Secular Café: The euromess continues: how to bring it to an end

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The euromess continues: how to bring it to an end Apr 5th 2012, 05:55 Still under discussion! http://www.economist.com/node/21552250 Quote: THE Irish left the sterling zone. The Balts escaped from the rouble. The Czechs and Slovaks left each other. History is littered with currency unions that broke up. Why not the euro? Had its fathers foreseen turmoil, they might never have embarked on currency union, at least not with today's flawed design. The founders of the euro thought they were forging a rival to the American dollar. Instead they recreated a version of the gold standard abandoned by their predecessors long ago. Unable to devalue their currencies, struggling euro countries are trying to regain competitiveness by "internal devaluation", ie, pushing down wages and prices. That hurts: unemployment in Greece and Spain is above 20%. And resentment is deepening among creditors. So why not release the yoke? The treaties may declare the euro "irrevocable", but treaties can be changed. A taboo was broken last year when Germany and France threatened to eject Greece after it proposed a referendum on new bail-out terms... ...This week Policy Exchange announced a shortlist of five contestants for a £250,000 ($400,000) prize for the best plan to manage a break-up of the euro. It may be a sign of the magnitude of the task that the organisers did not declare a winner; instead they asked those on the shortlist to do more work and resubmit their ideas. (A cartoon produced by an 11-year-old Dutch boy won a €100 voucher.)... ...The fate of the euro will probably be determined by politics as much as economics. A debtor state may tire of internal devaluation. A creditor may want to stop supporting others. And any one of the euro's 17 members may balk at the loss of sovereignty involved in saving the currency. But the worst outcome of a euro split would be a chaotic breakdown. An orderly process increases the chance that it might be possible to salvage from the wreckage other gains of European integration, notably the single market. So euro-zone governments need to think the unthinkable. No self-respecting general would refuse to plan for a predictable war, no matter how much he dislikes the idea of fighting it.

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