Simon Tilford is chief economist at the Centre for European Reform in London. Tilford works on the political economy of the euro zone, fiscal and monetary policy, supply-side reforms in the EU. In most EU country there is an underlying commitment; people are actually willing to put up with quite a lot of pain in order to be central of things. In some countries like Czech Republic people are not prepared to make that trade off. But they are the minority. There has been little outburst of anti-German feeling.
Do you believe that some countries can strong enough to challenge Germany?
Well, I think that if German, French and Spanish economies continue to struggle and if they are unable to persuade the Germans that the euro zone needs a different strategy to deal with the crisis then we could see a standoff of confrontation between on the one hand Germany and Austria and the Netherlands then on the other hand France, Italy and Spain. I think this is inevitable. Germany does have quite a few allies. Poland is a supporter as well.
Aren’t the German supporters divided?
Countries need to persuade the Germans that the current strategy to deal with the crisis is not going to work.
In Hungary they say Europe does not take into account national characteristics.
There is not doubt that for example Britain is different. If you look at Spain the Spanish economy is in deep trouble and the Spanish government can’t really do much about that yet it hasn’t prompted hostility towards Germany or the EU. In most EU country there is an underlying commitment; people are actually willing to put up with quite a lot of pain in order to be central of things. In some countries like Czech Republic people are not prepared to make that trade off. But they are the minority. There has been little outburst of anti-German feeling.
Do you think the crisis regarding the euro is over?
I think there is still a chance the euro zone could break up. I don’t know how big that chance is. It is so difficult to predict. I think they have to move a lot further than they have so far despite all the rhetoric. They haven’t agreed on any significant institutional reform. I think if the euro is going to work countries will have to take on some of the characteristics of a federation. They struggle even to agree on a banking union. Macroeconomic policies remain very-very restrictive. We are in a slump in Europe yet governments are cutting spending. That is a very risky thing to be doing. They are going to have to change direction.