Is the Union Unraveling?

In the LA Times today, Dimitri Papadimitriou writes about the very real danger of seeing the end of economic union in Europe; a union Papadimitriou insists is ultimately worth saving.

He quickly sketches out what a serious first step toward a solution might look like (rather than this patchwork of half-measures that is sure to be torn apart).  The latest set of deals don’t look like they will provide the “breathing room” they’re intended to create.  What’s needed, Papadimitriou suggests, is for the European Central Bank to step forward with a bond-buying program; something that would perform a function similar to that of the US TARP program.

But calming volatility, providing real breathing room, is just the first step.  The next steps in the eurozone triage ultimately need to include serious efforts to tackle the underlying growth problem in Greece:

Greece lacks both an industrial base and the widespread availability of technology. It simply can’t be productive enough to compete with neighbors such as Germany, France or the Netherlands. It’s in deep recession and doesn’t have the resources to grow out of it, even with an easing of its still-enormous debt level.

Most of the austerity measures and reforms in place — and calls to continue or increase them — won’t work. Raising taxes in a society distinguished by flagrant tax evasion has only boosted the shadow economy …

Read the entire op-ed here.