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The ECB’s Damned-If-You-Do QE Moment

The eurozone is in a dreadful mess. The currency area’s economy is stagnating: It grew by only
0.8 percent in the year to the third quarter of 2014 and remains 2 percent smaller than in
early 2008. The unemployment rate is 11.5 percent. Deflation looms: prices fell by 0.2 percent in the
year to December.

That last fact looks set to prompt the European Central Bank (ECB) to embark on a program of
quantitative easing (QE) at its next meeting on Jan. 22. Since official interest rates are at zero and can
scarcely fall further, ECB President Mario Draghi is counting on unconventional monetary policy to
boost the economy and lift inflation back towards its target of “below, but close to, 2 percent.” While
the ECB has already bought some private-sector assets, it is now expected to start purchasing large
quantities of government bonds with freshly created money. But while nothing has been officially
decided yet, German opposition is such that QE is unlikely to be big and bold enough to stave off
deflation – and the easing may do more harm than good.

Deflation would be disastrous for the debt-laden eurozone. Optimists point out that the fall in the price
level is partly due to the collapsing prices of commodities, notably oil, which makes net consumers
such as the eurozone better off. That’s true, but the eurozone economy is so weak that this one-off price
fall is already leading businesses to slash wage offers, entrenching its deflationary impact.
Since inflation (excluding energy prices) is only 0.6 percent in the eurozone, deflationary pressures are
mostly a symptom of debt-depressed demand, which in turn exacerbate the problem. The prospect of
lower future prices deters companies from investing. And since nominal interest rates cannot go lower
than zero, falling prices push up real borrowing costs, further denting investment while making
existing debts harder to bear. That’s calamitous for a Spanish homeowner tied to a big mortgage in
negative equity and, likewise, for many governments trying to get a grip on their mountains of debt.

Once deflationary expectations become entrenched, they are extremely difficult to shift, as Japan’s
experience over the past two decades shows. So the ECB needs to credibly commit to do “whatever it
takes” to bring inflation back up to 2 percent.

Ideally, Draghi would “helicopter drop” cash to eurozone citizens, in effect, creating money and sending everyone a big enough check to get growth humming
and inflation back on target. (To similar effect, it could finance a big increase in government spending
with central-bank cash.) But the EU treaties and German monetary taboos preclude that.
The German policy establishment, including the Bundesbank, Chancellor Angela Merkel’s
administration, and the German Constitutional Court, is implacably opposed to QE. Among other
things, the Germans fear that if, for instance, the ECB starts buying lots of Italian government bonds, it
will take the pressure off Rome to reform and put its public finances in order. They reason that this
could eventually put the ECB in an impossible position: keep buying the bonds of a by-then-insolvent
Italy or precipitate a default in a 2.1-trillion-euro bond market — the eurozone’s biggest — that may
impose hefty losses on the ECB’s shareholders, not least the German government, and doubtless
shatter the euro. Moreover, Germany’s Constitutional Court objects to open-ended ECB commitments
that may entail open-ended losses for German taxpayers. Since Draghi dare not offend Germany too
much, any QE program will be limited and hedged with conditions.

Many aspects of the proposed QE program remain unclear, including when purchases will begin, how
much of which bonds will be bought, and on what terms. One thorny issue is Greece. Three days after
the ECB’s Jan. 22 meeting, Syriza, a radical-left party that wants to end austerity and renegotiate the
debts Greece owes eurozone governments, is expected to win the Greek elections. Although Syriza does
not want to restructure the market-traded bonds that the ECB might buy, Athens would be forced to
default if it was ejected from the euro. And including Greek bonds in QE would make it easier for a
Syriza government to borrow from markets, strengthening its hand in debt-relief negotiations with its
creditors. Excluding Greek bonds, though, would preempt the election outcome and revive speculation
of a Greek exit from the euro.

Hence the case for a delay — at least until the ECB’s meeting in March. But the Greek drama is unlikely
to be resolved by then. And a similar predicament arises in Spain, where Podemos, a radical-left party
that wants to audit and potentially restructure Spain’s debt, is leading in the polls ahead of elections
due by year-end. So a delay could become indefinite. The longer the ECB waits, the more deflationary
expectations are likely to become entrenched. So the ECB is likely to take the plunge, while perhaps
postponing Greek bond purchases and trying to insulate itself from the risk of a Greek default.

The next issue is the size of the program. Markets will be disappointed with anything less than 500
billion euros. Sovereign bond markets in the eurozone (except Greece) have already rallied massively
over the past year in anticipation of QE. For example, Italy, with public debt of 133 percent of GDP and
rising, can now borrow for three years for a mere 0.56 percent, down from 1.47 percent a year earlier,
and for 10 years for only 1.67 percent, down from 3.83 percent on Jan. 21, 2014. Since QE seems largely
priced in, markets could sell off if the figure is less than 500 billion euros. But while that sounds huge,
it would only partly reverse the 1 trillion euro shrinkage of the ECB’s balance sheet over the past two
years. And it is a mere 7.4 percent of the 6.8 trillion euros of governments bonds outstanding across the
19-country currency union.

A third issue is how much of which bonds to buy. Unlike the United States, which began its own QE
program in 2008, the eurozone lacks federally issued Treasury bonds, so the ECB must decide which
member governments’ bonds to buy. Since deflationary pressures are strongest in struggling southern
Europe, solely buying Spanish, Italian, and Portuguese bonds might be most effective, but that would
infuriate the Germans. Short of that, buying in proportion to the size of each government’s bond
market would tilt purchases towards southerners with bigger debts.

At the other extreme, the ECB could buy only the safest, triple-A-rated government bonds, primarily
Germany’s. But that would be perverse, since Germany needs QE least, and it would spark a sell-off of
southern European bonds. And by signalling that it thought southern European bonds weren’t safe, the
ECB would spook investors. So, in the end, the ECB will probably buy bonds in proportion to eurozone
governments’ capital contributions, where Germany weighs heaviest but southern Europeans still get
their fair share.

The most controversial issue for the Germans is how to handle the risk of a government defaulting on
bonds bought by the ECB. The ECB insists that such a default would be illegal, since it would be
“monetary financing” — central-bank financing of government borrowing — which the EU Treaties
forbid. But if it did happen, it would be embarrassing for central bankers who jealously guard their
independence — and Germans fear it would entail hefty losses for them. So the ECB looks set to insist
that each country’s central bank — for instance, the Bank of Italy — bear the risk of losses on their own
government’s bonds individually.

But Guntram Wolff of Bruegel, a Brussels-based think tank, argues that this would either undermine
QE’s effectiveness (because ECB buying would make Italy’s other bondholders more exposed to a
default) or fail to protect the ECB against loss. Worse, it would signal that the eurozone was no longer a
genuine currency union with a single monetary policy, in which central bank operations inevitably
have distributional consequences. That could revive concerns about Germany’s commitment to the
euro’s survival.

Yet the German fears are misconceived. As Paul de Grauwe of the London School of Economics points
out, it would make no fiscal difference to Germany whether Italy defaults on bonds purchased by the
ECB if any debt-servicing payments that the Italian government makes (or not) to the ECB are in any
case remitted to it (or not). To put it differently, since monetized debt costs Italy nothing, why default
on it?

Since QE is likely to be too little, too late to stave off deflation — and could even make matters much
worse — is it really the best way forward? After all, big and bold QE programs have had mixed results in
the United States, Britain, and Japan. They have artificially inflated asset prices, but scarcely
encouraged consumers to spend or businesses to invest. Arguably, QE encourages financial
speculation at the expense of business investment. Why venture new investment in a weak economy,
when there is easy money to be made from financial engineering? Besides, zombie banks don’t want to
lend to new borrowers.

On the plus side, QE has lowered governments’ borrowing costs, by pushing down longer-term interest
rates and because interest on bonds purchased by the central bank reverts to the government. Had
governments used this leeway for fiscal stimulus, QE might have been more effective in boosting
growth. Unfortunately, EU rules and German dogma preclude a fiscal boost in the eurozone.

QE may have its biggest impact on growth and inflation by weakening the currency, making exports
cheaper and imports pricier. On Jan. 15, in anticipation of the start of the ECB’s QE, Switzerland
abandoned its efforts to limit its currency’s rise against the euro, causing the Swiss franc to soar and
the euro to plunge. The trade-weighted euro has fallen by 5.5 percent over the past month, leaving it 8.2
percent weaker than a year ago — perversely, since the eurozone already has the largest (almost
entirely German) current-account surplus in the world. In a world of depressed demand, competitive
devaluation is a zero-sum game — and invites protectionism.

Ultimately, the reason why the eurozone is stagnating and sinking into deflation is that it is depressed
by excessive debt. Since the mutual monetization of debts by the ECB is politically unacceptable, the
eurozone needs to move forward with debt restructuring. Instead of wasting political capital enraging
the Germans with half-hearted QE, efforts should focus on the need for a debt conference to relieve
public debt, along with wholesale restructuring of private debts on zombie banks’ balance sheets.

Why Greece needs a Syriza win

European politics normally pauses for the Christmas break. But this time it erupted with a vengeance. On Dec. 29, Greek parliamentarians rejected the government’s candidate for president, triggering early elections scheduled for Jan. 25. Syriza, a radical-left coalition that wants to renegotiate the terms of Greece’s 205 billion euros’ worth of loans from eurozone governments, is leading in the polls.

Many fear that a showdown between eurozone authorities and a Syriza-led government bent on debt relief and ending austerity could revive the panic that almost destroyed the euro in 2012 and could even force Greece out of the 19-country currency union. The Athens stock exchange has plunged. Yields on Greek government bonds have soared. The cost of insuring against a Greek default has skyrocketed. But a Syriza victory on Jan. 25 may not be a calamity for Europe in the end. It may be a necessary step toward resolving a crisis that has been festering since 2009.

It’s not surprising that voters are angry with Prime Minister Antonis Samaras’s coalition government, which has implemented the brutal austerity demanded by the European Union and the IMF since Athens received its first bailout in 2010. Greeks have suffered six years of severe slump. The economy has shrunk by more than a quarter. Incomes have collapsed by nearly a third; many workers go unpaid. One in four Greeks — and one in two young people — is unemployed. The social safety net has been shredded. Many families scrape by on seniors’ slashed pensions. Crowds jostle for handouts at food banks. Some children are reduced to scavenging through rubbish bins for scraps. Hospitals run short of medicines. Malaria has even made a return.

Eurozone policymakers insist that Greeks have only themselves to blame for their plight and that the harsh treatment the policymakers imposed is working. But that isn’t true. Yes, successive Greek governments splurged before the crisis, doling out jobs and favors to their political patronage networks. With tax evasion rife, they borrowed abundantly: a whopping 15 percent of GDP in 2009 alone.

But Greece’s reckless borrowing was financed by equally reckless lenders. First in line were French and German banks that lent too much, too cheaply — foolishly treating the Greek government as if it were as creditworthy as Berlin and encouraged by Basel capital-adequacy rules and European Central Bank collateral-lending rules that treated sovereign bonds as risk-free.

By the time Greece was cut off from the markets in 2010, its soaring public debt of 130 percent of GDP was obviously unpayable in full. It should have been written down, as the IMF later acknowledged publicly. Austerity would then have been less extreme and the recession shorter and shallower. But to avoid losses for German and French banks, eurozone policymakers, led by German Chancellor Angela Merkel, pretended that Greece was merely going through temporary funding difficulties. Breaching the EU treaties’ “no-bailout” rule, which bans eurozone governments from bailing out their peers, they lent European taxpayers’ money to the insolvent Greek government, ostensibly out of solidarity, but actually to bail out creditors. Poor Greeks were, in effect, consigned to a debtor’s prison.

While foreign banks that held on to their Greek bonds eventually took some losses in 2012, Greece’s EU creditors have bled the country dry. Thus eurozone banks share responsibility for Greece’s plight, while eurozone policymakers — as well as the Greek elites who did their bidding — are to blame for the extent of the misery that Greeks have endured. So whatever you think of Syriza’s left-wing politics, it is justified in demanding debt relief from the EU. It’s a pity more mainstream Greek voices aren’t doing so too.

Debt relief isn’t just a matter of justice. It’s an economic necessity. Contrary to the propaganda from the EU and Samaras’s government, Greece is not putting the crisis behind it. Yes, the economy is finally growing a little: by 1.9 percent in the year to the third quarter of 2014. Employment has edged up. The government has achieved a primary surplus — its revenues now cover its outgoings, excluding interest payments. And it managed to sell investors some longer-term bonds last year. Briefly, Samaras even thought that Greece could escape the EU’s clutches and fund itself freely from the markets when its EU loan ends in February.

Yet even at the height of the markets’ euphoria about the eurozone last summer, before Germany’s economy stalled, investors who were desperate for yield and increasingly blind to risk in markets awash with central-bank liquidity were unwilling to lend to the Greek government on terms on which it could finance itself sustainably. And the mood soured long before a Syriza government seemed imminent.

Greece’s public debt is still a crushing 175 percent of GDP. With the economy gripped by deflation — prices fell by 1.2 percent in the 12 months to November 2014 — the real debt burden is rising. Even under optimistic scenarios for growth and interest rates, bringing it down would require implausibly large payments to hated foreign creditors for the foreseeable future.

