Martin Wolf foresees possible outcomes of the euro crisis. All options are painful.
“Marry in haste; repent at leisure.” Full of impetuous ardour, Germany’s partners seduced – some might say blackmailed – the continent’s most powerful economy into sacrificing monetary independence two decades ago. But, as the prince in Giuseppe di Lampedusa’s Leopard remarked of his own indissoluble union: “Fire and flames for a year; ashes for thirty.” Now is the eurozone’s time of ashes. ….
I can envisage five outcomes: first, a happy marriage, on Germany’s terms, albeit after a painful period of adjustment; second, a miserable marriage, which endures because a break-up is too costly; third, a degree of mutual accommodation, in which the north becomes more southern and the south more northern; fourth, a partial break-up, with the remaining members moving into one of the three previous categories; and, finally, total break-up. What is certain is that Germany will not get the eurozone it wants easily or swiftly. If partial or total break-up is avoided, the period of difficulty will be long and painful. The crisis of the eurozone is likely to be a very long-running soap opera – if it does not end in tragedy.
Martin Wolf, “A bitter fallout from a hasty union“, Financial Times, 20 June 2012.
Tags: exchange rates
