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    On the Hot Seat

    US, eurozone face similar troubles with different tools

    Evariste Lefeuvre, chief economist for the Americas, Natixis
    Aram Boghosian for The Globe
    Evariste Lefeuvre, chief economist for the Americas, Natixis

    Evariste Lefeuvre is chief economist for the Americas for the French financial services giant Natixis and author of several books on the US and European economies. After speaking at the Harvard Kennedy School of Government recently, he sat down with Globe Sunday business editor Robert Gavin to discuss the European economic crisis, the future of the euro, and the impact across the Atlantic.

    The eurozone crisis is dragging into its fourth year. Was the euro a mistake?

    A mistake, no. But it was probably ill-conceived. The hasty construction of the eurozone was more political than economic. That’s why the institutional framework was not strong enough and why the first stage of the crisis was institutional. It just did not work.

    What stage are we in now?

    We are in the second stage, where we have to think about growth. It’s something that European institutions have been unable to foster for decades. The philosophy of Europe has to be different. It has to be based on more cooperation.

    Following the last recession, US policy makers pumped stimulus into the economy, supporting at least a modest recovery, while Europe embraced austerity — and slipped back into recession. Over the long term, which policy will prove smarter?


    It’s not a matter of being smarter. The US has the freedom of its economic policy. It can manage the external value of the dollar, pursue a strong macroeconomic policy, and use federal budgets more easily. In Europe, you have no control of [such] tools. Basically, the problem for European countries is there is no way to mutualize debt, or resources, or taxes, so it was to each his own. The outcome was contractionary policy.

    What’s the next step for Europe? A stronger European government?

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    It would be utopian to believe in more political integration in the short run. So the first challenge is not that. It’s about making sure that all is done to help the European recovery. If nothing genuine is done for growth, you could see another crisis.

    Why should we in the United States care about Europe?

    When European growth is weak, you have a strong negative for global growth, and that is bad for the US economy. There are financial ties. When you have a crisis in Europe, you have a spillover in the US. Finally, the US has strong political ties with Europe, a place with sound democracies. It’s important that the crisis not turn into huge social unrest with a bad outcome in terms of political landscapes.

    Do you see the eurozone staying as is?

    It probably will not expand much in terms of new countries. An exit is out of the question.

    That’s what I was getting at. Will the eurozone get smaller?

    The risk of an exit now is much lower than it was. Many foreigners, including Americans, underestimate the political will to maintain the eurozone.

    What would be the consequences of a eurozone breakup?


    For one country, it could be very bad. It would be complete isolation from financial markets for a long, long time. For the eurozone, it depends. If it’s a tiny country, it’s a shock, but a shock that can be survived. If it’s Italy or Spain, it’s the end of the story.

    What do you see as the solution?

    You have to be optimistic, but not utopian. What we have to do is create a banking union and try to slowly build one or two common taxes so we can have some kind of common pot. That would be a very good step. Political integration, I don’t think it’s possible.

    So you see economic union without political union?

    There will never be a United States of Europe.

    What’s your view of US economic policies?

    The [budget] process, as everybody knows, has been a mess. I’ve never been a strong opponent of [Federal Reserve chairman] Ben Bernanke. I think he knows what he’s doing, but the exit [from the Fed’s stimulus policies] will never be easy.

    Where do you see the eurozone in 10 years?

    I’m a positive person. This crisis will force many European governments to produce strong, significant reforms, so the economy should be in better shape in 10 years.

    Robert Gavin can be reached at