In re-reading Al Gore’s fascinating “The Future”, we note that Gore sets forth two “options” concerning resolving the problems of the Euro Zone.
One is to allow Greece and other nations with extraordinary debt burdens to declare bankruptcy and to exit, so they can return to their own currencies and devalue them in relationship to the Euro in order to spur their economies. However, he points out that this for a country like Greece would be “exceptionally painful and expensive.” (We believe the pain of remaining in the Eurozone in the long run will be much greater.)
The other is to move quickly to a fiscal unification of the Euro Zone and for Germany to commit to a huge transfer of wealth to the indebted nations over the next two decades. However, he notes that Germany has already spent over two trillion dollars in absorbing the economy of East Germany and does not have an appetite for repeating the process through subsidies to the weakest Euro partners.
Then there is the suggestion made by George Soros, multi-billionaire and one of the world’s great political activists and philanthropists. He suggests Germany should depart the Euro Zone! He maintains this would greatly reduce the economic disparities among the remaining members, thus removing the prime cause of stress.
Cyprus has already adopted currency exchange controls, some claim causing de facto devaluation of its Euros. (The right to send Euros out of the country is highly restricted and withdrawals from bank accounts are rationed.)
The European Union current approach is an exercise in ‘kicking the can down the road.’ The prime purpose of the E. U. is not to assist the debtor nations but to protect the German, French and, to a lesser extent, U. S. bankers from losses.
This should not surprise us. We have the same thing right nearby with Tom Corbett’s approach to Harrisburg’s insolvency.
