Saturday, 19 May 2012

One Simple Way To Stop Kicking The Can Down The Road

We all know with calm certainty that it each European economy functioned without the Euro. 

We can argue that Germany has done much better under the single currency, and that Greece has always been a basket case whatever the currency. But these economies functioned. 

Whereas the sovereign debt crisis is driven by complete uncertainty about whether the 'Eurozone' economic union will ever be sustainable, and the conviction that some economies are definitely doomed without their own national currency.

In this situation one might have thought the ultimate route to relative economic stability would be to set a date by which the Euro will be withdrawn. Everyone would then unite to deal with that fundamental economic fact. 

Some might argue that the decision to form the Eurozone also encouraged unity and stability, as should efforts to maintain it. Yet it's obvious that including weak economies in the drive towards monetary union created moral hazhard, driving national fiscal and banking sector irresponsibility to the point of fraud. And there's plenty of evidence on the streets and in the polls to demonstrate that the maintenance efforts are divisive rather than unifying. It's difficult to see how a decision to return to national currencies would drive the same behaviour - in fact it may eliminate it entirely, or at least reduce it to manageable, local levels where the national politicians and their banks would be stuck with the consequences of their fiscal profligacy rather than everyone else. That may explain why some resist, while it's in the job description of European officials to support the Euro in service of the single market fantasy policy.

At any rate, there's one simple way to stop the politicians 'kicking the can down the road'. 

Remove the can. 

Image from JMK Advisors.

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