Is the euro rescue succeeding?

by Uri Dadush and Bennett Stancil

Vox
February 6, 2011

The recent fiscal problems in Greece, Ireland, Italy, Portugal, and Spain have left the single currency in need of rescue. But this column argues that this is only part of the problem. Until leaders deal with the core issues – the periphery’s lost competitiveness and misaligned economic structures – Europe’s rescue will ultimately fail.

The New Year has been kind to the Eurozone. The euro has strengthened and bond spreads between Germany and Europe’s troubled economies have narrowed. Evidence that countries are dealing adequately with the underlying causes of the crisis, however, remains scarce.

The fiscal problems in Greece, Ireland, Italy, Portugal, and Spain (the periphery) – which are the focus of efforts in national capitals and in Brussels – are only part of the problem. Until leaders deal with the core issues – the periphery’s lost competitiveness and misaligned economic structures – Europe’s disease will continue to fester.

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