One of the books I’m currently reading, Dominic Sandbrook’s [amazon_link id=”0141032154″ target=”_blank” ]State of Emergency[/amazon_link], is too big to carry around so on the Tube I’ve read [amazon_link id=”184954400X” target=”_blank” ]Greekonomics: The Euro crisis and why politicians don’t get it[/amazon_link] by Vicky Pryce. It’s an excellent contribution to understanding the Eurozone crisis.

Pryce is Greek by origin and so has the authority to criticise her native country about its genuine faults – clientilism is one of the major issues she highlights. However, she rejects two arguments sometimes heard: that the Greeks are to blame for the crisis because they’re lazy and expected to consume without producing; and that the Euro crisis is all the fault of the peripheral indebted nations – Portugal, Ireland and Spain as well. She writes: “While the political, administrative and judicial systems in Greece are dysfunctional, there is potential in sectors of the economy which could be harnessed to drive a more prosperous future.”

In fact, politics is the major theme of the book: it argues that the Euro’s creation was a political project not rooted in sound economic analysis. The initial hubris involved in launching the single currency was followed by a failure to either plan for the inevitable tensions or crises, and total failure to enforce and implement the structural reforms that might have made the Eurozone economically viable. She makes a forceful case. Before the Euro was launched, while seeing it as mainly a political project, I thought the macroeconomic inflexibility it involved would be more than offset by supply-side improvements, including the achievement of a genuine single market without currency barriers. This optimism was obviously misplaced. Indeed, we are still seeing in the crisis countries how hard it is politically to deliver structural economic reforms.

What to do next? Pryce argues, first, that European leaders need to recognise that if Greece leaves, the Euro itself will collapse, at huge economic cost. And, secondly, that a large chunk of the peripheral country debts will have to be written off. Germany cannot avoid either accepting partial default or the collapse of the Euro. However, she is optimistic about the scope for continuing progress on productivity in Greece.

No doubt some readers will disagree with parts (or all) of her analysis, but the book sets out the debate very readably, and underlines the links between the political and the economic forces at play –  links everybody overlooked in those long-ago pre-crisis years.

[amazon_image id=”184954400X” link=”true” target=”_blank” size=”medium” ]Greekonomics: The Euro crisis and why politicians don’t get it[/amazon_image]