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Correlation is not causation: the overall lower government debt increase in the EZ countries is not necessarily the result of the Euro itself; many so-called "frugal" countries with large GDP are part of the EZ. Would be interesting to know what caused the difference between EZ and the other...
by Bernard on Thu May 6th, 2021 at 05:00:53 PM EST
[ Parent ]
But lack of correlation indicates a lack of causation, so if other countries has larger increases in debt it indicates that eurogreen's last sentence isn't true. It isn't because of the euro that the euro zone can run deficits, it is despite the euro. Also because sovereign governments with their own currency are not restrained by deficits, only countries using a foreign currency are.

Sweden and Denmark are your typical "frugal" countries with current accounts surpluses (easier outside the euro zone) and low debt/GDP ratios. Actually, now I realise that one can argue against the metric in my last comment in that relative increase in government debt gives undue weight to previous debt level (which is low in the case of Sweden and Denmark). So if one wants to make comparisions one should use some other metric.

by fjallstrom on Thu May 6th, 2021 at 08:54:31 PM EST
[ Parent ]
But perhaps being outside the euro forces them to have a low deficit or a surplus? Perhaps it's not purely a policy choice?

It is rightly acknowledged that people of faith have no monopoly of virtue - Queen Elizabeth II
by eurogreen on Fri May 7th, 2021 at 01:24:19 PM EST
[ Parent ]
It could also be that having a sovereign currency and not the Euro means they can call the shot themselves.  A dozen years ago, when Iceland was trying to dig out of the Kreppa, joining the Euro was floated as a solution.  I told friends, "You don't want to do that.  The ISK may be in a crater, but at least you have the last word on what it is and what it's good for."
by rifek on Mon May 10th, 2021 at 02:05:42 PM EST
[ Parent ]


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