The euro: Eurogeddon | The Economist

Don’t forget about Europe–they are still having a currency crisis–and a few solutions would be good to find.

It is a reasonable question, and it may explain why the euro treaties did not provide for a lender of last resort or bail-outs and stopped the ECB buying government-bond issues. Yet the American analogy does not quite work, and not only because the United States has a more flexible economy and a far bigger federal budget. The crucial difference is that nobody doubts the dollar’s future existence. Yet Mr Mayer’s brief history of currency unions shows how transient they can be. Throughout the crisis markets have questioned the euro’s survival.

That makes it harder to take a tough line on countries like Greece. Many Germans share Mr Mayer’s view that Greece ought to go; but the markets are unlikely to stop there, turning to Portugal, Spain, Italy and even France. A worry about such unravelling is what drives the German government to want Greece to stay. But a Greek economy in near-permanent depression will need support for years to come. Unless and until creditor countries grow faster, which may mean accepting higher inflation, the euro crisis will not go away.

via The euro: Eurogeddon | The Economist.


One thought on “The euro: Eurogeddon | The Economist”

  1. Fear of what may happen when Greece leaves the Eurozone is no basis for economic policy. Greece – and the other troubled countries like Spain, Italy and France – continues to fail to implement any meaningful labor law reforms. Cutting budgets in the absence of improving the fundamentals is a one-way street to ruin, but apparently none of the aforementioned countries seems to mind this. So the only rational approach is to permit them to fail, exit the Euro, and return to rapidly-devaluing national currencies. Trying to keep the Euro going in the face of continued economic insanity will only compound today’s problems.

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