Without debt relief, the economy looks set to remain depressed. While it has scope for a bounce from its depths, a sustained recovery strong enough to make up lost ground, put Greeks back to work, and bring down debt is not in the cards. Even at its current annual growth rate, the economy would recover to its 2008 level only in 2030. Domestic demand is depressed by the debt overhang, while exports remain weak. Even with imports suppressed by crunched incomes, the country is running a whopping (and widening) trade deficit. The banking system is bust. No wonder businesses aren’t investing.

Nor has Greece fixed its fundamental flaws. Despite all the talk of reform, the EU’s priority has been austerity and wage cuts. The corrupt, clientelist political system remains intact. Politically connected businesses continue to have a stranglehold over cartelized markets. The rich still don’t pay their taxes. Re-electing Samaras and his New Democracy party won’t change any of that.

Nobody knows how an untested Syriza would behave in government. While its roots are on the hard left, Alexis Tsipras, its telegenic 40-year-old leader, has been softening his rhetoric and policy stance. Yes, Syriza’s spending commitments, such as hiking pensions, seem unrealistic. Regrettably, the left-wing coalition wants to tax and regulate cosseted capitalists instead of exposing them to competition to up their game. But since Tsipras’s movement does not have a stake in the clientelist system, it might actually follow through with its reform pledges. And on the key issue of debt relief, Syriza is Greece’s best hope.

If Merkel were wise, she would make a virtue of a necessity and offer Greece debt relief as a gesture of solidarity. She must know that if the euro ultimately collapses, Germany will be blamed — again — for wrecking Europe. The chancellor could call on historical precedent: West Germany’s debts were slashed in 1953 through the London Agreement. She could even throw in a Marshall (or Merkel) Plan of investment for Greece and other crisis-hit countries that would also boost German exports.

Unfortunately, that is highly unlikely. Because of Merkel’s mistaken bailout of Greece’s private creditors in 2010, German taxpayers would lose out if Greece’s debt were cut. Since Germans self-servingly believe that as creditors they are virtuous, they feel no obligation to be generous to Greeks whom they view as sinful profligates. And Berlin is loath to set a precedent that could encourage others, notably the Irish, to seek relief for the bank debt unjustly imposed on them by the EU.

So Greece needs to stand up for itself and demand a negotiated write-down, backed by the threat of unilateral default. It can credibly do so: Since Athens has a substantial primary surplus, it would not need to borrow if it stopped servicing its debts. Syriza says it won’t write down bonds held by private investors, so Argentina-style legal entanglements aren’t a concern. With the bonds held by Greek banks untouched, the European Central Bank could scarcely refuse to accept them as collateral for liquidity. Meanwhile, German threats to force Greece out of the euro are probably bluster: Merkel has no legal right to deprive Greeks of the use their own currency, and it is implausible that unelected central bankers would dare splinter the eurozone. So Tsipras just needs to control his spending urges and stand his ground.

Will this cause upheaval? No doubt. Could it go horribly wrong? Of course. Is it necessary? Absolutely. Choosing the “safe” Samaras option would condemn Greece to continuing misery.

Sluta betrakta flyktingar som välgörenhetsfall

Ingen vann det svenska valet. Det tål att upprepas eftersom en del uppträder som om ett parti som avvisades av 87 procent av väljarna är de verkliga valvinnarna. Jo, det är en besvikelse, rentav chockerande, att ett parti med nynazistiska rötter fick 13 procent av rösterna i Sverige, så känt för att vara ett trevligt land. Men Sverigedemokraterna och deras skadliga åsikter kan bara få genomslag om andra politiker och medierna låter dem få det.

Jämfört med sina motsvarigheter i andra europeiska länder är Sverigedemokraterna ännu ett relativt litet parti. I EU-valet i maj låg främlingsfientliga anti-etablissemangspartier i topp i Storbritannien, Frankrike och Danmark och fick över 20 procent i Österrike och Italien. Utanför EU blomstrar de i Norge och Schweiz. Eftersom det alltid finns människor som är missnöjda med sina liv och tillståndet i landet klarar sig Sverige relativt bra.

Och även om Sverige har problem, klarar sig landet mycket bättre än större delen av övriga Europa. Sverige har inte kraschade banker och oöverstigliga skulder. Man har inte lidit under alltför stränga besparingsprogram. Ekonomin har växt mer än i något annat avancerat land i Europa efter krisen. Svenska politiker och myndigheter tillmäts i allmänhet ett större förtroende än deras europeiska motsvarigheter. Så döm inte er själva för hårt.

Eftersom det är normalt att väljarna vill se ett byte när en regering suttit två mandatperioder, belyser valresultatet i första hand hur svag dragningskraften är hos Socialdemokraterna, det traditionella regeringspartiet som knappt förbättrade sitt resultat från 2010.

Självklart bör Sverige inte slå sig till ro. Den stora faran är att politiker i mittfåran drar fel slutsatser av valresultatet. Ett misstag skulle vara att försöka ta efter Sverigedemokraternas budskap för att vinna deras väljare. Men som erfarenheterna från Storbritannien visar; det lönar sig inte att härma de främlingsfientliga. Det är inte bara smaklöst; det fungerar inte. David Camerons regering driver envist en invandringsfientlig linje och har gång på gång skärpt visumregler medan oppositionspartiet Labour kritiserar de konservativa för att inte ta i tillräckligt. Detta har på intet sätt minskat stödet för The UK Independence Party (UKIP) utan gett en skjuts åt deras kärnfråga, legitimerat deras xenofoba åsikter och stimulerat väljare att välja den äkta varan.

Ett bättre sätt är att tackla de problem som felaktigt skylls på invandrarna. Sveriges arbetsmarknad gynnar dem som har jobb på bekostnad av dem som står utanför vilket utestänger många unga, lågutbildade och invandrare.

Invandrarna blir dubbelt anklagade: av de arbetslösa och för att de är arbetslösa. Det skulle vara bättre om arbetsmarknaden öppnades för att ge alla lika chans att ta sig fram.

Sverige borde också sluta betrakta flyktingar som välgörenhetsfall. Det är beundransvärt att Sverige så generöst tar emot många människor på flykt från krisen i Syrien och andra håll. Men de som får asyl i Sverige är fullt kapabla att betala tillbaka den generositeten genom att bidra till samhället – det är faktiskt precis vad de vill. Så ös inte bara vänlighet över flyktingar; hjälp dem att komma i arbete.

Här behövs nytänkande. Jimmie Åkessons vision för Sverige är en återvändsgränd, en negativ reträtt in i isolering och ett idealiserat förflutet – men han har åtminstone en. Etablerade partier erbjuder ofta tråkiga, teknokratiska versioner av status quo. Hur vore det att försöka inspirera väljarna med en djärv och tydlig idé om framtiden?

Germany’s economic mirage

For 60 years, successive German governments sought a more European Germany. But now, Chancellor Angela Merkel’s administration wants to reshape Europe’s economies in Germany’s image. This is politically unwise and economically dangerous. Far from being Europe’s most successful economy – as German Finance Minister Wolfgang Schäuble and others boast – Germany’s economy is dysfunctional.

To be sure, Germany has its strengths: world-renowned companies, low unemployment, and an excellent credit rating. But it also has stagnant wages, busted banks, inadequate investment, weak productivity gains, dismal demographics, and anemic output growth. Its “beggar-thy-neighbor” economic model – suppressing wages to subsidize exports – should not serve as an example for the rest of the eurozone to follow.

Germany’s economy contracted in the second quarter of 2014, and has grown by a mere 3.6% since the 2008 global financial crisis – slightly more than France and the United Kingdom, but less than half the rate in Sweden, Switzerland, and the United States. Since 2000, GDP growth has averaged just 1.1% annually, ranking 13th in the 18-member eurozone.

Written off as the “sick man of Europe” when the euro was launched in 1999, Germany responded not by boosting dynamism, but by cutting costs. Investment has fallen from 22.3% of GDP in 2000 to 17% in 2013. Infrastructure, such as highways, bridges, and even the Kiel Canal, is crumbling after years of neglect. The education system is creaking: the number of new apprentices is at a post-reunification low, the country has fewer young graduates (29%) than Greece (34%), and its best universities barely scrape into the global top 50.

Hobbled by underinvestment, Germany’s arthritic economy struggles to adapt. Despite former Chancellor Gerhard Schröder’s labor-market reforms, it is harder to lay off a permanent employee in Germany than anywhere else in the OECD. Germany languishes in 111th place globally for ease of starting a business, according to the World Bank’s Doing Business rankings. Its largest firms are old and entrenched; it has produced no equivalent of Google or Facebook; and the service sector is particularly hidebound. The government has introduced fewer pro-growth reforms over the past seven years than any other advanced economy, according to the OECD. Average annual productivity growth over the past decade, at a mere 0.9%, has been slower even than Portugal’s.

The brunt of the stagnation has been borne by German workers. Though their productivity has risen by 17.8% over the past 15 years, they now earn less in real terms than in 1999, when a tripartite agreement among the government, companies, and unions effectively capped wages. Business owners might cheer, but suppressing wages harms the economy’s longer-term prospects by discouraging workers from upgrading skills, and companies from investing in higher-value production.

Wage compression saps domestic demand, while subsidizing exports, on which Germany’s growth relies. The euro, which is undoubtedly much weaker than the Deutschmark would have been, has also helped, by reducing the prices of German goods and preventing France and Italy from pursuing currency depreciation. Until recently, the euro also provided booming external demand in southern Europe, while China’s breakneck industrial development raised demand for Germany’s traditional exports.

But, with southern Europe now depressed, and China’s economy decelerating and shifting away from investment spending, the German export machine has slowed. Its share of global exports fell from 9.1% in 2007 to 8% in 2013 – as low as in the “sick man” era, when Germany was struggling with reunification. Because cars and other exports “made in Germany” now contain many parts produced in central and eastern Europe, Germany’s share of global exports is at a record low in value-added terms.

German policymakers pride themselves on the country’s vast current-account surplus – €197 billion ($262 billion) as of June 2014 – viewing it as a sign of Germany’s superior competitiveness. Why, then, are businesses unwilling to invest more in the country?

External surpluses are in fact symptomatic of an ailing economy. Stagnant wages boost corporate surpluses, while subdued spending, a stifled service sector, and stunted start-ups suppress domestic investment, with the resulting surplus savings often squandered overseas. The Berlin-based DIW institute calculates that from 2006 to 2012, the value of Germany’s foreign portfolio holdings fell by €600 billion, or 22% of GDP.

Worse, rather than being an “anchor of stability” for the eurozone, as Schäuble claims, Germany spreads instability. Its banks’ poor approach to lending their surplus savings inflated asset-price bubbles in the run-up to the financial crisis, and have imposed debt deflation since then.

Nor is Germany a “growth engine” for the eurozone. In fact, its weak domestic demand has dampened growth elsewhere. As a result, German banks and taxpayers are less likely to recover their bad loans to southern Europe.

Given how bad wage compression has been for Germany’s economy, foisting wage cuts on the rest of the eurozone would be disastrous. Slashing incomes depresses domestic spending and makes debts even less manageable. With global demand weak, the eurozone as a whole cannot rely on exports to grow out of its debts. For struggling southern European economies whose traditional exports have been undercut by Chinese and Turkish competition, the solution is to invest in moving up the value chain by producing new and better products.

Germany’s economy needs an overhaul. Policymakers should focus on boosting productivity, not “competitiveness,” with workers being paid their due. The government should take advantage of near-zero interest rates to invest, and encourage businesses – especially start-ups – to do likewise. Finally, Germany should welcome more dynamic young immigrants to stem its demographic decline.

This would be a better economic model for Germany. It would also set the right example for the rest of Europe.

The elections show the only hope for the EU is a European Spring

Europe is in a mess. Its economies are failing to deliver higher living standards for most people—and many have lost faith in politicians’ ability to deliver a brighter future. Only 43% even bothered to vote in this weekend’s European elections and those that did deserted mainstream parties for the extremes. It’s a wake-up call that Europe desperately needs to change.

After an unnecessarily long and deep recession, Europe’s recovery is the flimsiest on record: feeble in the euro zone, a return to housing bubble and bust in Britain. Real wages in Britain have fallen by nearly a tenth since the crisis, while the average German earns fractionally less than 15 years ago. Living standards in crisis-hit southern Europe have fallen off a cliff. Twenty-six million Europeans are out of work—including 15 million young people neither in employment nor education. A lost generation is in the making.

Many countries have zombie banks and crushing debts. Most have feeble productivity growth and weak investment. All are aging fast, and without immigration, workforces are set to shrink. Combine depressed demand, inadequate investment, poor productivity and demographic drag, and Europe seems set for stagnation and decline unless it radically reforms. Depressingly, most Europeans think younger generations will have a worse life than they do.

The present economic pain and fear of the future are poisoning politics too. Many people no longer trust mainstream politicians, EU technocrats and elites in general, who seem self-serving, captured by vested interests, and incapable of solving Europe’s problems, let alone setting out a compelling vision of a brighter future. Some are even losing faith in democracy itself.

