Daily View: Greece, debt and the future of the euro
Commentators look at what a European debt crisis could mean for the future of the euro.
the eurozone should never have been formed:
"For some of us writing at the time of the Eurozone's formation just over a decade ago, the current crisis has been all too predictable. Other currency unions, we pointed out, had been tried in history and always fallen apart... The problems were visible from the outset. For example, neither Greece nor Italy's national finances were in a good enough condition to merit joining. But the greater ideal of a Eurozone prevailed over financial common sense. Economics gave way to politics, as it so often does. Proof, also, that creative accounting is not confined to dodgy public companies."
The that Greece's inability to devalue its currency because it is in the euro highlights that it was a flawed venture:
"The fundamental objection to monetary union is that it leads to a common budgetary policy as well as a single interest rate. Greece's woes illustrate how this happens; the taxpayers of other eurozone countries pay the price. Britain has its own economic problems, but British voters at least have the power to punish the policymakers who created them. Joining the euro means giving up that democratic right."
countries such as Germany may bail out Greece as there is more than economic credibility at stake:
"There is the question of the symbology of the Great European Project. If the euro goes, what is left?
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How can the fantasy political union to which Eurocrats are committed, and for which we have paid so dearly with our sovereignty and our independence, be remotely sustained if the individual members cannot even maintain a successful currency union?
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Federation looks highly unlikely anyway, at least in name: but it is torpedoed altogether if the euro becomes a spavined currency."
The eurozone countries to save the euro by having a less laissez-faire approach:
"The continent must think more imaginatively about how to solve the predictable (and predicted) problems of a trans-national currency. At root, the issue is the mismatch between centralised monetary authority and devolved political power. The disciplines of the Maastricht criteria were supposed to ¬reconcile the two, but they were applied falteringly even in the good times, and are flatly incredible today... They could attempt alternatives, such as requiring the ECB [European Central Bank] to stand behind fundamentally sound bonds facing speculative attack. What they can afford to do no longer, however, is to wash their hands and throw the single currency's fate over to the market"
Greece will be rescued because a lot of the Greek government debt is in banks across Europe, however, he is bleak about the future of the Euro:
"Within Europe, the ability of governments to get deficits down will determine whether the euro has a long-term future. (My own view, for what it is worth, is that it will be through this crisis but not the next one, the one that comes along in another 10 years' time.)"
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