Greek Crisis Causes Second Thoughts on the Euro

European nations are bailing out Greece, at great cost

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European nations have agreed to bail out Greece with the help of the International Monetary Fund. Greece's economic struggles, which hit a crisis point in recent months, have been a major test for the European Union and Europe's shared currency. With the interconnected economies struggling to maintain Greece's stake, some pundits are wondering: Should Europe be having second thoughts about the euro?

  • Bailout Reveals Euro Failures  The U.K. Spectator's Daniel Korski says the varied economies are just too distinct. "It would be difficult to see how it would be politically feasible for the French government to raise taxes on its citizens and redistribute them to assist displaced Portuguese fishermen. As we have seen with the German reaction to the Greek crisis, transferring taxes inside the eurozone poses significant problems. In short, there were always serious doubts, according to economic theory, as to how successful the euro could ever be."
  • The 5 Countries That Should Abandon Euro  Portugal, Ireland, Italy, Greece and Spain. Think-Tanker Mark Weisbrot writes in the Huffington Post, "The problem is that they have a fixed - and for their level of productivity - overvalued currency. For the PIIGS countries, that is the euro. [...] If these countries had their own national currencies, they could allow their currencies to depreciate. This would give their economies a boost by making their exports more competitive and reducing imports."
  • Two European Currencies?  The Spectator's Daniel Korski doesn't think European countries could ever revert back to one currency per state. But what if Europe split itself between two European currencies? "One way out of the problem may be the implementation of a two-currency EMU, with both currencies run by the Frankfurt-based ECB. The Euro is so great, Europe may be lucky enough to get two for the price of one."
  • Why This Would Be a Disaster  The Guardian's George Irvin warns against dropping the Euro. "Were the [Southern European] Club Med countries to return to the drachma, peseta and escudo, the financial markets would immediately send those currencies plunging. The response of member-state governments would be to impose capital controls and erect trade barriers, leading to a massive contraction in intra-eurozone trade and a consequent fall in income and employment. Under normal circumstances this would be bad enough, but under current conditions of world recession such a fall in income would look much like what happened in the 1930s."
  • Clearly, Europe Is Keeping Euro  World Politics Review's Judah Grunstein notes just how far member states are going to preserve the Euro. "For Europhiles, the potential involvement of the IMF is also seen as a symbollic defeat, sending the message that Europe is not up to saving the euro on its own, as well as a strategic one, in that once involved, the Washington-dominated institution would have a de facto say in the budgetary decisions of an EU and euro-zone country."
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