Reform the euro or bin it

[CHIMO]

The Greek financial crisis has put the very survival of the euro at stake. At the euro's creation, many worried about its long-term viability. When everything went well, these worries were forgotten. But the question of how adjustments would be made if part of the eurozone were hit by a strong adverse shock lingered. Fixing the exchange rate and delegating monetary policy to the European Central Bank eliminated two primary means by which national governments stimulate their economies to avoid recession. What could replace them?

The Nobel laureate Robert Mundell laid out the conditions under which a single currency could work. Europe didn't meet those conditions at the time; it still doesn't. The removal of legal barriers to the movement of workers created a single labour market, but linguistic and cultural differences make US-style labour mobility unachievable.

Moreover, Europe has no way of helping those countries facing severe problems. Consider Spain, which has an unemployment rate of 20% – and more than 40% among young people. It had a fiscal surplus before the crisis; after the crisis, its deficit increased to more than 11% of GDP. But, under EU rules, Spain must now cut its spending, which will likely exacerbate unemployment. As its economy slows, the improvement in its fiscal position may be minimal.

Some hoped the Greek tragedy would convince policymakers that the euro cannot succeed without greater co-operation (including fiscal assistance). But Germany (and its Constitutional Court), partly following popular opinion, opposed giving Greece the help that it needs.
http://www.guardian.co.uk/commentisfree/2010/may/05/reform-euro-or-bin-it-greece-germany

[girl gone mad]

1. This is the reality.

Everyone whining about tax evaders and pensioners needs to take a step back and look at the big picture.