Social tensions within countries are multiplying, as are political frictions between them. Understandable anger at the injustice of bailouts for rich bankers and budget cuts for poor schoolchildren overlaps with a despicable scapegoating of outsiders, notably immigrants. Scots will vote on whether to split from Britain in September, Catalans from Spain in November. Bombs go off when Angela Merkel visits Athens.

The project that binds Europeans together—the European Union—has never been more unpopular; Britain may even vote to leave. The EU’s crowning achievement, the euro, is increasingly seen as a sadomasochistic straitjacket. As a result, most Europeans now associate the EU with austerity, recession and German domination, with constraints on what they can do, rather than on how they can all achieve more together.

This anti-EU, anti-foreigner, anti-establishment mood is fertile ground for extremists and charlatans, who have done extremely well in the European elections. Xenophobic reactionaries came top in Britain, France and Denmark. Outright neo-Nazis came second in Hungary, third in Greece and grabbed a seat even in Germany. The far left came first in Greece. An anti-establishment movement headed by a comedian came second in Italy. Ultimately, Europe’s open societies–post-war Europe’s most amazing achievement—are at risk. So as well as radical economic reforms, Europe’s politics needs to change too.

Europe needs bold leaders, political entrepreneurs, and a grassroots movement for change. Perhaps Italy’s new 39-year-old prime minister, Matteo Renzi is the man to get the ball rolling. Bucking the anti-incumbent trend, he won a whopping 41% of the vote in Italy, twice as much as his nearest rival. He has pledged to shake up its hidebound economy and its corrupt politics. He needs to capitalize on his landslide victory to press on with domestic reform and demand changes to how the euro zone is run.

Instead of a euro zone shaped by Germany’s narrow interests as a creditor, we need a euro zone that works for all its citizens. Zombie banks should be restructured, excessive debts (both private and public) written down. Increased investment is essential, along with reforms to boost productivity. The economically damaging and politically poisonous fiscal straitjacket imposed by Berlin needs loosening. To create lasting shared prosperity, Europe needs to break the grip that vested interests have over its economies and make them more adaptable, dynamic and decent through reforms that add up.

The EU also needs to become more open, accountable, and democratic. Europeans need a greater say over the future direction of the EU—and the right to change course. And instead of its closed, clubby, class-based politics from a bygone industrial age, Europe needs a more open politics for the internet age. Above all, Europe needs hope, a politics of genuine optimism, a prospectus for a better future. It needs a European Spring: economic and political renewal.

Eurozone voters have been blackmailed and betrayed. No wonder they’re angry

The European Union was often unpopular even before the financial crisis. But the long slump and eurozone policymakers’ blunders have created a political firestorm. Support for the EU has plunged to all-time lows. Most Europeans now associate it with austerity, recession and German domination, with constraints on what they can do, rather than on how we can achieve more together. Anti-EU parties, often xenophobic and comprising reactionary extremists, are set to do well in next week’s European elections. Europe urgently needs to change course.

But while critics such as Nigel Farage and Marine Le Pen are generally wrong, and their solutions worse, it is foolish to deny that terrible mistakes have been made in recent years, especially in the eurozone. As I know first hand, having worked directly with the European Commission president, José Manuel Barroso, EU institutions are often dysfunctional, unduly dominated by Germany, and not democratic enough. To start to put things right – and thus win back support for the EU – one needs to be unflinchingly honest about what has gone wrong.

The crisis has shredded trust in mainstream politicians’ competence and motives. They failed to prevent the crisis and have proved incapable of resolving it. They bailed out banks and their creditors while slashing spending on poor schoolchildren. They inflict suffering on others, while remaining largely unscathed themselves. No wonder voters are angry.

In Britain they can at least throw the rascals out. But in the eurozone, flawed and unjust policies have been imposed by policymakers in Berlin, Brussels and Frankfurt who are unaccountable to local voters.

When Greece’s debts became unbearable in 2010 they should have been written down, with the French, German and other banks that had recklessly lent to the Greek government taking losses.

But to bail out those banks, eurozone governments instead compounded the problem, lending their taxpayers’ money to Greece. The bad lending of private banks thus became obligations between governments. To try to recover their loans, eurozone policymakers then imposed brutal austerity, causing a longer and deeper slump than that which Germany suffered in the 1930s.

Blackmailed by the threat of being forced out of the euro, local taxpayers in Ireland, Portugal and Spain were also bullied into paying for foreign banks’ mistakes. In late 2010, the Irish government tried to backtrack on its foolish guarantee of all Irish bank debt, largely owed to German, British and French banks. But Germany, the European commission and, above all, the European Central Bank strong-armed Ireland into continuing to repay foreign banks with taxpayers’ money. The bill for bailing out the foreign creditors that financed Ireland’s bust banks is €64bn – €14,000 for every person there.

Abusing the desire of the Greeks, the Irish and others to be part of Europe – and their fear of being forced out of the euro – to impose iniquitous conditions on them is the very opposite of the solidarity on which the European project is meant to be based.

Thus, a crisis that could have united Europe in a collective effort to curb the banks that got us into this mess has instead divided it, pitting creditor countries – primarily Germany – against debtor ones, with EU institutions becoming instruments for creditors to impose their will on debtors.

Policymakers also wrongly concluded from Greece that Europe as a whole faced an immediate fiscal crisis – and while failing to tackle the banking and private debt problems they lurched into collective austerity, depressing demand so much that they worsened public finances. When their further mistakes sparked panic, they demanded ever more austerity. A study by a European commission official using its own economic model concludes that this collective, excessive austerity caused a cumulative loss of nearly 10% of eurozone GDP – and nobody has been held to account. That the ECB – finally – halted the panic, austerity has been eased off and economies have stabilised hardly excuses the earlier mistakes, while unemployment remains extremely high.

The enduring legacy of bailing out the banks that lent to Greece is a rigid system of centralised fiscal controls. Because Angela Merkel agreed to breach the legal stipulation that eurozone governments cannot bail out their peers, German taxpayers suddenly feared they were liable for everyone else’s debts. So she demanded much greater control over other countries’ budgets – and the commission was delighted to oblige.

This EU straitjacket is economically dangerous, because countries that share a currency need greater fiscal flexibility, not less. And it is politically poisonous, because when voters throw out their government, EU fiscal enforcer Olli Rehn pops up on television to insist the new one stick to the previous one’s failed policies. Denying voters democratic choices about tax and spending alienates people from the EU. And if voting for mainstream politicians doesn’t lead to change, it is no surprise that people turn to the extremes.

Instead of a eurozone shaped by Germany’s narrow interests as a creditor, we need one that works for all its citizens. Zombie banks need to be restructured; excessive debts written down.

More investment is needed, along with reforms to boost productivity (and thus wages). Elected governments need much greater discretion over their budgets, constrained by markets’ willingness to lend and, ultimately, by the possibility of default. A fairer, freer and richer eurozone is in Germany’s enlightened self-interest too.

The EU as a whole also needs to be more open, accountable and democratic. Europeans need a much greater say over the very political decisions that the EU takes – and the right to change course. To save the EU, we need to fix it.

Investors are ignoring eurozone risks

Markets awash with liquidity can both conceal and exacerbate underlying economic problems and long-term solvency issues. Investors and policy makers in the eurozone ought to have learnt that lesson from the pre-crisis bubble years. Instead they have both swung from blind panic to short-sighted complacency within less than two years.

But the crisis in the eurozone is far from over and markets are pinning too much hope on the European Central Bank embarking imminently on quantitative easing.

Sovereign yields in the struggling “periphery” have plunged ever since ECB President Mario Draghi pledged to do “whatever it takes” to save the euro in July 2012.

But while the initial fall in yields from their panicky heights was welcome and justified, the epic rally this year is taking them into bubble territory.

Yes, prospects have improved since a year ago. Southern European economies are no longer reliant on external funding and are finally growing again. But in their hunt for yield, investors are ignoring the risks that remain.

The banking crisis is unresolved. Public debt is still rising. And the recovery remains feeble.

Indeed, with inflation sharply down and prices falling in some parts, nominal GDP growth has scarcely improved. It was minus 1.4 per cent in Ireland and 0.1 per cent in Italy in the year to the fourth quarter of 2013, and 0.3 per cent in Spain in the year to the first quarter of 2014. In effect, the eurozone is relying entirely on achieving and maintaining large primary surpluses for decades to stabilise and bring down debts – a tall order.

At the very least, then, debt dynamics in the “periphery” are precarious. And precisely because the fear of imminent doom has abated, politics in countries with scarily high unemployment and crushing debts could easily become more turbulent.

Yet even with a stagnant, unreformed economy, unstable politics and public debt of 133 per cent of GDP, Italy can now borrow for 10 years at a little over 3 per cent, a euro-era low. So can Spain, for the first time since the bubble era in 2005.

In Ireland, 10-year yields have plunged to a mere 2.89 per cent, only 20 basis points above US Treasuries. Yet the economy tanked in the fourth quarter of last year, it has debts of more than 150 per cent of GNP (adjusted for profits booked there for tax purposes), and it emerged from its EU-International Monetary Fund programme only last December.

Junk-rated Portuguese 10-year bonds yield less than the 4 per cent offered by triple-A rated Australian ones.

Even an insolvent Greece, which restructured its privately held debt only two years ago, owes a mountain more to the EU and the IMF and is still reliant on their funding, recently tapped markets for five years at a mere 4.95 per cent. Since Greece’s public debt – 172 per cent of GDP and rising – remains unsustainably large, investors are in effect gambling that the government will prioritise repaying them and eurozone authorities will be willing to grant Greece some form of debt relief.

Or you could lend to triple-A rated New Zealand for five years and get 4.2 per cent.

Sentiment can turn quickly. Witness the whiplash emerging markets suffered when the US Federal Reserve announced its quantitative easing taper last year, and again when the taper began. While the prospect of tighter US monetary policy may eventually weaken the euro against the dollar, it also presages higher global interest rates, a big negative for the debt-laden eurozone.

So what? The ECB is about to launch its own QE programme and inflate bond prices. Not so fast. So far, all the ECB has done is try to talk the euro down. Any further loosening is more likely to take the form of a negative deposit rate than QE. Remember that Germans are happy with their inflation at 0.9 per cent. They, and many others at the ECB, tend to see falling prices in southern Europe not as a problem but part of the necessary adjustment process.

Frankfurt will also be reluctant to embark on another experimental policy so soon after the German Constitutional Court ruled its Outright Monetary Transactions illegal. With the ECB still engaged in its asset-quality review of eurozone banks, QE also seems premature and of dubious benefit. And the more markets rally in anticipation of QE, the more likely the ECB is to delay, in the hope that the bond-market bubble will spill over into stronger economic growth.

While the sun shines, governments should rush to pre-fund their borrowing needs. But investors ought to be warier of the looming storm clouds – as should eurozone policy makers, who have yet again prematurely declared victory.

Europa behöver ekonomisk och politisk förnyelse

Valet till Europaparlamentet nästa månad borde utlösa en djupgående debatt om Europas framtid. Hur läker vi såren efter den ekonomiska krisen, det ekonomiska lidandet, spänningarna inom länders befolkningar, den politiska splittringen mellan länder?

Medan USA:s ekonomi hämtar sig, den asiatiska växer till och Europa åldras – hur ger vi nytt liv åt våra vacklande ekonomier? Hur kommer det sig att Europas kostsamma åtgärder för att motverka klimatförändringen i världen gör så få globala avtryck? Hur ska vi reagera på Putins aggressioner i Ukraina? Hur ska Europa säkra sitt framtida behov av energi? Hur kan man bekämpa den tilltagande högerextremismen?

Det är några av de stora frågor som politiker borde ägna sig åt. Trots detta pågår nästan ingen debatt alls. Delvis beror detta på missuppfattningen att Europaparlamentet inte skulle ha något att säga till om. I förra valet var det bara 43 procent av européerna som brydde sig om att rösta (45 procent av svenskarna). Ändå behövs numera parlamentets godkännande för nästan vartenda beslut inom EU: bankregler, handelsavtal, hålla internet öppet, göra det billigare att använda mobilen utomlands.

Fast en större fråga är att vi lever i en tid av teknokratisk (van)skötsel, snarare än politiskt ledarskap, med snäva ramar för politiska alternativ, korta tidsperspektiv och begränsade ambitioner. De flesta politiker, kringskurna av etablerade intressegrupper och i avsaknad av stora tankar, försöker ta sig fram så gott det går istället för att göra något omvälvande. De lappar och lagar, duckar och smiter undan istället för att hålla upp en övertygande, ljusare framtidsvision och sedan kämpa för att nå den. Likväl är det just radikal förändring Europa behöver.

Ekonomiskt sett är större delen av Europa i oordning. Banker i konkurs, en förkrossande skuldbörda, svag produktivitetstillväxt, klena investeringar, hög arbetslöshet och krympande befolkning. I varierande grad påverkar dessa faktorer alla europeiska ekonomier. Europa är inte dynamiskt nog. Här saknas en motsvarighet till Silicon Valley. Alla internetålderns jättar är amerikanska: Google, Amazon, Facebook, Twitter, Apple.

Ur ett bredare perspektiv ser vi att av de 100 högst värderade företagen i Amerika är 20 under 40 år medan inte ett enda av Europas topp 100 företag är grundat efter 1975 (i motsats till avknoppade eller sammanslagningar av äldre företag).

