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English Subtitles

Really these individual countries are locked into the system and austerity is really the only option they've got until the Eurozone collapses

In the UK we do have some discretion over our policy because we're not locked into the single currency but because of dogma the current regime the current government is following the policy of austerity at the moment although they're failing in terms of generating growth and there're also failing in trying to reach their budgetary targets

We can look at other countries say The United States

They've been adopting more of an expansionary policy more of what people call at Keynesian policy to deal with it

And they have had better growth in their economy and had better success in generating jobs

I think Keynesian policies would actually work. There's very little intellectual rigour or sustained empirical evidence to show that austerity works we've had a number of arguments put forward in the past and they've all been shown to be flawed really what we need to do is to get the economy going again

It's unlikely to come from consumers it's unlikely to come from firms who are unlikely to invest if they cannot sell their products we've really got to put the government to try and get the economy growing againThe importance of growth is that it improves living standards it improves the quality of life it can improve the goods and services we can buy it can improve the education and health

And the particular problem at the moment is that in terms of austerity and in terms of economies that flatlining is that we're not all in it together

The real people that are suffering from austerity are particularly the unemployed

This is a real problem particularly in the Eurozone countries and particularly for the young

The young under 25 many of them cannot get jobs

And if they cannot get jobs now they will have real problems getting into the labour market in the future

So it's not just about the dry GDP figures is not just about dry economic growth statistics what's important is that it does affect the quality of people's lives

And particularly the problem now is unemployment in the Eurozone area

The big discussion about happiness we need to move away from GDP of course GDP is a flawed indicator GDP is a flawed indicator and we should move to this other indicator such as happiness

These happiness indicators are very difficult to calculate and difficult to compare across countries

Certainly we need to look perhaps at new data about the quality of life about well-being as well is just GDP solid-state GDP is the measure we look at that we statistically look at every month every quarter every year to see where the economies getting better

It's a imperfect indicator it doesn't capture all the things about the quality of life

It doesn't capture particularly things about the environment and weather we're damaging the environment

So we do need to look at a range of indicators

So GDP is flawed but it's not bad

I think there's still real problems for the euro and I actually think it's likely the euro will collapse

The difficult question is when it will collapse

The Eurozone has real problems because it's locking very different countries into a single currency, a single monetary policy regime and tight fiscal rules

That creates real problems for many other countries and the Eurozone

The way they really need to get out of their problems is actually to devalue their currency to have a lower exchange rates and to have looser monetary policy

They're really caught in a trap at the moment

Really, for the Eurozone its got really two options

One: it has an integrated fiscal system where you have a European tax-and-spend system.

Not fiscal rules, but fiscal integration as individual countries do

That's very unlikely

If you don't have a fiscally integrated system then the next choice is really you have not single currency is

And the Eurozone will collapse.

I think the Eurozone might stagger on for a few more years but eventually it will collapse

And we've seen this in the past, we've seen historical precedents for this

If we go back to the 1920s we had something called the gold standard

Virtually the whole of the world economy was locked into the gold standard

Basically a fixed exchange-rate regime

Once one country decided to leave, the whole system unravelled and that country was the United Kingdom in 1931

I think is very likely the Eurozone will collapse

The very difficult question is knowing when

I actually think if the Eurozone collapses it will be a problem in the short run

It's very difficult to have an orderly withdrawal from the single currency

It will cause financial instability

But in the long run it will be better for Europe and better for Great Britain,

Because if individual countries have some control over their macroeconomy they can generate economic growth and a stronger Europe will be one which is a growing Europe.

And that will be good for Europe and it will be good for the UK because it's one of our major trading partners

Europe's really caught in a bind, particularly the Eurozone's caught in a bind because the Eurozone regime really requires austerity because countries are locked into this single currency and the single monetary policy with much of the policy determines by Germany

Introduction

What will happen to the Euro and the Eurozone in the future?  This video discusses the main problems the Eurozone faces. 

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