Economic crisis: Cheerio to the euro?
26 January 2010
The financial hardships experienced by countries like Greece and Ireland raise the issue of their possible exclusion from the Eurozone. But opinions on the feasibility of such an outcome are mixed.
"The Eurozone is going through its first identity crisis," declares Die Presse reporting on an internal European Commission document about the Greek budget crisis that shows "black on white" that there are serious concerns gripping the Eurozone.
According to Le Figaro, the re-election of Jean-Claude Juncker as head of Eurogroup "looks a lot like a 'monetary Munich'." As in 1938, when the British and French governments showed themselves powerless against Hitler, Juncker now seems equally week faced with the "monetary implosion" that looms in Greece. According to the French daily, the basic concern for Eurogroup "is only aimed at avoiding chaos and a knock-out punch to the euro," and that "Mr. Juncker has no more power than the former League of Nations." "To do nothing for Greece would put Europe in danger of having to face a monetary crisis that might also drag in Portugal, Spain and Ireland," warns Le Figaro. According to Die Presse, "the healthiest and most radical solution would entail setting Greece adrift. But for the moment no one is saying this out loud."
The euro has been a disaster for Ireland
Some Irish commentators are tempted by this solution. According to David McWilliams in the Sunday Business Post, it is in Ireland's interest to "divorce from the euro". Faced with a serious crisis, the "I" of the PIGS (Portugal, Ireland, Greece and Spain) would find it easier to devalue its currency. "It is clear the euro has been a disaster for Ireland," argues the journalist and economist, "and will ensure our slump lasts considerably longer than it has to. When we look at other countries, we see that, of the three entrants into the then EEC in 1973, we are the only ones using the euro. However, we trade less with other eurozone countries than either Denmark or Britain... The Danes and the British had the confidence to know that they would still be full members of the EU without the euro. They kept their own currencies because they knew they’d need them at times like this. The Swedes made the same decision. "
A red herring
No one is yet seriously thinking in such terms, for this "disaster scenario contains several weaknesses," reports the Reuters Breakinviews website and echoed in Le Monde. A decision like that couldn't be implemented from one day to the next". Also, "making coins and banknotes for the new currency would take a minimum of several months. The decision to leave the Eurozone would also unleash a long series of legal and political wrangles and would place the exiting country in a head-on crisis with its allies. And finally, unless having recourse to autocracy along lines of the North Korean model, the government deciding to leave the euro would have to devise a drastic plan even more severe than what they would be trying to avoid in order to be taken seriously by international investors. In short, thinking that leaving the Eurozone would be an 'attractive alternative' for countries is a red herring, and it just won't happen in the real world."