Monetary stimulus is much more fun when it buys you a holiday

Why not use QE to give holiday vouchers to northern Europe? No, really, why not?

It's always nice to read a proposal that could simultaneously ease the euro crisis and get you a free holiday to Barcelona. It's even more fun seeing the idea gestate from a slightly boozy tweet to a full-blown plan, set in motion by the disability blogger and campaigner Sue Marsh:

After a while, I had a thought. All of the countries in trouble were holiday destinations - Greece, Spain, Italy, Portugal even Ireland. The ones weathering the storm were the colder, northern countries. Would it not make sense to encourage and incentivise holidays? [...] Hell, was fun automatically not an option just because it was fun?

A few weeks ago, there were rumours of another 700 billion bailout for Eurozone banks. I had just watched Spanish banks get a bailout of more billions and the markets ate the extra money mercilessly in about 48 hours. With the press of a few buttons, the banks or markets appeared to have eaten the very money they had just created! [...]

I asked more seriously on twitter if any economists could explain to me why my holiday idea wouldn't be a better stimulus to the Eurozone than another bank bailout.

Marsh's idea was picked up by NIESR's Jonathan Portes, who wrote it up with Declan Gaffney, another prolific blogger on disability and welfare issues. Their plan sounds a lot like it would work, cost no more than a bank bailout, and as Sue says, be fun:

Our proposal is that they should issue vouchers to their citizens, redeemable only on spending in goods and services in those countries suffering financing difficulties (Spain, Ireland, Portugal, Greece, Cyprus and Italy). Holiday vouchers, in other words. So German holidaymakers could pay for their drinks in Cretan bars (and their flights, hotel bills, souvenirs, ferry tickets and the like) with "money" created by the ECB and distributed to them by their own government. The Greek businesses would in turn be able to trade in the vouchers for euros from the German government (via the banking system and the ECB).

This solves a number of problems. It would loosen monetary policy across the eurozone and ease the financing problems of the periphery countries. But most importantly, as Martin Wolf has long argued, the fundamental problem of the eurozone is not fiscal profligacy in periphery countries, but internal current account imbalances. Consumers in the periphery countries have been spending on goods and services from Germany and the Northern countries, but not vice versa, financed directly or indirectly by capital flows from those same countries. Now those flows have dried up; so one way or another, the current account balances must be corrected.

Both posts are well worth a read, and serve to drive home an important point: there are far more options to deal with crises than those that most policy makers think they actually have. When all you have is a hammer, everything looks like a nail; but European governments have far more than just hammers in their toolbox.

Greeks sunbathe on a beach in Athens. Photograph: Getty Images

Alex Hern is a technology reporter for the Guardian. He was formerly staff writer at the New Statesman. You should follow Alex on Twitter.

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Erdogan’s purge was too big and too organised to be a mere reaction to the failed coup

There is a specific word for the melancholy of Istanbul. The city is suffering a mighty bout of something like hüzün at the moment. 

Even at the worst of times Istanbul is a beautiful city, and the Bosphorus is a remarkable stretch of sea. Turks get very irritated if you call it a river. They are right. The Bosphorus has a life and energy that a river could never equal. Spend five minutes watching the Bosphorus and you can understand why Orhan Pamuk, Turkey’s Nobel laureate for literature, became fixated by it as he grew up, tracking the movements of the ocean-going vessels, the warships and the freighters as they steamed between Asia and Europe.

I went to an Ottoman palace on the Asian side of the Bosphorus, waiting to interview the former prime minister Ahmet Davu­toglu. He was pushed out of office two months ago by President Recep Tayyip Erdogan when he appeared to be too wedded to the clauses in the Turkish constitution which say that the prime minister is the head of government and the president is a ceremonial head of state. Erdogan was happy with that when he was prime minister. But now he’s president, he wants to change the constitution. If Erdogan can win the vote in parliament he will, in effect, be rubber-stamping the reality he has created since he became president. In the days since the attempted coup, no one has had any doubt about who is the power in the land.

