Vox
October 3, 2011
No simple solution to the euro crisis exists. This column argues the heart of the Eurozone’s woe is a balance-of-payments crisis whose solution requires real adjustment of prices and wages in the periphery countries. It proposes Ten Commandments that balance the need for discipline with the need to minimise panic when a crisis does strike.
The Economist recently argued in its editorial column that the real cause of the crisis-stricken countries of the Eurozone is a lack of credibility, that these countries need fiscal stimulus to grow out of their problems, and that voluminous rescue programmes are needed to create a firewall around Europe’s solvent governments (Economist 2011).
Unfortunately, both the diagnosis and the treatment are wrong.
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