozone
and how it has been seen and dealt with in Asian economies. Garicano also
frequently mentioned that one of the root causes of the Eurozone crisis was the
design error of this entire union of European countries. This he supported with
many examples and diagrams, including a ‘diabolical loop’, which clearly
exemplified the crisis that the Eurozone is in currently.
Furthermore,
Garicano used a clever metaphor to highlight the issue of the Eurozone. This
was relating the fall or collapse of the Eurozone to a bike and how it needs to
travel fast in one direction or risks toppling over. This effectively
demonstrated an issue with the Eurozone and helped to make the concept of the
design of the Eurozone easier to understand.
Moreover,
Garicano talked in length of one case study. This was about Spain and how it
was once a thriving economy yet now in an economic disaster and rife with
corruption. It was clearly apparent that this was not an easy topic for him to
talk about, since he was Spanish himself but claimed that he had no intentions
of lying but merely to tell the truth. This was clearly evident with the data presented
of how the economy of Spain has suffered tremendously in the last few years.
One clear piece of data that Garicano used was that the wage rates before the
Eurozone crisis of a college graduate was 25% higher than that of a high-school
dropout. However, currently the wage rate of a college graduate and a high school
dropout is the same. This therefore leads to many students dropping out at high
school and not pursuing further education, impacting the economy on the long
run!
Garicano also
briefly discussed possible solutions to this crisis and solutions that are
already being considered. This included Senior Eurobonds (ESBies) and Junior
Eurobonds (EJB). Fortunately, there is a possibility that the ESBies could
break this diabolical loop that was mentioned previously and help to aid the
Eurozone. Garicano ended the lecture by claiming if Asian countries in 1998
could do it why is the Eurozone any different?
To conclude, the
lecture was riveting and highly interesting. It succeeded in offering another
expert’s opinion on this matter which has filled the media over the past months
and even years.