Arbetsmarknader gynnar ofta omhuldade insiders på bekostnad av utomstående, särskilt ungdomar. Europa saknar fortfarande en gemensam marknad för energi, samt tjänster inklusive datatjänster. Vår energiförsörjning är dyrare än Amerikas, farligt beroende av Ryssland och allt mindre grön nu när kol, som trängts ut av Amerikas kraftiga ökning av skiffergas, eldas i Europa istället.

Även politiskt råder oordning i Europa. Stödet för EU har nått sin hittills lägsta nivå. De flesta européer tycker att EU går åt fel håll. Demokratin är bristfällig på den europeiska nivån och är svag på den nationella. Förtroendet för politikernas kompetens, motiv och ärlighet har raderats ut. Våra öppna samhällen hotas utifrån av Kreml och inifrån av främlingsfientliga personer och reaktionärer.

Lyckligtvis är Sverige i mycket bättre form än de flesta. Under de senaste tio åren, liksom under perioden efter krisen, har levnadsstandarden ökat mer än i Tyskland. Folks förtroende för det politiska systemet är högre än på andra håll.

Men Sverige har inte råd att självbelåtet sitta still. Hushållens skulder är oroväckande höga. Likaså arbetslösheten, särskilt bland unga och invandrare. Medan nästan vartannat nystartsföretag i Silicon Valley och ett av fyra i hela USA har en invandrare bland grundarna, lyckas Sverige inte utnyttja den fulla potentialen hos sina olika talanger. Inte ens i det land där Skype och Spotify föddes, grundades något av de 20 största företagen efter 1975. Förtroendet för politiker sjunker samtidigt som en av tio stöder ett parti med nynazistiska rötter.

Sorgligt nog tror en majoritet av svenskarna, liksom de flesta européer, att dagens barn får en svårare framtid än dagens vuxna har.

En sådan pessimism är nedbrytande. Europa behöver inges hopp, en genuint optimistisk politik, ett program för en bättre framtid. För det krävs djärva reformer för att göra våra ekonomier mer anpassningsbara, dynamiska och rimliga, en öppnare politik och ett mer demokratiskt EU. Vi behöver en europeisk vår; en ekonomisk och politisk förnyelse.

Extract from European Spring

Like passengers on an up escalator, Britons and other Europeans for decades enjoyed seemingly effortless rises in living standards year after year. Expanding economies and swelling social spending lifted nearly everyone up. Each generation could look forward to much better lives than those of previous ones. Yet in recent years, this growth escalator has broken down.

It has been creaky for a while: since the turn of the century, productivity growth has been sluggish across most of Europe – and wage rises even slower. But piling on debt provided an artificial boost, while bubbly house prices and financial trickery blinded people to the risks.

Then the financial crisis and the panic in the eurozone threw a spanner in the works and the escalator went into reverse. The long slump and governments’ subsequent budget cuts have exposed the chasm between the fortunate – and sometimes undeserving – few who continue to thrive and the majority who are struggling. Many people have fallen far – not least the 26 million Europeans who are out of work, many of them for a long time. In Britain, real wages have fallen by nearly a tenth. A typical British household is no richer than a decade ago. Even the much-vaunted German escalator has stalled. The average German earns fractionally less than 15 years ago.

Some parts of Europe have been in freefall. In Greece, where national income has shrunk by a quarter, children scavenge through rubbish bins for food scraps while hospitals run short of medicine. In Spain, where more than one in four people are unemployed, suicide is now the top cause of death after natural causes. In Ireland, where house prices have halved, nearly one in five homeowners are in arrears on the mortgages on their depreciated homes, while the cost to Irish people of bailing out the banks that made all the bad mortgage loans comes to €14,000 (£11,600) each. In Italy, more than two in five young people are out of work; in Greece and Spain, it’s nearly three in five.

Across Europe, 15 million people below the age of 30 are neither in employment nor education. A lost generation is in the making. Is it any surprise that young Europeans are having even fewer babies since the crisis and that someone emigrates from Portugal every four minutes?

Fortunately, prospects look less bleak than they were in 2012, when panic stalked the markets and the euro seemed on the brink of collapse. Finally, most European economies are growing again, while markets are buoyed by easy money. But after the longest and deepest recession since the Great Depression of the 1930s, and even with exceptional monetary support, the recovery is the flimsiest on record. In Britain, the combination of austerity, easy money and a cheap currency without meaningful reform generated three years of stagnation – and now the authorities are cranking up yet another cycle of debt-fuelled consumption, housing bubble and bust.

Far from a “march of the makers”, it is a flight of the speculators. Much of Europe remains lumbered with broken banks and crushing debts. Most of Europe suffers from record-low investment and feeble productivity growth. All of Europe is ageing fast – and without immigration most countries’ workforces are set to shrink.

The future seems bleak, too. Prominent economists talk of a “new normal” of permanently low growth, a “great stagnation” of innovation and even of the “end of growth” in the West altogether. (Others, on the contrary, think innovation is speeding ahead, but fear that humans will lose the “race against the machine” and that robots will steal people’s jobs.) There are certainly many worrying signs. Most of Europe has fallen further behind America’s productivity levels. Britain’s productivity record over the past decade is as poor as the eurozone’s. Germany has performed worse than Greece. Italy did worst of all: a big fat zero.

Europe’s productivity pipeline is blocked. Not enough new businesses are launched. Start-ups have trouble lifting off. Growth in promising small companies often stalls. Established businesses don’t innovate enough or invest enough in future growth. With a few notable exceptions such as Skype, Spotify and Shazam, the internet revolution has largely happened elsewhere. The new giants of our digital world – Google, Apple, Amazon, Facebook, Twitter, LinkedIn, PayPal, eBay – are all American. There is no European equivalent of Silicon Valley.

Europe isn’t just falling further behind the US; it also faces ever-greater competition from China, India, Brazil, Mexico, Turkey, Korea and other emerging economies – not just in lower-end manufacturing but also in higher-tech sectors. Apple’s biggest rival in smartphones? Not Finland’s Nokia, but Korea’s Samsung. The world leader in solar panels? No longer Germany, but China. Britain’s biggest manufacturer? India’s Tata (which owns, among many things, the luxury car maker Jaguar Land Rover).

Demography may not be destiny, but Europe’s population trends look pretty dismal all the same. As the post-war baby boomers retire over the next 15 or so years, the burden on smaller, younger generations will be huge. In 2010, there were nearly four people of working age for every person aged 65 and over; without migration, there will be fewer than two-and-a-half by 2030. The challenge isn’t just financial, it’s practical: who will care for the massed ranks of pensioners? As the labour force shrinks (as it already is doing in many European countries), economies will need to notch up faster productivity growth and investment merely to stand still. But if the economy is likely to stand still, why invest?

Europeans can’t even comfort themselves that their flaccid economy is getting greener. Despite all the costly policies that Europe has introduced, greenhouse-gas emissions from electricity generation are rising in Europe, whereas in the US, despite policymakers’ inaction, they are falling. The EU’s flagship emissions-trading scheme has flopped. While the US is dashing for cheaper and cleaner shale gas, Europeans spurn shale while burning more filthy coal. Many countries, notably Germany, are also committed to phasing out nuclear energy, which will further increase emissions (and costs). As a result, energy prices are much higher in Europe than in the US, hitting consumers and curbing growth. Without greater energy investment, the lights might even go out.

Depressingly, an overwhelming majority of Europeans – Britons as well as French, Germans and Spaniards – think their children will have a worse life than they themselves have. This negativity is so deeply ingrained that people scarcely notice it any more. Witness how Europeans tend to focus on the perceived risks of new technologies rather than their potential rewards. One in two thinks one should not start a business if there is a risk of failure – as there inevitably is. Hope of a better future – a belief that progress is possible – is fading.

The present economic pain and fear of the future are poisoning politics, too. Social tensions within countries are multiplying, as are political frictions between them. Understandable anger at the flagrant injustice of bailouts for rich bankers and budget cuts for poor schoolchildren overlaps with a despicable scapegoating of outsiders, in particular immigrants. Scots will vote on whether to split from Britain in September 2014, Catalans from Spain in November. Germans and Greeks are at each other’s throats. The project that binds Europeans together – the European Union – has never been more unpopular; Britons may even vote to leave. The EU’s crowning achievement, the euro, is increasingly perceived as a sadomasochistic straitjacket.

Many people no longer trust mainstream politicians, EU technocrats and elites in general. They seem captured by vested interests and incapable of improving the lot of ordinary people, let alone setting out a compelling vision of a brighter future. Politics is turning nasty, fractious and inward-looking – with unpredictable consequences. Worst of all, many are losing faith in democracy itself. This anti‑establishment, anti-foreigner, anti-EU mood is fertile ground for extremists and snake-oil salesmen. In next month’s European elections, the far left seems likely to top the poll in Greece. An anti‑establishment movement headed by a clown may come first in Italy. Above all, xenophobic and reactionary parties such as Britain’s Ukip and France’s Front National look set to do exceptionally well. They peddle a return to a romanticised past when the world seemed less threatening: when Europe was less open, less diverse and everyone knew their place.

Worse, they are polluting politics more generally. Listen to the abuse heaped on immigrants – who did not cause today’s crisis – by supposedly respectable politicians and pundits in Britain, France or the Netherlands these days. Substitute “black people”, “women” or “poor people” for immigrants in their sentences and the vile nature of their sentiments becomes clear. The dehumanisation of people is how the march towards fascism began.

Reactionaries’ scapegoating of foreigners is vile but effective. The solutions they propose are false: stop the world, stamp on difference, turn the clock back. But their success is symptomatic of a genuine sickness. Europe’s sluggish economies are strangled by vested interests that stifle opportunity and steal the value created by others. EU institutions have become instruments for creditors to impose their will on debtors. Democracy is lacking at an EU level and ailing at a national one. Our open societies – post-war Europe’s most wonderful achievement – are at risk.

Our economies and politics need to change. We need to deal with the banking and debt crisis decisively and fairly and create lasting shared prosperity through reforms to make our economies and societies more adaptable, dynamic and decent – reforms that add up. We need to dispel bad ideas such as the austerity delusion, the “competitiveness” myth, the bubble mentality and the notion that economies are inherently stable and predictable. We need reforms that would break the power that vested interests have over our economies and our politics. We need changes to institutions to make them work better, not least a more open, accountable and democratic EU with genuine political choice. And we need a more open politics here at home.

It is an agenda of standing up for those locked out of the system, not in the noxious, hateful way that populist extremists do, but rather by opening up opportunities for everyone to get ahead. An equal chance to get a good education and a decent job. The capital to give every young person a start in life. The opportunity to start your own business and build it up. Shifting tax off hard work and enterprise and on to unearned rewards from land ownership and inheritance. The ability to save for your retirement tax-free without your returns being gobbled up in fees. A future-proofed state pension system. The security that enables you to sleep easily at night – and take risks. Open capitalism, not crony capitalism. The freedom to be who you want to be, live the life you want to lead and still have a place in society.

Europe desperately needs to change. It needs hope, a politics of genuine optimism, a prospectus for a better future. We need a European Spring: economic and political renewal.

Eurozone fiscal colonialism

Last Tuesday, the European Parliament finally approved a mechanism for restructuring and closing down failed banks across the euro zone. But the system, which will not be established until 2015, is unworkably complex and leaves a veto power with national governments. Six years after the financial crisis began, Europe has still not resolved its banking mess.

Despite the hoopla in bubbly financial markets, the crisis continues to inflict grave hardship. Zombie banks are still curbing credit to businesses in Southern Europe. Millions of people in sickly economies have lost their jobs or must scrape by on slashed wages, while they struggle with huge debts and pay higher taxes for worse public services. Many have lost that most precious commodity: hope for a brighter future.

Social tensions within countries are multiplying, as are political frictions between them. Support for the European Union is at an all-time low. Extremist parties are set to advance in European Parliament elections next month.

The primary cause of the crisis was the reckless lending of German and French banks (both directly and through local banks) to Spanish and Irish homeowners, Portuguese consumers and the Greek government. But by insisting that Greek, Irish, Portuguese and Spanish taxpayers pay in full for those banks’ mistakes, Chancellor Angela Merkel’s government and its handmaidens in Brussels have systematically privileged the interests of German and French banks over those of euro zone citizens.

Germany, in particular, remains in denial about its banks’ bad loans. Loath to cede control over its stricken banks, Berlin has used its clout to eviscerate the euro zone’s banking union. Worse, the German government, together with the European Commission and the European Central Bank, wrongly blamed the euro zone crisis on fiscal profligacy across Southern Europe. This self-serving misdiagnosis has inflicted lasting economic and political damage.

The massive austerity that Europe’s leaders enforced has caused deep recessions and soaring unemployment, while perversely destabilizing public finances. In Greece, the economy has shrunk by a quarter and the incomes of the poor by one-third; six in 10 young people are unemployed. By some measures, this is a worse slump than Germany suffered in the 1930s.

In my former post, as an economic adviser to the president of the European Commission, I argued against such measures, but to little avail. When European policy makers’ mistakes sparked a bond-market panic that brought the euro zone to the brink of collapse, their response was still more austerity. Only in the summer of 2012 did the European Central Bank finally quell the panic.

