I hate to sound like Raaid but am I the only one who can see the blindingly obvious ?
Within the eurozone theres only one country that is out of step economically with the rest.
Its Germany. ( ok and perhaps Netherlands and Belgium too).
What countries like Greece and Spain urgently need is a rapid depreciation of currency, this is at the moment impossible within the Euro.
Even with recent falls on the currency markets the Euro (which is defacto the new D/Mark) is underpinned by the fundamental strength of the German economy.
With all the eurozone locked into the same currency, this artificially bolsters the German economy even more,and perpetuates over a longer time scale the fundamental inequalities within the eurozone economies.
Entering the Euro wasnt an economic decision it was political, commited by politicians on idealogical grounds. well now the political consiquences are apparent for all to see.
Some hard choices are going to have to be made very soon, these choices will have long term effects for us all. Do you expect your politicians to make the correct decisions ?
Choice. As things are. Continue to prop up failing economies with billions in money, force these failing nations to suffer decades of austerity job losses and poverty and face the fact that even with "loans" and assistance eventually if these economies dont grow they will be unable to repay any assistance. If this happens that nation will be forced to default and leave the euro with catastrophic consiquences and possible dominoe effect to other weak euro currencies.
Choice. Planned expulsion of weak euro currencies from the euro into either there own currencies or even a "second division" Euro 2. So that these nations can have the "short sharp shock" as they reallign there economies thus avoiding decades of poverty and stagnation. A weaker currency would boost exports and although imports would cost more a period of inflation falling currencies and growth would probably have these nations back on track within a decade. There is an added advantage, most of these nations are in the sunny south of Europe. think of the cheap holidays !
Choice. Germany leaves the Euro ! If Germany went back to the DMark The Euro would fall on currency markets giving all the remaining Eurozone members an opportunity to go for growth, on the otherhand the DMark would rise harming German exports (unless the have productivity gains) and the market if given free reign would after a period reallign the exchange rates to realistic levels.
Choice Force ALL non Euro European countries into the Euro (including the Swiss), These nations either have large economies or financially strong balance sheets, they being within the eurozone would undoubtedly strengthen the euro.
The German taxpayer has been the greatest contributor to the european project for decades now. Until the euro came into force Germanys contributions had no tangible benefit for Germany except for a few subsidies that came back into Germany. However the Euro has aided the German economy massivly since its introduction. Its no surprise that the two largest exporting nations have artificially low exchange rates. If you doubt the truth of this statement just look at the chinese Govts insistance on not letting there currency float on the markets, pegging it artificially low.
Personally my choice for future prosperity for europe would be for Germany (plus anyone who wished to join the new dmark ) to leave the Euro, enabling the Euro to have massive falls.
The political ramifications are perhaps even more alarming and each seperate course has its own implications, and some as is the nature of these things totally unforseeable
As for the bigger picture what we are seeing is the effects of globalisation, the reconverence of the global economy and the economic future being reshaped in our lifetimes.
We live in interesting times.
|