Eurozone Deadlock: Finding a Path Out of the Crisis by Professor Luis Garicano, LSE

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.