The Ailing Euro
According to the Centre for Economics and Business Research (CEBR), in a press release of 11th July, on the euro: “Greece is a sideshow”, “the real issue is whether Spain and Italy can stay in” and the conclusion is that they “doubt if they can in the longer term”.
On the euro, as on so many matters of economics and politics, there is a wide range of views. Some have argued, since it was conceived, that the euro could not survive. It is hard to see how the same currency, and hence the same exchange rate and interest rate, could serve such widely diverse economies as those of Germany, France, Italy, Greece and others. Perhaps it could be made to work if economic and political policy were more closely aligned but that surely would involve ceding further key sovereign powers to Europe ?
The questions now must be :
(1) whether there is the will in the ‘PIGS’ economies to accept the austerity measures that come with the substantial bailouts already given to Portugal, Ireland and Greece – the alternative is to pull out of the euro and allow some devaluation as an economic stimulus; and
(2) whether there is the will in the stronger economies, such as Germany, to continue providing this level of support.
Time will tell, as ever, but the CEBR’s Douglas McWilliams gives “the euro a one in five chance of surviving the next 10 years in its present form”