It’s true that the gap between northern and southern eurozone countries is growing, but that gap can certainly be closed, according to Knot. But this requires a multi-pronged approach: ‘Reforms must be introduced on the national front to strengthen the growth potential of these economies, but we can lead a sensible policy from Europe by tackling the challenges together.’
Carrot and stick
Then reforms. But it is precisely these that have just taken off in the last 20 years. And even now, Knot says he can’t guarantee the reforms will be successful. “Southern European countries are also simply democracies, so in the end it’s the voters who decide what happens there.” Which, according to Knot, is possible: keep a carrot-and-stick combination available to those countries, even if he prefers the carrot.
No Neuros
“A joint European program that also includes those benefits when they reform, that’s the best way forward.” Going only to the northern countries seems “not a viable way”. “If you start separating these things, I’m afraid the euro will fall apart completely.” Furthermore, according to Knot, it may be less attractive for the Netherlands to share just one euro with rich northern countries “because we would like to sell our stuff abroad and for that we simply need as big a foreign country as possible”.
Home booklet
Can the ECB still do its job well now that euro economies are drifting so far apart? “If we fail to halt this distorted growth, it will become increasingly difficult for the ECB to pursue a single policy that affects all corners of the eurozone equally. I think we have some tools in place to ensure that this is still the case at the moment, but in the longer term it is important for governments to put their own houses in order.’
Knot cannot answer the question of how long the current situation will be sustainable. He notes, however, that whenever a crisis hits Europe, there is “a high degree of political cohesion and the will to get out of it”.
“EMU has been both a political and an economic project from day one.” According to Knot, the invasion of Ukraine has shown how important it is for the euro countries not to let themselves be played apart and to stick together. ‘This also includes successful economic integration. I absolutely believe it.’