Thanks to the central bank’s action and an easing of austerity, euro zone economies have stabilized. Berlin and Brussels claim — wrongly — that their handling of the crisis has been vindicated.

The bungled decision to bail out German and French banks by lending to an insolvent Greece in May 2010, rather than writing down its debts, scarred the euro zone. It violated the legal basis on which the euro was formed: that a government in difficulty should not be bailed out by its peers.

Because Ms. Merkel agreed to breach this rule, Germany’s taxpayers feared that they were on the hook for Southern Europe’s debts. Ms. Merkel therefore demanded greater control over other countries’ budgetary decisions — and the European Commission was only too delighted to grab new powers. Countries that share a currency and an interest rate need greater fiscal flexibility, not less, but the commission now applies a fiscal straitjacket — including the right to demand that a government rewrite its budget before presenting it to parliament.

This centralization of fiscal powers is not just economically dangerous; it is also politically poisonous. When voters in a member country have turfed out their government, as they have done at almost every election since the crisis, Olli Rehn, the commission’s vice president and fiscal enforcer (currently on temporary leave), has popped up on television to insist that the incoming government stick to the old one’s failed policies. That a remote, unelected and scarcely accountable official in Brussels should deny voters legitimate choices about tax and spending decisions is undemocratic and alienates people from the European Union.

A crisis that could have united Europe in a joint effort to curb the mighty banks has instead divided the euro zone into creditor nations and debtor ones, with banks’ bad loans becoming intergovernmental obligations. European Union institutions have become instruments for creditors to impose their will on debtors, subordinating Europe’s southern “periphery” to the northern “core” in a quasi-colonial relationship. Berlin and Brussels now have a vested interest to entrench this system rather than cede power and admit to mistakes.

To get out of this mess, the euro zone needs a change of policies and institutions. Banks need to be restructured and unbearable debts written down. More investment is needed, along with bold reforms to boost productivity.

The “no bailout” rule should also be restored. Elected national governments must have much greater flexibility to tax and spend as they please, constrained by markets’ willingness to lend to them and ultimately by the possibility of default. A mechanism for the orderly restructuring of sovereign debt should be established for that purpose.

To avoid future panics, the European Central Bank’s role as a lender of last resort to solvent governments should be enshrined. The mechanism for restructuring failed banks also needs to be properly independent.

In the long term, a euro zone treasury accountable to both European and national legislators should be created, with limited tax-raising and borrowing powers. To persist with current policies and institutions will corrode support for the European Union and risks destroying it. We need a European Spring of economic and political renewal.

Europe’s bogus banking union

After a 16-hour marathon negotiating session ending on March 20, politicians, technocrats, and journalists were all keen to declare the deal on the final piece of Europe’s banking union a success. But appearances are deceptive. While the “banking union” may soon exist on paper, in practice the eurozone banking system is likely to remain fragmented along national lines and divided between a northern “core,” where governments continue to stand behind local banks, and a southern “periphery,” where governments have run out of money.

Think back to June 2012. Spain’s busted banks threatened to drag down the Spanish state, as Ireland’s had done to the Irish state 18 months earlier, while panic tore through the eurozone. European Union leaders resolved to break the link between weak banks and cash-strapped governments. A European banking union would move responsibility for dealing with bank failures to the eurozone level – akin to America, where distressed banks in, say, Florida are dealt with by federal authorities with the power to bail in bondholders, inject federal funds, and close down financial institutions.

But, a month later, the European Central Bank finally intervened to quell the panic. That saved the euro, but it also relieved the pressure on Germany to cede control of its oft-distressed banks. Since then, the German government has used its clout to eviscerate the proposed banking union; all that remains is a shell to keep up appearances.

For starters, it will not apply to the huge losses incurred during the current crisis. The ECB will directly supervise bigger eurozone banks starting in November (the first step of the banking union), and now it is assessing the strength of their balance sheets. If this exercise is conducted properly – a big if – undercapitalized banks that are viable would be forced to raise additional equity, from bondholders if necessary, while unviable ones would be wound down.

But EU rules on national bank resolution will not yet be in force, while the eurozone’s single resolution mechanism will be initiated only in 2015. So banks in northern Europe that are still backed by creditworthy governments would be treated differently than those in cash-strapped southern Europe: Germany can afford to bail out its banks; Italy cannot.

More likely, the ECB will fudge the exercise, owing to fear of reigniting the financial crisis and pressure from national governments. Small countries will be singled out to make the exercise look tough, while bigger problems will be swept under the carpet: German banks have already succeeded in excluding many of their assets from the assessment.

One argument for making the ECB the watchdog for eurozone banks was that it was less captured by the banks than national supervisors were. But its behavior throughout the crisis suggests otherwise. It has repeatedly prioritized the interests of banks in “core” countries and proved more pliable to political pressure from Berlin and Paris than from Madrid or Rome, let alone Dublin or Athens.

Even after the new banking union framework is fully in place, it will be full of holes. At Germany’s insistence, the ECB will supervise only the eurozone’s 130 or so biggest banks. That will leave the smaller Ländesbanks (state-owned regional banks), many of which made spectacularly bad lending decisions in the bubble years, and Sparkassen (smaller savings banks) in the hands of local politicians and Germany’s pliable financial supervisor.

The argument that smaller lenders are not a systemic threat is spurious: consider Spain’s cajas. In any case, there will not be a level playing field.

Above all, the single resolution mechanism is a mirage, because national governments retain a veto over closing down any bank. The mechanism is deliberately complex to the point of being unworkable; it is inconceivable that a bank could be wound down over a weekend to avert market panic. And the collective funds that eventually will be at its disposal are meager: a mere €55 billion ($76 billion).

In practice, then, rescuing banks will remain in the hands of national governments, all of which are captured by “their” banks but whose capacity to bail them out varies: French and German banks will be rescued; Cypriot banks will not. To increase their chances of a bailout, banks in the eurozone periphery will doubtless borrow as much as they can from politically connected banks and investors in the core countries. Thus, national taxpayers will remain on the hook for bankers’ losses.

The upshot is that the eurozone as a whole is likely to struggle with a zombie banking system, with only patchy efforts to restructure banks decisively and fairly. Worse, the north-south, core-periphery divide will harden, with taxpayer-backed banks on one side and banks that must fend for themselves on the other.

That is a bonus for struggling southern taxpayers, but it implies that even sound banks could have higher funding costs than dubious northern European banks for the foreseeable future. Southern businesses would then face higher borrowing costs than northern businesses, hindering growth. The bogus banking union is thus a recipe for entrenching economic and political division.

Vågar Europa de reformer som behövs?

Större delen av Europa har levt i kris sex hela år. Banker har konkursat – och blivit utlösta. Skulderna har vuxit sig större. Paniken närapå slet sönder euron. Ekonomier har stagnerat eller krympt. Löner har sjunkit. Arbetslösheten har skjutit i höjden. På det hela taget har eurozonen drabbats värre än under den stora depressionen på 1930-talet.

Efter denna långa, mörka vinter har experter och politiker hälsat de första magra tecknen på tillväxt som en signal om att bättre tider är på gång. Fast en svala gör ingen sommar. Även om utsikterna är bättre än för ett år sedan förblir utvecklingen klen i det korta perspektivet, och utmaningarna på längre sikt enorma.

Detta är uppenbart i södra Europa. I Grekland, där nationalinkomsten har sjunkit med en fjärdedel letar barnen efter matrester i soptunnorna medan sjukhusen har brist på mediciner. Krossad under en ohållbar statsskuld fortsätter landets inåtvända ekonomi att krympa. I Spanien, där mer än en av fyra saknar arbete, tar så många livet av sig att självmord blivit den största dödsorsaken efter de naturliga.

I Italien saknar två av fem ungdomar arbete – i Grekland och Spanien nära tre av fem. En förlorad generation håller på att skapas. Är det då förvånande att unga européer föder ännu färre barn sedan krisen bröt ut och att någon emigrerar från Portugal var fjärde minut?

 I norra Europa är situationen inte lika alarmerande, men ändå rätt dyster. Frankrike föll ned i recession under andra halvåret 2013. Det ryck i tillväxten som Storbritannien nyligen gjort ser ut att vara farligt instabilt: trots att lönerna sjunkit med en tiondel, lånar konsumenterna för att spendera mera och därmed blåsa upp ännu en bostadsbubbla.

Till och med Tyskland är mycket svagare än vad folk tror. Inbromsningen i Kina och fallet i Sydeuropa skadar Tysklands export samtidigt som köpkraften förblir svag och investeringsnivåerna når nya bottennoteringar. Sedan 2008 har den tyska ekonomin bara växt med totalt 2,5 procent. Sverige har klarat det dubbla. I Berlin har passiviteten satt in. Enligt OECD har man, sedan krisens början, gjort mindre än något annat land för att reformera sin ekonomi.

På kort sikt är det största hindret för tillväxt en ouppklarad bankkris till följd av överdriven skuldsättning. Hushållen i Europa är nästan lika skuldtyngda som de var 2008 och statsskulden är mycket större. Många banker är zombies–varken påfyllda med tillräckligt nytt kapital att låna ut, eller avlivade. Företagen varken kan eller vill investera. Lovande delar av ekonomin är ofta svältfödda på resurser att växa med, eller bakbundna av snåriga regleringar och konkurrenshinder.

Problemet förvärras av den långvariga avmattningen av produktiviteten och enorma befolkningsförändringar. Sedan mitten av 1990-talet har Europa halkat ännu längre efter USA: medan produktiviteten hos amerikanska arbetare ökade med 1,8 procent om året det senaste decenniet, med Sverige hack i häl, var genomsnittet för eurozonen bara 0,9 procent med Grekland bara en bråkdel före Tyskland, och med Italien på noll. Kombinationen av en klen produktivitetsökning och den demografiska tendensen att arbetskraften minskar i åldrande samhällen gör att den ekonomiska tillväxten blir fortsatt svag.

Stagnation och nedgång är inte oundvikligt. En omstrukturering av banker och nedskrivning av lån skulle ge ekonomierna ett lyft. Djärva reformer skulle kunna starta en våg av innovationer och företagande. Ökad invandring skulle hjälpa. Det går att göra mer för att hjälpa exporten till snabbväxande ekonomier som Kinas. Men har Europas politiker modet att konfrontera alla de etablerade egenintressen som hindrar tillväxten?

Sveriges framtid avgörs inte av Jimmie Åkesson

Sverigedemokraternas tredjeplats i opinionsundersökningarna inför valet till EU-parlamentet i maj och till Riksdagen i september nästa år innebär att Sverige står inför en prövning. Landets framtid kommer inte att avgöras av Jimmie Åkessons parti, trots ansträngningarna att sudda bort dess nynazistiska förflutna.

Det verkligt viktiga är hur politiker i mittfåran uppträder. De har inte råd att ignorera ett parti som har stöd av nästan var tionde svensk. Men faran ligger i att de kan komma att försöka vinna dessa väljare genom att ta efter SD:s invandrarfientliga inställning och riskera en kapplöpning om vem som är värst. Därför är det helt avgörande att respekterade politiker intar en mer positiv attityd.

Regel nummer 1: Gå inte i försvarsställning. Det var rätt gjort av Socialdemokraterna att öppna arbetsmarknaden för människor från tidigare kommuniststater i Östeuropa som gick in i EU 2004. Alliansregeringen kan också vara stolt över vad den har åstadkommit på immigrationsområdet. Med utgångspunkt i Sveriges berömvärda tradition att välkomna flyktingar, har den därutöver öppnat för ökad arbetskraftsinvandring.

Den här månaden är det fem år sedan den förutseende reformen infördes för att tillåta företag som inte kan hitta passande arbetskraft lokalt, att anställa personer med den rätta kompetensen från hela världen på tvååriga visum som är förnybara. Det är en flexibel, tillväxtvänlig politik som rimmar väl med de behov som en liten ekonomi har i en snabbt föränderlig värld.

I takt med att den globala ekonomins tyngdpunkt flyttar österut och söderut medan Europas samhällen åldras och arbetskraften krymper, måste Sverige i allt högre grad delta i konkurrensen om den arbetskraft som landet behöver. Det handlar inte bara om att ta hand om de gamla (och betala deras pension) eller att se till att internationella företag med bas i Sverige är framgångsrika. Det handlar om att stödja innovationer, drivkraften bakom högre levnadsstandard, vilket alltmer hänger samman med att människor av olika slag inspirerar varandra på platser som Silicon valley–och även i Stockholm. Google, Yahoo, eBay, PayPal, YouTube och många andra företag skapades alla av invandrare i samarbete med infödda. Skype, Europas mest framgångsrika nystartsföretag på internet, var ett samarbetsprojekt mellan svenskar, danskar och ester.

Regel nummer 2: Var öppen kring de verkliga problemen och försök att tackla dem. Ibland lyckas Sverige mindre bra med att sätta befintliga invandrare och deras barn i arbete. Kombinerat med ett generöst välfärdssystem öppnar det för Sverigedemokraterna att påstå att invandrarna är en börda och inte en tillgång. Men det är inte sant. En färsk undersökning från OECD visar att invandrare i Sverige faktiskt är nettobidragsgivare till samhällsekonomin.

