Wall Street Journal
April 5, 2011
Is what's good for the euro zone so bad for some of its members that it would be better for them to leave, however painful the consequences may be?
This is a variation on the question that has hung over the currency area ever since it was formed. Back in the days before the fiscal crisis raised the stakes, the question we all asked was whether the interest rate set by the European Central Bank was as appropriate to the economic situation in Germany as it was to Greece.
If the European Central Bank delivers its promised interest rate rise Thursday, the "one-size-fits-all" debate will get new legs, if it hasn't already.
Clearly, one interest rate doesn't suit all of the euro-zone members all the time. Indeed, if the members of the ECB's governing council really do what they say they do, the interest rate they set is more likely to suit a large member of the currency area than a small one.
That's unless the small member manages to turn itself into a version in miniature of a large member—let's say, Germany—which is what the currency area's policy makers mean by the term "convergence."
Neither Ireland, Greece nor Portugal has yet managed to so transmogrify itself, and so if the ECB's interest rate suits Germany, it won't suit them.
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