 

City of melancholy

The view from the Ottoman palace was magnificent. Beneath a luscious, pine-shaded garden an oil tanker plied its way towards the Black Sea. Small ferries dodged across the sea lanes. It was not, I hasten to add, Davutoglu’s private residence. It had just been borrowed, for the backdrop. But it reminded a Turkish friend of something she had heard once from the AKP, Erdogan’s ruling party: that they would not rest until they were living in the apartments with balconies and gardens overlooking the Bosphorus that had always been the preserve of the secular elite they wanted to replace.

Pamuk also writes about hüzün, the melancholy that afflicts the citizens of Istanbul. It comes, he says, from the city’s history and its decline, the foghorns on the Bosphorus, from tumbledown walls that have been ruins since the fall of the Byzantine empire, unemployed men in tea houses, covered women waiting for buses that never come, pelting rain and dark evenings: the city’s whole fabric and all the lives within it. “My starting point,” Pamuk wrote, “was the emotion that a child might feel while looking through a steamy window.”

Istanbul is suffering a mighty bout of something like hüzün at the moment. In Pamuk’s work the citizens of Istanbul take a perverse pride in hüzün. No one in Istanbul, or elsewhere in Turkey, can draw comfort from what is happening now. Erdogan’s opponents wonder what kind of future they can have in his Turkey. I think I sensed it, too, in the triumphalist crowds of Erdogan supporters that have been gathering day after day since the coup was defeated.

 

Down with the generals

Erdogan’s opponents are not downcast because the coup failed; a big reason why it did was that it had no public support. Turks know way too much about the authoritarian ways of military rule to want it back. The melancholy is because Erdogan is using the coup to entrench himself even more deeply in power. The purge looks too far-reaching, too organised and too big to have been a quick reaction to the attempt on his power. Instead it seems to be a plan that was waiting to be used.

Turkey is a deeply unhappy country. It is hard to imagine now, but when the Arab uprisings happened in 2011 it seemed to be a model for the Middle East. It had elections and an economy that worked and grew. When I asked Davutoglu around that time whether there would be a new Ottoman sphere of influence for the 21st century, he smiled modestly, denied any such ambition and went on to explain that the 2011 uprisings were the true succession to the Ottoman empire. A century of European, and then American, domination was ending. It had been a false start in Middle Eastern history. Now it was back on track. The people of the region were deciding their futures, and perhaps Turkey would have a role, almost like a big brother.

Turkey’s position – straddling east and west, facing Europe and Asia – is the key to its history and its future. It could be, should be, a rock of stability in a desperately un­stable part of the world. But it isn’t, and that is a problem for all of us.

 

Contagion of war

The coup did not come out of a clear sky. Turkey was in deep crisis before the attempt was made. Part of the problem has come from Erdogan’s divisive policies. He has led the AKP to successive election victories since it first won in 2002. But the policies of his governments have not been inclusive. As long as his supporters are happy, the president seems unconcerned about the resentment and opposition he is generating on the other side of politics.

Perhaps that was inevitable. His mission, as a political Islamist, was to change the country, to end the power of secular elites, including the army, which had been dominant since Mustafa Kemal Atatürk created modern Turkey after the collapse of the Ottoman empire. And there is also the influence of chaos and war in the Middle East. Turkey has borders with Iraq and Syria, and is deeply involved in their wars. The borders do not stop the contagion of violence. Hundreds of people have died in the past year in bomb attacks in Turkish cities, some carried out by the jihadists of so-called Islamic State, and some sent by Kurdish separatists working under the PKK.

It is a horrible mix. Erdogan might be able to deal with it better if he had used the attempted coup to try to unite Turkey. All the parliamentary parties condemned it. But instead, he has turned the power of the state against his opponents. More rough times lie ahead.

Jeremy Bowen is the BBC’s Middle East editor. He tweets @bowenbbc

This article first appeared in the 28 July 2016 issue of the New Statesman, Summer Double Issue