Well French Central Bank Governor Christian Noyer is back in the news again. Today the FT have an interview with him, and some of his points make interesting reading.
Firstly on the euro and structural reform:
Q: “Of the three Scandinavian countries in the EU, one is in the eurozone (Finland), one links its currency to the euro (Denmark) and one is not in the eurozone (Sweden).”
A: ?That clearly demonstrates that it is not the monetary regime that eventually leads to good economic results and low unemployment. It is really the way that structurally the economy works.?
Note, he is not saying that monetary policy isn’t important, but simply that the big issue is the way an economy works structurally. These ‘structural differences’ are of course quite wide within the eurozone, and this then complicates the application of uniform monetary policy.
Then on the social model, in answer to the same question he says:
?One of the key elements of the way these countries work is that they have mixed a greater level of flexibility in labour and product markets – a bit like the UK economy – with a high degree of social protection, which is traditional in continental Europe.?
?This kind of model might be the appropriate one for continental Europe. You could never repeat it exactly, but it is full of lessons for countries such as France, Germany and Italy.?
?To me, the Scandinavian model shows that you can have both flexibility and protection – but not protection in the sense of a job for life, even if your company is sinking. Protection means that you have a social safety net to help you during a transitional period, and have a whole system of education, training and re-training that obliges people to find a new job. It gets people back into work.?
Interesting. This is not an ‘either-or’ situation. I tend to agree with that.