Likväl är det ett enormt slöseri med talang att Sverige, trots att ekonomin växer snabbare efter krisen än i något annat EU-land på ekonomiskt framskjuten position, fortfarande har en arbetslöshet på 8 procent samtidigt som unga och i synnerhet invandrare kämpar för att få jobb. Det verkliga problemet är en arbetsmarknad som favoriserar dem som redan är inne på bekostnad av dem som står utanför. Att reformera detta borde vara prioriterat.

Regel nummer 3: Ha respekt för väljarnas legitima farhågor, men stryk inte deras fördomar och missuppfattningar medhårs. Med sin blandning av främlingsfientlig nationalism, socialkonservatism och stöd till välfärdsstaten – för infödda – attraherar Sverigedemokraterna väljare både på höger- och vänsterkanten. Opportunistiska politiker ur alla schatteringar kan därför frestas att efterlikna dem.

Bortsett från att det är ynkligt att göra invandrare till syndabockar för att försöka vinna röster, så skulle den strategin inte fungera. Erfarenheter från Nederländerna, Storbritannien, Frankrike och andra håll visar att det bara skulle gynna Sverigedemokraterna att spela på främlingsfientlighet.

När politiken blir råare är väljarna mer benägna att rösta på ”den äkta varan” än på någon efterhärmare i mittfåran. Och politiker som säljer sin själ till djävulen vinner inte nyckeln till himmelriket (eller ens till Sagerska palatset) utan riskerar att dra förbannelse över sitt land.

En våg av populism i Europa

Bekymrar det att Sverigedemokraterna ligger kring tio procent i opinionsundersökningarna? Med tanke på valet till Europaparlamentet i maj nästa år borde det oroa ännu mer att det går så pass bra för obehagliga extremister på andra håll i Europa. Vänd blicken österut: Sannfinländarna ligger på 18 procent. Se åt väster: det populistiska Fremskrittspartiet fick 16 procent i valet nyligen i Norge, som står utanför EU, och sitter nu i regeringen. Se söderut: det invandrarfientliga Dansk Folkeparti drar 19 procent i opinionsundersökningarna.

Längre bort är läget ännu värre. UK Independence Party fick 23 procent av rösterna i årets brittiska lokalval. I det österrikiska valet nyligen fick det högerextrema Frihetspartiet 21 procent. Gert Wilders hatspridande PVV leder i opinionsmätningarna i Nederländerna. Marine Le Pens rasistiska Nationella fronten leder i Frankrike.

Det går också bra för extremister i många länder i Öst- och Centraleuropa, inte minst i Ungern. Obehagligast av dem alla är nynazisterna i Greklands Gyllene gryning, vars ledare har gripits i samband med diverse brott, däribland mord.

Även om dessa högerextremister skiljer sig sinsemellan (en del hatar homosexuella, andra ger sken av att försvara dem) så är de allmänt sett positiva till statlig styrning av ekonomin, socialkonservativa och med en kultur präglad av främlingsskräck–med andra ord djupt icke-liberala. Och det ser ut som om de kommer att bli ytterst framgångsrika i Europavalet nästa år. Det skulle ge dem en större plattform, ökade bidrag och ett större inflytande över all lagstiftning i EU– således också över Sveriges. Eftersom många inte bryr sig om att rösta i Europavalet, och de som gör det ofta proteströstar, kan extremhögern till och med visa sig bli den största enskilda partigruppen i nästa EU-parlament.

Medan de flesta av Europas extremister ligger långt ut på högerkanten finns några långt till vänster. I Grekland, till exempel, ligger Syriza, en koalition av radikala vänsteraktörer, jämsides i opinionsmätningarna med det styrande konservativa partiet. Andra, bland dem Beppe Grillos populistiska rörelse Fem stjärnor, som fick en fjärdedel av rösterna i årets val i Italien, är inte lätt att kategorisera. Det som alla dessa extremister har gemensamt är fientligheten mot EU. På så sätt kan parlamentet rentav komma att få en majoritet som är emot EU och som kan blockera allt som Europas ledare kan komma att besluta under de kommande fem åren. Bryssel skulle bli lika förlamat som Washington.

Denna våg av extremism har många orsaker. Finanskrisen har rivit sönder förtroendet för eliters förmåga och förstärkt känslan av att ekonomierna styrs till förmån för privilegierade insiders snarare än för hela samhället. De som förlorat på den ekonomiska omvälvningen har blivit mångdubbelt fler. Européerna ser alltmer pessimistiskt på sin framtid och är övertygade om att deras barn kommer att få ett sämre liv. Många skyller felaktigt sina umbäranden på främlingar, sådana som finns långt borta, som kineser, eller på invandrarna i grannhuset. Andra trivs helt enkelt inte med kulturell mångfald. Och de anklagar ”kultureliter” för att förråda ”folket” när dessa öppnar sina ekonomier och samhällen och överlåter makt till Bryssel.

Även om extremisterna har fel både vad gäller analys och lösningar är deras framgång ett symptom på djupare problem. Endast en av två européer är nöjd med hur demokratin fungerar i det egna landet, mindre än hälften med hur den fungerar på EU-nivå. Bara en av fyra litar på sin regering och en liknande andel litar på landets parlament. Den goda nyheten är att Sverige är det enda större europeiska land där en tydlig majoritet (60 procent) litar på regeringen (och 70 procent på riksdagen). Svenska politiker bör göra allt de kan för att det ska förbli på det viset.

Hur flexibla är Washington och Bryssel?

Europa och Amerika har glidit isär. Med ett uppåtstigande Kina och när kalla kriget blivit ett avlägset minne har USA flyttat sitt fokus till Asien. Därför är Barack Obamas besök i Stockholm den 4 september anmärkningsvärt på två sätt. Han är inte bara den förste sittande amerikanske president som gör ett bilateralt besök i Sverige. Det är dessutom hans första resa till Europa efter de i juni inledda förhandlingarna om ett transatlantiskt ekonomiskt samarbete som skulle kunna föra Västvärldens länder närmare varandra i en global ekonomi som alltmer lutar åt öst.

Det bästa är alltid att öppna sina marknader för alla. Men när samtalen inom världshandelsorganisationen WTO om en världsomspännande frihandel inte kommer någon vart och det inte finns några regler alls om utländska investeringar, skyndar sig länder att träffa hundratals bilaterala och regionala avtal. USA förhandlar om ett samarbete kring Stilla havet (Trans-Pacific Partnership) som skulle föra samman så skilda länder som Australien, Kanada, Japan, Mexiko och Vietnam. Samtidigt förhandlar EU med Indien, Japan, Kanada, Vietnam och många andra.

Men ett avtal mellan USA och EU skulle vara någonting helt annat. De två står tillsammans fortfarande för 45 procent av världsekonomin och för nästan en tredjedel av världshandeln, samtidigt som amerikanska och europeiska företag har investerat över 2,8 biljoner dollar i varandras ekonomier. I en tid när tillväxten är svag och det är ont om jobb skulle ett lyckat avtal kunna betyda en kraftig ekonomisk injektion.

För en liten ekonomi som Sveriges, vars framgång är beroende av utrikeshandel och internationella investeringar, är detta särskilt viktigt. Under de senaste decennierna har svenska företag blivit globala och nu investerar de mer i USA än i något annat land. Och det är trafik i båda riktningarna. Amerikanska Nasdaq äger Stockholmsbörsen samtidigt som Manpower, General Electric, IBM och ytterligare omkring 1300 USA-företag som etablerat sig i Sverige, tillsammans har fler anställda i Sverige än några andra utländska företag.

Förhandlarna siktar på snabba resultat, möjligen redan nästa år. Men det finns gott om hinder. Bidragsbönder är en mäktig påtryckargrupp både i Bryssel och i Washington. Amerikaner accepterar genmodifierade grödor, européer vill inte ha dem. Frankrike vill skydda sina filmer mot Hollywood. Skandalen med NSA:s spioneri gör européerna särskilt angelägna att skydda sina personuppgifter. Mer allmänt sett har Amerika och Europa olika regleringar och standarder på allt från att godkänna nya mediciner till att avgöra om en kemikalie är säker – och båda tycker naturligtvis att deras eget system är bäst. Amerikanska företag skulle bli mycket missnöjda om de fick se fler hindrande EU-regleringar smita in bakvägen medan européerna oroar sig för de förment lägre kraven i USA.

Det stora problemet med alla handelsförhandlingar är att regeringar ofta är bakbundna av protektionistiska lobbygrupper som övertalar dem att ett större urval av billigare importprodukter är ett hot snarare än en fördel. Under det kalla kriget hade den amerikanska regeringen ett bredare perspektiv till följd av den övergripande prioriteringen att hålla samman Västalliansen. Kan en sådan logik möjligen än en gång förmå Washington och Bryssel att vara flexibla? Trots allt skulle en överenskommelse inte bara föra Europa och USA närmare varandra. Det är också en chans att etablera långsiktigt hållbara, globala regler och förhoppningsvis kickstarta en utveckling mot en friare världshandel.

Vielfalt ist das Narrativ der Progressiven

I n ganz Europa nehmen die Vorbehalte gegen Einwanderung und Vielfalt zu. Menschen aus anderen Ländern oder mit ausländisch klingenden Namen werden für alle möglichen Missstände verantwortlich gemacht. Angeblich nehmen sie unsere Arbeitsplätze weg, leben auf Kosten des Sozialstaats, sind Kriminelle und integrieren sich nicht. Solche Vorurteile fallen angesichts der Wirtschaftskrise auf immer fruchtbareren Boden, zumal einige Medien gefährliche nationalistische Ressentiments bedienen. In dieser Situation meiden Progressive das Thema Einwanderung, bisweilen bedienen sie sogar selbst fremdenfeindliche Ansichten. Das ist ein großer Fehler. Denn sowohl progressive Prinzipien, als auch Pragmatismus und ökonomische Vernunft sprechen dafür, Einwanderung und Vielfalt politisch zu unterstützen. Parallel dazu brauchen wir mutige politische Maßnahmen, damit jeder Einwohner Europas das Beste aus seinen Talenten machen kann. Diese Politik gilt es in ein positives Narrativ einzubetten, das der bunten Realität der europäischen Gesellschaften im 21. Jahrhundert entspricht.

Viele vermeintlich Progressive glauben allerdings, ihre Parteien müssten in der Einwanderungspolitik einen strikteren Kurs einschlagen, um konservative Wähler zurückzugewinnen, die von populistischen Rechtsaußen-Parteien verführt zu werden drohen. Zweifellos müssen Progressive auf die Ängste und Sorgen unzufriedener Wählergruppen eingehen. Jedoch ist es nicht nur moralisch falsch, sondern auch wahlstrategisch kontraproduktiv, sich die Argumente rechter Parteien zu eigen zu machen und deren Sprache zu übernehmen. Denn Menschen mit Einwandererbiografien sowie die linksliberalen Mittelschichten machen einen wachsenden Anteil der progressiven Wählerschaft aus. Beide Gruppen haben tendenziell eine positive Einstellung gegenüber Vielfalt. Einwanderungskritische Botschaften schrecken sie daher eher ab.

Neben moralischen Prinzipien und wahlstrategischen Erwägungen gibt es zudem wichtige ökonomische Argumente für eine positive Einstellung zu Einwanderung und Vielfalt. Das ist besonders wichtig, denn die Bürger sind offener für den kulturellen Wandel, wenn sie glauben, davon zu profitieren. Tatsache ist: Die europäischen Gesellschaften altern unaufhaltsam. Im kommenden Jahrzehnt wird sich die Erwerbsbevölkerung in Westeuropa durchschnittlich um etwa 0,3 Prozent pro Jahr verringern – in einigen Ländern, vor allem in Deutschland noch mehr. In Zeiten hoher Arbeitslosigkeit erscheint ein Rückgang des Arbeitskräfteangebots auf den ersten Blick vielleicht nicht als Problem. Aber wenn wir nichts unternehmen, werden die alternde Bevölkerung und die schrumpfende Arbeitnehmerschaft zu dauerhaft niedrigerem Wirtschaftswachstum führen. Das bedeutet weniger Mittel, um die Renten, die Gesundheitsversorgung und die sozialen Dienste für die wachsende Anzahl älterer Menschen zu bezahlen, den gesamten Sozialstaat zu finanzieren und die hohen staatlichen Schulden zu bedienen.

Zuwanderung schafft Wachstum und Dynamik

Gewiss kann Zuwanderung allein die Auswirkungen des demografischen Wandels nicht auffangen. Aber sie kann dabei helfen, sich den neuen Bedingungen anzupassen. So können Einwanderer einen wichtigen Beitrag leisten, wenn es um die Finanzierung der Babyboomer geht, die sich in den nächsten 20 Jahren zur Ruhe setzen werden – und die den jüngeren Generationen enorme Schulden und andere Verpflichtungen hinterlassen. Bereits heute sind junge, im Ausland ausgebildete Einwanderer im Hinblick auf die öffentlichen Finanzen Nettozahler.

