Der Spiegel: Clinging to Euro will only prolong agony

From Spiegel Online – Top Economists Debate the Crisis ‘Clinging to the Euro Will Only Prolong the Agony’:

Leading German economists Peter Bofinger and Stefan Homburg are split over the euro’s chances of survival. In a discussion moderated by SPIEGEL, they talked about the wisdom of introducing a euro bond and what would happen if Germany left the common currency…

Stefan Homburg: In 1995, the great thinker and European policy expert Ralf Dahrendorf predicted that the euro would divide rather than unite the continent. At the moment, we are experiencing the beginning of this process. Political tensions are growing in Europe, and the Germans are being viewed as taskmasters. For these reasons, it would be better to bring down the curtain on the euro and return to the deutsche mark…

Euro bonds violate the Maastricht Treaty, which stipulates that no country can be held liable for another country in the euro zone. The euro bonds would even elevate liability to the level of a principle and force Germany to vouch for the debts of other countries whose fiscal behavior we cannot control. Our population would not tolerate the tax increases and reductions in transfer payments that this would necessitate…

Throughout history, there have been hundreds of government bankruptcies. Look at Argentina and Russia, for example. But in none of these cases did the entire financial system collapse. Of course, the financial industry likes being able to collect hefty risk premiums without risk. But, it can’t be right for Germany’s taxpayers to prop up the banking sector under the guise of saving countries or the euro…

Bofinger: … In Spain and Ireland, it was the private sector, not the government, that lived beyond its means. In 2007, the Irish government had a balanced budget, and the Spanish government even had a surplus. The financial sector, on the other hand, issued loans that made no sense at all for years…

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This entry was posted in Accountability, Bankers' Bailout, Budget, Economy, Euro / Sovereign Money, Solutions and tagged , . Bookmark the permalink.

One Response to Der Spiegel: Clinging to Euro will only prolong agony

  1. Pingback: Germany owns Europe: during boom bankers went out way to get dirty, needed to go abroad to (Vanity Fair/Michael Lewis) |

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