There is no sunlit future for the euro

by Martin Wolf

Financial Times
October 18, 2011

Hurrah! The eurozone’s crisis will be solved at the European Union’s summit this Sunday. So participants at last Saturday’s meeting of finance ministers of the group of 20 leading advanced and emerging economies have suggested. Will such hopes be vindicated? No. It is conceivable – if unlikely – that the eurozone will find ways to manage its emergency. It is inconceivable that it will cure the illness, partly because members are in denial about its nature and partly because it is a chronic condition.

Understandably, outsiders, terrified of another global financial shock, are putting fierce pressure on the eurozone’s members to deal with its interlinked crises of sovereign and banking illiquidity and insolvency. Ministers called on the eurozone to act “decisively to restore confidence, financial stability and growth”.

Fix banks; fix Greece; and fix debt markets of other fragile eurozone sovereigns. These are the elements of the desired package. The main policy approach is also clear: pour buckets of money over everything.

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