This article in today’s FT offers yet another adjustment option: you can read it here.
Category: EMU
Paul Krugman has a follow-up post to his earlier one where he points out that being pro-European is one thing, but that being pro-EMU in the 1990s was another.
I have one gripe with the piece: it wasn’t only ugly Americans (and eurosceptic Little Englanders) who were €-sceptical. Here is a newspaper article by Peter Neary, for example, written in 1997, and I have already linked to a longer 1997 piece by Neary and Thom, as well as to a 2000 article by Thom and myself that make my own feelings on the subject pretty clear.
More important, however, are PK’s concluding comments:
Was the euro a mistake? There were benefits — but the costs are proving much higher than the optimists claimed. On balance, I still consider it the wrong move, but in a way that’s irrelevant: it happened, it’s not reversible, so Europe now has to find a way to make it work.
I couldn’t agree more. The logical move at this stage (and some cynics thought this was the point of EMU all along) would be a move to fiscal federalism, so as to smooth out asymmetric shocks, but the French and Dutch votes of 2005 make that a pretty implausible scenario. It is the logical move, though.
Martin Wolf writes on the adjustment problems within the euro area: you can read it here.
Landon Thomas has an article on the fragility of EMU in today’s New York Times: you can read the article here.
This FT editorial outlines the challenges facing the euro area.