Eurozone crisis: The “Merkel Memorandum”
10 August 2012
“For all you know, Angela Merkel is even now contemplating how to break up the euro,” says The Economist in its latest assessment of the options available to the German Chancellor. In a spoof memo addressed to Ms Merkel “drafted in utmost secrecy by a few trusted officials,” the newspaper outlines the kind of advice she may be receiving. Assessing the current situation, the weekly says –
Bluntly, the plan isn’t working. Greece is a disaster zone. Ireland and Portugal are making some progress ... but they still have a long way to go and could easily be knocked off course. Worse, Spain looks as if it may need a full bail-out rather than the partial one for its banks you had hoped would suffice.
The newspaper continues to lay out the pros and cons of a Grexit and of multiple countries leaving the eurozone. In the style of a mandarin’s briefing paper, it details the legal difficulties of exiting the euro, which it compares to, “a Hotel California that you can never leave.” Finally, the fictional advisers conclude the memo –
Of the two options, our judgment is that the larger break-up makes more overall economic sense than an exit of Greece alone. But we must emphasise that the economic and financial risks of it going wrong are much greater, and pushing it through would be an order of magnitude more difficult than co-ordinating an exit by Greece alone. Finally, a drawback associated with both options, even if they were to work, is that many of the benefits would lie in the future ... whereas the costs would be felt here and now – and blamed on you and your government.