Insiders and outsiders

Economist
September 6, 2011

If the European Central Banker were printing money like newspapers print columns proposing solutions to the euro-zone crisis, Europe might finally face some of that dangerous inflation Jean-Claude Trichet keeps warning us about. There is no shortage of ideas for ways out of this mess. Some solutions are elegant, some rely on brute force, but solutions do exist. What a booming business in euro-solutions hasn't managed to accomplish is an implementation strategy; however clever the policy proposals, euro-zone governments have been reluctant to act at all, to say nothing of boldly, unless pushed to the brink by markets.

It's possible that the cycle of brinksmanship will move the euro zone step-by-step toward a sustainable union, and that the bickering and dithering is primarily about negotiation over the allocation of the costs of this process. I'm not sure that's right, however.

Europe's leaders know what they'll have to do to stabilise the situation. The key question now is: what is the set of euro-zone countries consistent with the political will to save the currency area? Europeans in Europe's core will share a currency with "outsider" countries, but they won't fight to save them. So who are the outsiders? Who has to go to convince core voters that the cost of saving the euro zone is worth bearing?

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