Wall Street Journal
July 18, 2012
Contrary to what is claimed daily in the media by politicians and many economists, there is no "euro crisis." The single currency doesn't have to be "saved" or else explode.
The present crisis is not a European monetary problem at all, but rather a debt problem in some countries—Greece, Spain and some others—that happen to be members of the euro zone. Specifically, these are public-debt problems, stemming from bad budget management by their governments. But there is no logical link between these countries' fiscal situations and the functioning of the euro system.
It's worth stressing that the deficits now plaguing these countries were, in large part, justified only a few years ago as necessary to initiate so-called "recovery policies." But it is always an illusion to believe that governments could increase total demand and thereby induce producers to produce more. Governments can only shift resources from those who have created them to those who haven't. The present state of affairs in countries that engaged in stimulus blowouts in 2008 and 2009 should serve as proof of the failure of the Keynesian model.
When an individual or a firm is indebted, moreover, they are rightly considered to be responsible for reimbursing their debts, and they either have to spend less or produce more to do so. Their debts are not generally problems to be shifted onto other people who managed their money more cautiously. Why shouldn't the same moral discipline be imposed on governments?
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