Hans-Werner Sinn replies to his critics in relation to Target 2 balances here. Readers of this blog will undoubtedly draw their own conclusions. At the heart of his fallacy is the conceptual absurdity of separate regional credit policies in a monetary union with perfect capital mobility.
Doug Irwin provides a nice account of the historical links between exchange rate and trade policy here.
The FT reports on Minister Noonan’s IMF initiative here. I would be interested in reactions to the Minister’s tactics.
Richard Pine makes a point about Greece that I have found myself wondering about in the context of Ireland:
The public service, which will lose 150,000 workers by 2015, and faces another round of pay cuts as part of new austerity measures, clearly does not relish a return to a new, devalued, drachma. Those in the private sector who need a stimulus to manufacturing, agriculture and tourism would welcome the boost in exports and the end of recession.
I think the political economy of eurozone membership is more complicated than this. Anyone in secure employment, be it in the public or the private sector, is presumably happy to be paid in a nice hard currency, while in the Irish case the multinational sector may not have the same interests as Irish-owned SMEs. But the general point that the more secure elements in society (and the wealthy) have a stake in eurozone membership, while those in precarious employment, and the unemployed, may have quite different interests, seems like a potentially valid one.
What do people think?