Note: Peter Bofinger and Sony Kapoor wrote the original Growth Compact for the EU in late 2011, which was then adopted albeit in a very watered down format. Download as PDF.
Sony: Peter, the markets are quiet, but the Eurocrisis is still with us, No?
Peter: Well, the crisis is continuing and the recession is getting worse, especially as it is affecting more and more counties. It has spread from the peripheral countries into the core of Europe. It has affected France, which is in recession, and it has also affected Germany, which has seen a severe decline in output in the fourth quarter of last year and more or less stagnated in the first quarter of this year.
Sony: When we were talking earlier you mentioned that this may bring new realisation in Germany and may change the debate in Germany somehow. Up until now the crisis has not actually been felt in Germany, it has just been on the TV. But is there not a danger that this may make a solution harder?
Personally, I can see it going both ways. On the one hand, Germans could realise that it is a systemic crisis and they are not immune, and therefore need to do something different. Or, on the other hand, ‘oh my God, we are in trouble ourselves and here are these countries asking us for help; we cannot actually afford to help them’. This could make it less likely that Germany does anything to help them. Which way is it more likely to go?