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For instance: Is the euro a failure? (Gilles Saint-Paul, 5 May 2010)
Thus it is somewhat disturbing that we are now asked to pour money into Greece to "save the euro" (while the British, who have no stake in the euro, are spared that burden). Besides the fact that apart from Germany, the other large Eurozone economies (France, Italy, and Spain) are barely in a better shape than Greece, and besides the moral hazard effects of the intervention, it makes little sense to prolong a monetary regime which is actually one of the reasons why those countries are in trouble.

Furthermore, in a typical adjustment program, shock therapy aimed at stabilizing public finances must be associated with policies that make it possible for the economy to start growing again - a necessary ingredient if one wants the program to be politically acceptable or just to fulfil its objectives. After all, jobs are needed for the people to tolerate the hardship imposed on them, and fiscal receipts are needed for the government to avoid fresh insolvency problems five years down the line.

In the case of Greece an important obstacle to recovery is the competitiveness problem. If Greece was not part of the European Monetary Union an IMF adjustment package would presumably have involved a sharp depreciation of the currency (if it had not happened before under the sheer pressure of the markets). By insisting that Greece remains in the Eurozone, the other member countries are greatly reducing the success probability of their plan.

The brainless should not be in banking -- Willem Buiter
by Migeru (migeru at eurotrib dot com) on Thu May 6th, 2010 at 10:29:49 AM EST
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