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Europe’s Achilles heel May 11, 2012

Posted by proeconomia in Fiscal policy, Main, Monetary policy, News on Greece, On the crisis, Opinion.

Read what the Economist has to say about Greece and the future of the eurozone. Have a taste from it:

“The idea of a chaotic Greek departure from the euro at a time of Franco-German disunion should terrify everyone it touches (the damage it would do the world economy may well be the biggest risk to Barack Obama’s chances of re-election, for instance). With so much at stake, the rest of the euro zone urgently needs to lower the risk that contagion from a Greek exit would infect Portugal, Ireland and even Spain and Italy.”

Then, “In fact, Germans need to live with higher inflation, consume a bit more and prop up the weaker members of the currency union. Indeed, the euro will survive only if every country confronts the choice it shies away from. Like some dreadful joke, the euro needs French reform, German extravagance and Italian political maturity.” (my emphasis before and below)

And then, for us: “Whatever the make-up of its next government, the idea that Greece can repay this is the biggest fantasy of all. Does that mean Greece is still better off in the euro? Probably, though the judgment gets ever finer. An exit, and the ensuing default, would lighten its debt, re-establish competitiveness and challenge its politicians to grasp their own destiny. Yet leaving the euro would also create chaos and destroy savings and, as often in the past, its advantages might rapidly inflate away. The rest of the euro zone is also better off with Greece “in”, if only because of the risk of contagion (and the inadequate preparations for that). But again, not at any price.”



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