Hinzu kommt: Einwanderer arbeiten überproportional im Pflege-, Gesundheits- und Sozialwesen. Sie üben Tätigkeiten aus, die viele Westeuropäer nicht übernehmen wollen. Dabei werden diese Jobs in den kommenden Jahrzehnten zunehmen. Den Vereinten Nationen zufolge wird der Anteil der Europäer über 60 Jahre an der Gesamtbevölkerung von 21 Prozent im Jahre 2006 auf 34 Prozent im Jahre 2050 ansteigen; der Anteil der über 80-Jährigen schnellt im gleichen Zeitraum von 3,8 auf 9,5 Prozent in die Höhe. Schon im vergangenen Jahrzehnt fand der größte Beschäftigungszuwachs nicht in der High-Tech-Branche statt, sondern in der Altenpflege.

Außerdem kann Migration das Wachstum fördern, indem es die Volkswirtschaften Europas flexibler macht, wie die jüngsten Erfahrungen mit der (meist temporären) Zuwanderung aus den neuen EU-Mitgliedsstaaten in die EU-15 zeigen. Besonders innerhalb der Eurozone ist eine größere Mobilität der Arbeitskräfte ein wichtiges Element des wirtschaftlichen Anpassungsprozesses.

All das ist den europäischen Entscheidungsträgern längst bekannt. Was fehlt, ist die Einsicht, dass Einwanderung mehr Diversität und Dynamik mit sich bringt und deshalb ein Motor für Innovation, Unternehmertum und Produktivität sein kann – und damit auch für Wirtschaftswachstum. Die unterschiedlichen Sichtweisen, Erfahrungen und der unbändige Wille zum Erfolg, den ausländische Arbeitnehmer mitbringen, tragen dazu bei, diejenigen neuen Ideen und Unternehmen hervorzubringen, von denen unser künftiger Wohlstand abhängt.

Studien belegen, dass Einwanderer mehr Unternehmergeist besitzen als die einheimische Bevölkerung. In Großbritannien gründen Migranten mit doppelt so hoher Wahrscheinlichkeit ein Unternehmen wie gebürtige Engländer. Auch lehrt die Geschichte, dass außergewöhnliche Menschen, die brillante Ideen haben, sehr häufig Migranten sind. Anstatt konventionelle Wege zu beschreiten, haben sie häufig einen anderen Blick auf die Dinge. 70 der insgesamt 300 amerikanischen Nobelpreisträger seit 1901 wurden im Ausland geboren; von den 117 britischen Nobelpreisträgern waren es 25. Der gesellschaftliche Beitrag von Migranten kann riesengroß sein – aber er ist vollkommen unvorhersehbar. Niemand hätte voraussagen können, dass das sowjetische Flüchtlingskind Sergey Brin eines Tages Google gründen würde. Und wäre ihm der Zutritt ins Land verweigert worden, hätte Amerika die verpasste Chance niemals realisiert. Wie viele potenzielle Sergey Brins schreckt Europa ab oder schickt sie wieder nach Hause – und zu welchem Preis?

Vielfalt hat dann den größten Nutzen, wenn Einwanderer und Einheimische zusammenarbeiten. Die meisten Innovationen entstehen in Gruppen, in denen sich talentierte Menschen gegenseitig inspirieren – und Menschen aus anderen Ländern neue Ideen, Perspektiven und Erfahrungen mit einbringen. Wenn zehn Mitarbeiter, die alle gleich denken, ein Problem lösen sollen, dann sind ihre zehn Köpfe kaum besser als einer (so begabt sie auch sein mögen). Wenn hingegen alle Beteiligten unterschiedliche Denkweisen haben und ihre Ideen hin- und herspielen, kommen sie schneller zu besseren Lösungen. Es spricht für sich, dass im vergangenen Jahrzehnt mehr als die Hälfte aller Start-up-Unternehmen in Silicon Valley Einwanderer als CEOs oder technische Leiter hatten. Google, Yahoo!, eBay, YouTube – sie alle wurden von Leuten mit gegründet, die als Kinder in die Vereinigten Staaten gekommen waren. Wenn es Europa mit seinem Programm „Europa 2020“ wirklich ernst meint und ein europäisches Silicon Valley schaffen will, dann muss sich der alte Kontinent der übrigen Welt öffnen.

Doch die große Frage lautet: Wie lässt sich das enorme Potenzial vielfältiger Gesellschaften am besten ausschöpfen? Kein Zweifel: Das Zusammenleben zu lernen kann hart sein. Im Laufe ihrer Geschichte haben europäische Gesellschaften stets darum gerungen, wie verschiedene Individuen frei, friedlich und produktiv miteinander leben können und jeder seinen Platz in der Gesellschaft findet. Die beste Lösung, die wir bisher dafür gefunden haben, ist die moderne, liberale Demokratie, in der Unterschiede innerhalb eines rechtsstaatlichen Rahmens toleriert werden, demokratische Institutionen Konflikte mithilfe politischer Verhandlungen zu lösen helfen und Rechtsstaatlichkeit für alle Bürger gleichermaßen gilt.

In diesem Kontext wird immer wieder die jahrhundertealte Frage gestellt, wie viel Intoleranz liberale Gesellschaften tolerieren können – gerade so, als würde dieses Problem nur unter Einwanderern auftreten. Was passiert, wenn die Hinzugezogenen unsere „europäischen“ Werte nicht annehmen? In Wirklichkeit sind liberale Werte gar nicht exklusiv europäisch. Sondern sie werden auch von vielen Nichteuropäern geteilt – sowie von manchen Europäern abgelehnt. Zudem gibt es einen wichtigen Unterschied zwischen illiberalen Ansichten und illiberalem Verhalten. Niemand kann gezwungen werden, an liberale Werte zu glauben. Aber wir können von jedem verlangen, sich an die geltenden Gesetze zu halten. Auch wer nicht glaubt, dass Männer und Frauen gleich sind, hat beide gleich zu behandeln.

Auf der anderen Seite muss Andersartigkeit erlaubt sein. Wer anders ist, sollte sich trotzdem zugehörig fühlen. Dennoch bestehen viele Einheimische darauf, dass die Einwanderer sich „integrieren“ müssten – eines dieser gefährlichen Wörter, die für unterschiedliche Leute unterschiedliche Dinge bedeuten. Wenn mit „Integration“ tatsächlich gemeint ist, dass die Einwanderer so werden sollen wie wir, dann frage ich zurück: „Und wie genau?“ Sollen sie sich Joschka Fischer, Angela Merkel oder Papst Benedikt zum Vorbild nehmen? Der Begriff der „Integration“ trennt unsinnigerweise zwischen „denen“ und „uns“. Doch eine Gesellschaft ist kein monolithisches Ganzes, ebenso wenig wie die Population der Einwanderer selbst. Die Bürger fühlen sich seit der Liberalisierung der sechziger Jahre freier, ihre individuellen Unterschiede auszudrücken. Und sie sind vernetzter mit anderen Orten als jemals zuvor. Stichworte hierzu lauten europäische Integration, Facebook, Erasmus oder „internationale Küche“. Es gibt nicht die eine Art, britisch oder deutsch zu sein. Richtigerweise hat Amartya Sen darauf hingewiesen, dass jeder Einzelne von uns zunehmend mehrere und einander überlappende Identitäten besitzt.

Vielfalt ist ein Wert an sich

Integration bedeutet, vollständig an der Gesellschaft teilhaben zu können – was nur möglich ist, wenn sie dich als ihr Mitglied akzeptiert. Dabei geht es um die Wirtschaft: Einwanderer brauchen Zugänge zum Arbeitsmarkt und zu Dienstleistungen. Und es geht um Kultur: Wir müssen Neuankömmlingen helfen, die Sprache zu lernen; wir müssen das Bewusstsein für potenzielle Konflikte stärken; wir müssen jeden – nicht nur Einwanderer – über unsere Gesetze und das politische System aufklären. Hingegen sind willkürliche Einbürgerungstests, die selbst viele Einheimische nicht bestehen würden, absurd und diskriminierend.

Um das volle Potenzial von Vielfalt auszuschöpfen, müssen verschiedenartige Menschen ermuntert werden, sich zu vermischen – in der Schule, bei der Arbeit, auf der Straße. Die Menschen müssen miteinander kommunizieren und offen sein für Neues. Wir brauchen nicht nur Lippenbekenntnisse zur Vielfalt, sondern wirkliche Wertschätzung gesellschaftlicher Diversität. Warum betrachten wir Vielfalt nicht als Wert an sich, anstatt Menschen unterschiedlicher Herkunft eine erdrückende und künstliche Uniformität überzustülpen?

Auf der praktischen Ebene sollten Unternehmen und Organisationen bestrebt sein, möglichst verschiedenartige Arbeitnehmer einzustellen. Die Gesellschaft muss Einwanderern das Gefühl geben, willkommen zu sein. Und die Regierungen müssen allen Einwohnern helfen, ihre Talente auszuschöpfen: Sie sollten in Bildung und Weiterbildung investieren, Barrieren auf dem Arbeitsmarkt und bei der Firmengründung abbauen, Diskriminierung stärker bekämpfen sowie Chancengleichheit und soziale Mobilität fördern. Wichtig sind Arbeitsmarktreformen, die Sicherheit mit Beschäftigungsfähigkeit und Aufstiegschancen verbinden. Nicht zuletzt müssen Regierungen, Unternehmen und Organisationen darauf ausgerichtet werden, Innovationen und Unternehmergeist zu fördern und in neue Ideen zu investieren.

Das sind große Reformen, die jeweils eine kulturelle, soziale und ökonomische Dimension besitzen. Sie zielen darauf ab, Einstellungen und Handlungsweisen zu verändern. Und sie gehen über das Minimum dessen hinaus, was für die Koexistenz in der Gesellschaft notwendig ist. Diese Reformen unterscheiden sich dadurch von traditionellen „multikulturellen“ politischen Maßnahmen, dass sie alle Bürger gleich behandeln: Keine einzelne Gruppe genießt eine Sonderstellung, die Menschen werden nicht in Schubladen gesteckt. Vielmehr wird sichergestellt, dass alle Einwohner am gesellschaftlichen Leben teilhaben können. Somit unterscheiden sich solche Reformen auch von integrationspolitischen Maßnahmen, die Einwanderern größere Anstrengungen abverlangen als anderen Mitgliedern der Gesellschaft.

Diesen positiven Ansatz gegenüber Vielfalt und Einwanderung sollten Progressive ohne Wenn und Aber vertreten. Er entspricht unseren Werten, er stimmt mit der Wirklichkeit unserer modernen europäischen Gesellschaften überein – und er ist ein Vehikel für einen wirtschaftlichen Fortschritt, der allen Menschen zugutekommt. Auf diese Weise kann die Vielfalt unserer Gesellschaften eine Quelle der Stärke sein und nicht der Schwäche, ein Grund dazuzugehören und kein Vorwand dafür, Menschen auszugrenzen. Wir sollten uns die Vielfalt zu eigen machen, statt sie zu leugnen.

Aus dem Englischen von Fabian Heppe, Michael Miebach und Marius Mühlhausen

La reforma inmigratoria, una posible solución al sistema en EU

La reforma inmigratoria está finalmente de vuelta en la agenda en Washington, D.C. Eso es algo para celebrar: un sistema que deja desprotegidos a 11 millones de personas mientras niega las oportunidades de empleo a trabajadores y empresas es claramente disfuncional.

Pero si bien es muy bueno que haya una posibilidad real de sacar de la clandestinidad a las personas que carecen de documentación adecuada, hasta ahora no hay ningún debate acerca de la reforma integral que Estados Unidos necesita realmente.

Consideremos lo absurdo del sistema actual; pensemos qué sucedería si cada estado de los Estados Unidos tratara de regular el flujo de personas como lo hace la federación. Los ciudadanos de Minnesota necesitarían visa para estudiar en Massachusetts.

Las compañías de internet en California podrían reclutar solo a un puñado de graduados de Colorado que deberán cubrir una serie de complicados requisitos. Si la mano de obra escaseara a causa de un auge en la explotación de petróleo y gas en Dakota del Norte, las leyes locales no permitirían que las personas ajenas al estado cubrieran esas necesidades legalmente. Y así sucesivamente.

Claramente, bajo tal sistema casi todos estarían peor. A las personas se les negaría la oportunidad de estudiar o trabajar en otros estados, de la misma manera en que se negaría a sus posibles compañeros de clase y colegas la oportunidad de enriquecer su pensamiento y su vida a través de la interacción con ellos.

Las universidades y negocios estarían privados del talento y por lo tanto tendrían menos posibilidades de crecer y crear empleos para los ciudadanos locales.

Todos los pequeños comercios en Dakota del Norte que podrían haber florecido para satisfacer las necesidades locales no podrían hacerlo. Las personas estarían viviendo y trabajando fuera de la ley.

En general, cada ciudadano sufriría por la falta de respeto a la ley, como ocurrió cuando la Prohibición socavó la ley y el orden más que el consumo de alcohol. Si retrocedemos un poco y pensamos en las consecuencias de que los estados limiten la movilidad de esta manera, quedará claro por qué el sistema de inmigración no funciona y el manipular un sistema intrínsecamente defectuoso no hará mucho por mejorar las cosas.

Desde un punto de vista económico y moral, lo mejor sería que todos pudiéramos movernos libremente, como sucedía en el siglo XIX, cuando Estados Unidos tenía fronteras más o menos accesibles. Eso puede parecer una fantasía peligrosa; sin embargo, la reciente experiencia en Europa indica lo contrario.

