Sony: Nice to see you Barry, let’s jump straight into it. What would you say is the state of play in the Eurocrisis?
Barry: European officials and leaders were telling us at the beginning of the year that the crisis was over. I doubt that most people believed them, although the markets were surprisingly sanguine for a time. None of the underlying problems had or have been solved; even before the fiasco surrounding Cyprus it was clear that the crisis would to be back. There had been no real re-balancing within Europe, no progress on banking union, and no agreement on limited fiscal union. So, I do not think anything has been solved, which renders me more pessimistic with the passage of time.
My view has always been that there would be no Eurozone collapse. At the same time I see no signs of a miraculous resumption of growth. Ruling out these alternatives leaves only the option of a lost decade in Europe, as the member states stumble towards deeper integration. But increasingly I worry that the political system cannot support a lost decade.
As the depressing economic and unemployment picture from the European Commission's growth forecasts makes clear, we at Re-Define have been right to be heavily sceptical of the current strategy being pursued by EU policy-makers.
As we warned in July 2012 in our analysis on Spain, the fiscal multipliers being used were highly underestimated. We warned that on the path being pursued, the Spanish economy and employment would be pulled downwards by a combination of fiscal adjustment and related emergent banking problems. This is exactly what has happened. Our analysis was later confirmed by the IMF, when it issued a Mea culpa on having underestimated fiscal multipliers.