Eric C. Maskin (New York, 1950) defended Obama?s decision to increase spending in order to escape the financial crisis now fenced-in by the republicans. In this interview he criticizes the EU for neither following the classic formula nor working together. Maskin, an expert in financial mathematics and professor at Princeton, won a Nobel Prize in Economics in 2007 and is in Valencia to help judge the Rey Jaime I Prize for contributions to economics in Spain.
Eric C. Maskin (New York, 1950) defended Obama?s decision to increase spending in order to escape the financial crisis now fenced-in by the republicans. In this interview he criticizes the EU for neither following the classic formula nor working together. Maskin, an expert in financial mathematics and professor at Princeton, won a Nobel Prize in Economics in 2007 and is in Valencia to help judge the Rey Jaime I Prize for contributions to economics in Spain.
What have you learned from the crisis?
It shows the importance of regulating financial markets. This is nothing new for economists, but perhaps it will be new to politicians, and I hope they learn this lesson.
Two years ago the G-20 countries announced a reform of the international financial system. Has it been enough?
I think something is still missing, starting with the United States. They passed the Dodd-Frank Act a year ago, and that was a step in the right direction, but not enough. The most important thing is to make sure that banks don?t take on too much risk, or to say it another way, that they don?t leverage themselves too much. The financial system has to have leverage restrictions in order to work well, and the ones we have now aren?t enough.
Some voices, including the Spanish president, suggest a return to imposing a tariff on international transactions. Would that achieve anything?
That?s not a serious solution. It could work for other things, but it?s not a viable method for addressing the financial crisis. For that we have to attack the root directly and ensure the banks are strong.
What do you think about the strength shown by markets as they put pressure on the PIGS? sovereign debt?
Financial markets are very powerful, there?s no doubt. All the reason more why Europe should act united and manage problems for its member countries. And right now they aren?t acting seriously. They are always hoping that the crisis would slow and then they react, and a serious political organization anticipates and act before a crisis occurs. For example, I believe that Europe could have intervened to help Spain before they got in to problems. If they had done it, we wouldn?t be dealing with this crisis.
Is now the time to do something?
Of course. A handicap that Spain endures by belonging to the European Monetary Union is that it cannot control its monetary system. It?s a terrible handicap, and for this reason Europe should help Spain with its debt. And they don?t.
The European Central Bank has started to lower interest rates. Is it the right time?
Lowering the rates should be good for Germany right now, but not for Spain. It?s too soon to lower them and it?s unfair for Spain, Portugal and the rest of the PIGS that are trying to recover.
Edited in English by Brandon Dyches and Jose L. de Haro (for comments contact: joseluisdeharo@eleconomista.es)
