Tags: Goolsbee | Russia | Ukraine | eurozone

Goolsbee: Russia's Ukraine Intervention May Save Eurozone

By    |   Friday, 28 March 2014 11:48 AM

Russia has intervened in Ukraine to prevent it from drawing closer to the West.

But ironically, the intervention might serve to pull the rest of Europe closer, saving the eurozone, says Austan Goolsbee, former chairman of President Barack Obama's Council of Economic Advisers.

"Russia's actions in Ukraine may have, single-handedly, solved one of the EU's most fundamental economic problems: how to keep weak economies from bailing on the eurozone together," he writes in The Wall Street Journal.

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"The fundamental weakness of the eurozone is that it relies on hard-hit economies, such as Greece and Spain, to endure austerity packages for years to try to raise productivity and cut labor costs enough to make the fixed exchange rate within Europe sustainable."

But Russia's adventurism in Ukraine may convince these countries to bite the bullet, says Goolsbee, now an economist at the University of Chicago business school.

"Suddenly, tolerating some years of austerity in order to be part of the eurozone doesn't seem so bad," he writes.

Bulgaria, Lithuania, Poland, Latvia, Hungary, Romania and the Czech Republic, the countries next up to join the group, may now be more willing to tolerate the austerity, Goolsbee says.

The European Commission reported that economic sentiment in the 18-nation bloc rose to 102.4 this month from 101.2 in February.

"Consumer confidence was particularly buoyant, registering the sharpest monthly increase since April 2009," the Commission said, according to Reuters.

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Russia has intervened in Ukraine to prevent it from drawing closer to the West.
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2014-48-28
Friday, 28 March 2014 11:48 AM
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