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2012-05-22

Den slutgiltiga artikeln om EMU och eurokrisen, av Gideon Rachman, Financial Times 21 May, 2012

RE: The Ultimate Article about EMU and the Eurocrisis

Time to plan a velvet divorce for the euro
In the coming months, Europe may be forced to decide
Sacrificing national self-rule on the altar of the euro is inherently objectionable
– and would invite a nationalist backlash across Europe.

 
Gideon Rachman, Financial Times 21 May, 2012


I had written repeatedly that the eurozone was a flawed construction that was likely to collapse. 

If that was the case, I was asked, would it not be better to break the whole thing up now?


At this point, I heard myself becoming shifty and evasive – “The trouble,” I replied, “is that I keep being told that a break-up would cause a catastrophe. Until I can tell you convincingly why that’s untrue, I can’t responsibly advocate it.”


But prevarication is no longer good enough. In the coming months, Europe may be forced to decide.

It is true that the transition from here to there will be painful and dangerous. My colleague Martin Wolf laid out an updated version of the full horror scenario in Friday’s FT – involving a breakdown of law and order in Greece, and financial collapse across Europe.


How could anyone responsibly run that risk?

The answer is that the alternatives to eurozone break-up are inherently implausible and deeply unattractive.


Without the option of devaluing their currencies, uncompetitive economies are left with “internal devaluation” – otherwise known as wage cuts and mass unemployment.

It is true that countries such as Greece badly need economic reforms. 


But these reforms – conducted within the straitjacket of monetary union with Germany – are causing political and economic turmoil.

In theory, the eurozone might rectify this error by moving to a real political union.


Even if EU politicians were able to overcome such objections and create a real federal union, this giant new entity would essentially hollow out the powers of national democracies.


Sacrificing national self-rule on the altar of the euro is inherently objectionable – and would invite a nationalist backlash across Europe.

Full text


Internal devaluation

Federalism

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