In today's Scotsman George Kerevan accuses the Fraser of Allander Institute of making "scary predictions" in our 'what-if' analysis, not a forecast, of Greek exit and euro breakdown - see here - published in the Economic Commentary this week.
He proceeds by asserting that the eurozone is not going to collapse because, well, George just knows so. Merkel needs to win an election so she'll eventually do the business. So, that's alright then. Problem over. No big job losses for Scotland. And by the way under his SNP Government the Scottish economy is doing very well thank you. Eighteen thousand jobs just created. Employment rate higher than UK. No mention of this "good news".
Unfortunately, Scottish jobs are still 3% below their recession peak whereas UK jobs are only 1% below. And, yes, the Scottish unemployment rate is now the same as the UK and the 16-64 employment rate is a little higher. But he seems to have conveniently forgotten that before the recession, in early 2008, Scottish unemployment stood at 3.9%, while UK unemployment was much higher at 5.5%.
But not content with argument, Kerevan feels the need to go one step further and rubbish the ING study whose findings provided a key input into our modelling exercise. The study is viewed by him as part of some grand corporate conspiracy on ING's part to recover from earlier problems of insolvency and because of its commercial presence in Greece. And just in case there was any further doubt he impugns our motives by charging us with headline seeking in our "friendly" rivalry with CPPR at Glasgow University.
At times I wonder what planet Kerevan lives on. He certainly seems to inhabit a different perceptual world from you or me.
Take the ING study.
Martin Wolf of the Financial Times, who has developed a reputation as probably the best economic journalist in the world - and cited as such by top macroeconomists such as Menzie Chinn at the University of Wisconsin. - commented on the ING study as follows:
" ... a thought-provoking paper... limiting the impact would not be easy .... A decisive response from the eurozone would be required to prevent severe contagion..... This analysis may even be too optimistic in its estimate of the impact of a full break-up."
Wolf concludes
"Thus, if Greece leaves, the eurozone will have to change fundamentally to make survival less painful and therefore more credible. If that is impossible, as many suppose, irrevocability must be seen as a mirage, which would in turn guarantee the repetition of large crises. It also destroys the economic arguments for the currency union by undermining financial integration and rendering long-term investments dependent on access to the entire eurozone economy far riskier. It is a nightmare."
I also think that this quote
" This week's deal may give Athens a tiny breathing space from its creditors. But unless Greece revives the drachma, devalues the currency and kick-starts its economy, it is a piece of financial Semtex waiting to explode. Once the Greek domino goes, the markets will turn on Italy, Spain, Portugal and Ireland."
and this quote
" ... the present European monetary crisis was minted in Germany, and is being made worse by Angela Merkel's myopic policy direction. ... the European sovereign debt crisis ... can't be resolved until Berlin politicians tell the German public to buy more foreign goods. Which is never. ... far from creating stability, the plan will wreak havoc in the bond markets, which will immediately attack those who do not form part of the new financial union. Perhaps Berlin is counting on this threat to whip laggards into line. More likely, market turbulence will intensify, followed by recession, strikes and Greece et al exiting the eurozone."
both highlight the real risk and consequences of a Greek exit and euro breakdown.
The author of the quotes?
Yes, you guessed it!
The first is George Kerevan writing in October 2011 after the Greek bailout deal. The second is George Kerevan again in December 2011 commenting on the Brussels EU summit and plans for a fiscal compact.
What will you say next week George?
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