From the BLOOMBERG Op-Ed:
Since the launch of the euro in January 1999, Germany and the Netherlands have experienced a growth slowdown and loss of wealth for their citizens that would not have happened had they never joined the euro…
Sweden and Switzerland didn’t have to make any such sacrifice of ordinary people’s prosperity, while at the same time they enjoyed stronger employment as well as budget and current-account balances. That leads to only one conclusion: The euro was a mistake from the outset. It should be abandoned in unison and soon. Nobody should be surprised by the persistence of divergent cost and price inflation that has occurred among the 17 countries that have adopted the euro. That divergence produced major discrepancies in competitiveness that continued to grow over the euro’s 13-year existence. Italy’s relative unit-labor costs, for example, are now 37 percent higher than in 1998, before the euro’s introduction, while Germany’s are 11 percent lower…
So 13 years later, where are we? Greece, if you look at the government’s monthly cash figures rather than the massaged numbers of the troika, now has a budget deficit of more than 11 percent of gross domestic product, a 4 percent to 5 percent primary deficit (excluding interest), and total debt of 135 percent of GDP net, 168 percent gross. The austerity program the Greeks are following — their only option, given that without control of their own currency they cannot devalue — has made both the deficit and debt ratios greater. Austerity has caused deflation of nominal spending and incomes, which have fallen by more than 5 percent, cutting tax revenue. Government debt will surge under any scenario within the euro: If Greece stays in, the correct “haircut” for its debt is 100 percent. But it could well be forced to leave later this year…
Click here to read the full article.