Ahora las personas pueden moverse libremente a través de los 27 estados miembros de la Unión Europea, desde Lituania hasta Leipzig, Londres y Lisboa. Lejos de causar que las sociedades europeas se derrumben, esta nueva movilidad ha logrado que la gente encuentre empleos más adecuados, ha dado vigor a las comunidades locales y un impulso a los nuevos negocios.

Entonces ¿por qué no hacer lo mismo entre Estados Unidos, Canadá y México? Por temor a que todos los mexicanos se muden a Estados Unidos, pero la experiencia en Europa indica otra cosa.

A lo largo de la Unión Europea, solo una pequeña fracción de los habitantes de los países más pobres se ha mudado a los más ricos para trabajar y la mayoría de ellos lo hace temporalmente. Además, como la diferencia de salarios en Estados Unidos y México es menor que la que hay entre Suecia y Rumania, ¿por qué tendrían que ser diferentes los resultados en América del Norte? De hecho, las personas que se mueven hacia el sur, hacia México, ahora superan en número a los que se mudan al norte, a Estados Unidos.

El permitir que las personas se muevan libremente no es políticamente posible por ahora; Estados Unidos aún podría mejorar su sistema de inmigración haciéndolo menos complicado, arbitrario y discriminador.

¿Por qué no reemplazar las diferentes clases de visas de trabajo, con sus arbitrarias limitaciones y criterios de elegibilidad terriblemente complicados, por un sistema más sencillo y más sensato como el de Suecia? Ahí, los comercios de todo tipo pueden contratar con visas renovables cada dos años a obreros de todas las capacidades, procedentes de todo el mundo, si no logran contratar personas locales adecuadas. Ese tipo de reformas favorables para los mercados serían más beneficiosas que la manipulación de los controles burocráticos.

El rígido sistema de inmigración de Estados Unidos necesita adaptarse a la nueva economía global en el que las personas se mueven cada vez más en todas direcciones, hacia el este y el oeste, hacia el sur y hacia el norte; donde quienes tienen la posibilidad de hacerlo se mueven repetidamente.

A menudo, las oportunidades se encuentran fuera de Estados Unidos; para los estadounidenses (y los africanos) que se dirigen a Shanghai para buscar la riqueza, el sueño chino es más seductor que el sueño americano.

Conforme Asia crece, los emprendedores que pudieron haber ido a Silicon Valley ahora se dirigen a Bangalore o a Beijing. Para competir en este nuevo mundo, el sistema de inmigración de Estados Unidos necesita ser mucho más flexible, enfocarse en facilitar la movilidad de las personas y hacer que la gente valiosa se sienta dispuesta a quedarse, en lugar de tratar de evitar que la gente entre.

How America can fix its immigration system

Immigration reform is finally back on the agenda in Washington, DC. That is something to celebrate: a system that traps 11 million people outside the protections of the law while denying businesses the workers they need to grow is clearly dysfunctional. But while it’s great that there is a real prospect of bringing people who lack proper documents out of the shadows, there is so far no debate about the root-and-branch reform America really needs.

To grasp the absurdity of the current system, consider what would happen if each U.S. state tried to regulate people flows in the way that the 50 states do collectively. Minnesotans would need a visa to study in Massachusetts. Internet companies in California could recruit only a handful of Coloradan graduates among those who met an elaborate set of bureaucratic criteria. If an oil-and-gas boom in North Dakota led to a shortage of all sorts of workers, local laws would prevent people from out of state from filling those needs legally. And so on.

Clearly, under such a system pretty much everyone would be worse off. The people denied opportunities to study or work across state lines, as well as their would-be classmates and colleagues whose thinking and lives would have been enriched by interacting with them. The universities and businesses deprived of talent and therefore less able to grow and create jobs for local people. All the small businesses in North Dakota that might have sprung up to satisfy local needs, but couldn’t. The people living and working outside the law. More generally, every citizen would suffer from the decline in respect for the rule of law, just as Prohibition did far more to undermine law and order than drinking booze ever has. If you step back a little and think through the consequences of each state restricting mobility in this way, it ought to be clearer why America’s immigration system doesn’t work – and why tinkering with an intrinsically flawed system will go only a little way toward making things better.

More from GPS: What America can learn from Britain

From an economic – and a moral – point of view, it would be best if everybody could move freely, as they could in the 19th century, when the United States had more or less open borders. That may seem like a dangerous fantasy, yet recent experience in Europe suggests otherwise. People can now move freely across the 27 member states of the European Union – from Lithuania to Leipzig and on to London and Lisbon. Far from causing European societies to collapse, this new mobility has better matched people to jobs, reinvigorated local communities and sparked dynamic new businesses.

So why not do the same in North America – between the United States, Canada and Mexico? Contrary to the fear that everyone in Mexico would move to the U.S. if they could, experience in Europe suggests otherwise. Across the EU, only a small fraction of the population from poorer countries has moved to richer ones – mostly temporarily, to work. And since the difference in income levels between the U.S. and Mexico is smaller than that between Sweden and Romania, why should things turn out differently in North America? In fact, people moving south to Mexico now outnumber those moving north to the United States.

Insofar as allowing people to move freely is not politically possible for now, America could still greatly improve its immigration system by making this less complicated, arbitrary and discriminatory. Why not replace all the different classes of work visas, with their arbitrary numerical limits and devilishly complicated eligibility criteria, with a simpler and more sensible system like Sweden has? There, businesses of all kinds can hire workers of all skill levels from around the world on two-year renewable visas if they can’t find suitable local recruits. Market-friendly reforms like that would do far more good than fiddling with bureaucratic controls.

America’s hidebound immigration system needs to adapt to a new global economy where people are increasingly on the move in all directions, east as well as west, south as well as north – and where those who have a choice often move repeatedly.

Often, opportunities now lie outside America; for Americans (and Africans) heading to Shanghai to try to strike it rich, the Chinese dream is more alluring than the American one. As Asia rises, entrepreneurs who might have gone to Silicon Valley are heading for Bangalore or Beijing. To compete in this new world, America’s immigration system needs to be much more flexible, focusing on making it easy for people to come and go and attractive for valued people to stay, rather than trying to keep people out.

Why America needs immigrants

It is no longer acceptable to discriminate against people on the basis of a whole range of characteristics that they happen to be born with, notably their gender, their race and their sexuality. So why is it still deemed acceptable to discriminate against people on the basis of where they happen to have been born?

The world is anything but flat: the biggest determinant of your life chances is not how talented you are or how hard you work, it is where you were born and who your parents are. Anyone lucky enough to have been born in the United States who doubts this should try to imagine how different their life would have been if they had been born in Africa.

A hard-working entrepreneur born in a remote African village has far fewer opportunities to achieve his dreams than a lazy dimwit born in America. Even if the African seizes all her chances and the American none, the American is still likely to enjoy a more comfortable life. And the surest thing that African could do to transform her (and her family’s) life chances is to go and work in the U.S.

But only if governments allow her to. Unfortunately, we live in a system of global apartheid, where the rich and the educated can move about increasingly freely, while the poor are expected to stay put, like serfs tied to the land where they were born.

For the most part, people are oblivious to the injustice of this: it is seen as part of the natural order of things, like slavery once was. But insofar as people try to justify this unnatural and unjust state of affairs, they claim immigration controls are necessary to protect people in rich countries from their poorer brethren. Yet if one thinks a bit more carefully, one realizes that these objections don’t stand up.

One objection to allowing women into the workplace was that they would take jobs away from men. But in practice, women have not deprived men of work. Why? Because people don’t just take jobs, they also create them, when they spend their wages as well as in complementary lines of work. The same is true, of course, of immigrants.

Another objection is that immigrants will all end up on welfare – as if someone enterprising enough to uproot themselves to move to America will suddenly want to do nothing, even though they could earn more working. Indeed, when immigrants are working, they’re accused of stealing “our” jobs and when they’re out of work, they’re accused of scrounging from the state. They can’t win: they’re damned if they do and damned if they don’t. Such accusations tell us more about critics’ prejudices than about immigrants’ behavior.

There is also something unpleasant about the notion that governments can – and ought to – select only the seemingly best people to allow in to a country. It is nonsense that we can predict how someone will contribute to a country, let alone how their children will. Who would have guessed that the son of a Kenyan goatherd would end up as U.S. president?

Google, Yahoo!, eBay, Intel and many other companies were all co-founded by people born outside America who arrived not through some clever selection process, but as children. Nobody could have guessed, when he arrived in the United States as a child refugee from the Soviet Union, that Sergey Brin would go on to co-found Google. Had he been denied entry, America would never have realized the opportunity that had been missed. How many potential Sergey Brins do Europe and post-9/11 America turn away or scare off – and at what cost?

As Fareed Zakaria rightly remarked in his book “The Post-American World,”: “America has succeeded not because of the ingenuity of its government programs but because of the vigor of its society. It has thrived because it has kept itself open to the world – to goods and services, to ideas and inventions, and, above all to peoples and cultures.”

A New European Growth Agenda

Austerity alone cannot solve Europe’s economic and financial crisis. Growth and jobs need to be promoted with equal zeal. European Union leaders now recognize this: kick-starting growth in 2012 was high on the agenda at the European Council’s meeting on January 30. But the big question remains: How?

The need for immediate action is clear. The eurozone’s economy contracted in the last three months of 2011; even Germany’s shrank. The new year is looking grim. France is flat-lining (as is Britain). Italy and Spain have sunk into deep recession. Greece is in its fifth year of a slump. And eurozone unemployment is at record highs, with nearly one in two young people jobless in Spain and Greece.

The economic headwinds are formidable: fiscal austerity, high interest rates outside AAA-rated countries, credit cutting by banks, deleveraging households, weak private-sector investment, and declining exports as the global slowdown undermines demand.

Until growth resumes, any tentative financial stabilization will be extremely fragile. Recession will hit banks’ and governments’ already-weak balance sheets, increasing pressure for faster deleveraging. But, while gradual adjustment is essential, faster and deeper cuts are largely self-defeating: big reductions in private credit and government spending will cause a sharper slowdown – and thus a vicious downward spiral. A big new push for growth is therefore vital.

So far, the growth agenda has consisted largely of structural reforms, which are essential for boosting future productivity and flexibility. The crisis does provide a political opportunity for bold moves on this front in many countries; but structural reforms generally will not generate growth and jobs immediately (one exception is permitting shops to open longer).

On the contrary, a shakeout of less productive jobs, for example, would at first raise unemployment, increase government outlays, and reduce private spending. And, because demand is depressed, credit is in short supply, and barriers to enterprise are often high, it will take longer than usual for businesses to create more productive jobs. In short, structural reforms alone cannot be relied upon to stimulate growth in 2012.

Instead, the immediate focus needs to be on boosting investment and exports in economies with a current-account deficit – such as France, Italy, and Spain (and the United Kingdom) – and stimulating consumption in surplus countries such as Germany and the Netherlands.

The European Central Bank has acted decisively to prop up European banks; now it needs to support the real economy, too. While official interest rates are only 1%, solvent sovereigns such as Spain pay more than 5% to borrow for ten years, while creditworthy businesses in Italy can borrow only at punitive rates, if at all. So the ECB should do more to unblock the transmission mechanism for monetary policy; the European Banking Authority should discourage excessive deleveraging by insisting that banks raise specific capital amounts rather than hit a uniform 9% ratio; and, where necessary, national governments should provide guarantees for bank lending to small and medium-size businesses.

While improving access to finance is vital, governments also need to do more to boost investment. They should prioritize measures to make it easier to start a business, lift barriers to venture capital, and introduce temporary 100% capital allowances to encourage businesses to bring forward investment. At the EU level, the (callable) capital of the European Investment Bank should be greatly increased, as European Commission President José Manuel Barroso suggested in his State of the Union speech last September, so that the EIB can finance a big wave of pan-European investment, notably in infrastructure.

Boosting exports is also essential. Deficit countries need to become more competitive, increasing productivity while cutting costs. A more competitive currency would be welcome: just as the sterling’s collapse since 2008 has lifted UK exports, a weaker euro would help Mediterranean economies regain competitiveness for price-sensitive exports. A fiscal devaluation – slashing payroll taxes and replacing the revenues with a higher VAT – would also help.

Surplus countries, too, must do their part, which is in their own interest. Just as China needs to allow the renminbi to rise, so Germany – whose current-account surplus exceeds China’s both as a share of GDP and in absolute terms – needs a higher real exchange rate. That means that Germans need to earn higher wages, commensurate with their increased productivity, so that they can afford more Greek and Spanish holidays. If businesses will not oblige, an income-tax cut would do the trick.

That brings us to fiscal policy. Governments that cannot borrow cheaply (or at all) from markets have no option but to tighten their belts. But they should pursue smart consolidation rather than unthinking austerity. So they should maintain investment in skills and infrastructure, while cutting subsidies and transfer payments. They should also legislate now for future reforms, notably to encourage people to work longer.

Last but not least, governments that can borrow at unprecedentedly low rates – 0% in real terms over 10 years in the case of Germany – must play their role in supporting demand. Would it be really be so difficult to see VAT coming down ahead of the German election next year?