In early November of last year, at the IMF Economic Forum, Larry Summers gave a short speech in which there were two words forgotten for a long time: secular stagnation. Summers is concerned by the fact that, beyond the financial-real estate bubble burst, and the subsequent economic crisis, there is an on-going trend toward a prolonged semi-stagnation, with anaemic growth and high unemployment. A week later, Paul Krugman, on The New York Times agrees to: “I’ve been thinking along the same lines, and have, I think, hinted at this analysis in various writings. But Larry’s formulation is much clearer and more forceful, and altogether better, than anything I’ve done. Curse you, Larry Summers!”

The economist who coined the term “secular stagnation” was Alvin Hansen, who became the most important propagandist of the ideas formulated by Keynes in the General Theory. The Harvard economist was already in his fifties, but he matured, after initial scepticism, a deep understanding of the paradigm shift produced by Keynes, influencing many young economists, including Paul Samuelson and James Tobin. The fear of a structural tendency to stagnation was due to the concern of insufficient dynamics of consumer demand that would cause a depressive phase, once World War II, with the tremendous mobilization of productive capacity that had led to the war mobilization, ended.

The fear of Hansen proved unfounded , and the term itself disappeared from the mainstream of economic theory, a part some Marxists like Paul Sweezy (following the Marxian interpretation of Rose Luxemburg). However in Europe some economists tried to overcome the weak aspect of Hansen’s hypothesis, shifting the emphasis from the fall in consumer spending to investment slowdown, due to the behaviour of large oligopolistic firms. Michal Kalecki , Josef Steindl and Paolo Sylos Labini have developed very relevant studies, which did not receive much attention right away, because the post-war years have been years of high and sustained growth.

The analysis of these economists has a common characteristic: the focus is  on the real sector of the economy, the distribution of income, the oligopolistic structure of production. There aren’t money supply and credit, interest rates and banks. But, even apart from the recent financial crisis, if we look at the twenty years "lost" in Japan, we see that the debts of the banks, the inability to fall below zero of interest rates and deflation, which raises real interest rates, were critical phenomena in determining the long stagnation of Japan .

On the monetary side explanations of the difficulty to get out of stagnation are not missed, just think of Keynes's liquidity trap. Another explanation was drawn by Don Patinkin, who had taken over the distinction between Kurt Wicksell's natural and monetary rate of interest. Both Krugman and Summers have referred to this setting: the problem is that interest rates have a floor (zero) under which they can not go down .

Surely, for a comprehensive analysis of stagnation trends, one must take into account both the real and the monetary sides of the coin; a not light task, on which Krugman has written some interesting  analysis. I am not equipped for this task, but I am willing to gamble on what causes stagnation of the Eurozone (EZ). Just consider that Ez had the worst performance compared to all the other currency areas , and even compared to EU countries not belonging to Ez.

The cause is fiscal austerity, or Merkel’s “home-works”. Under the leadership of Germany in fact the cause-and-effect relationship between the financial crisis and the growth of public debt has been turned upside down (taking as an excuse the Greek case). To exit from the recession then the only way is to cut public deficits, particularly in Pigs countries. As frau Angela said three years ago, any German housewife knows that you cannot cure debt with more debt. It is this economic vision that is creating the conditions for a crisis of the euro. It is a vision that falls into the category of stupidity, according to Carlo Maria Cipolla: a stupid person is the one who causes a loss to another person or group of persons without a gain or incurring a loss.

In a recent paper (International lending, sovereign debt and joint liability: an economic theory model for Amending the treaty of Lisbon, Policy Research Working Paper Series 6555, The World Bank) Kaushik Basu and Joseph Stiglitz show how the choice of co-operative management a debt is convenient to both the person who borrows and to her partner, that is another subject related to the first by the economic relations of various kinds (including having a common currency). The paper is theoretical, but the reference to the euro and Germany is explicit.

It is doubtful that the paper is able to shake the convictions of the German government, according to a saying of the ancient Greeks, "against stupidity even the gods can do nothing."