“The euro is the gold standard minus the shiny rocks”

Why the Euro Is Doomed in 4 Steps – Matthew O’Brien – The Atlantic:

The euro is the gold standard minus the shiny rocks. Both force countries to give up their ability to fight recessions in return for fixed exchange rates and open capital flows. But giving up the ability to fight recessions just makes it easier for recessions to turn into depressions. And that puts all of the pressure on wages to adjust down when a shock hits — the most painful and destructive way of doing things.

European nations that start downward spirals have trouble getting out of them because they don’t have the option of utilizing monetary policy. Rather than having a central bank reduce the value of their currency compared to other countries to boost exports, these countries are forced to lower wages relative to their competitors. Obviously this hurts workers and further drives down the economy.

The last 5 years have proven that this arrangement isn’t a good deal for the nations who are doing well or for the nations who are suffering. Either the European Central Bank needs to take stronger steps to help the PIIGS/Slovenia/Cyprus or the euro needs to go away.

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