EU and Euro

The EU and the euro are not out of the woods yet, not by a long shot.

Read : "Design Failures in the Eurozone - Can the be fixed ? " by Paul De Grauwe in :

http://www2.lse.ac.uk/europeanInstitute/LEQS/LEQSPaper57.pdf.

No need to read the paper : read the conclusions. Some excerpts :

"The recent decision by the ECB to act a lender of last resort is a major regime change for the Eurozone. It has significantly reduced the existential fears  which slowly but inexorably were destroying the Eurozone’s foundations.

The ECB’s new role although necessary is not sufficient, however, to guarantee the survival of the monetary union. Signals must be given that the Eurozone is here to stay. These signals are, first a partial debt pooling that ties the hands of the member countries of the Eurozone and shows that they are serious in their intentions to stick together. ...

 

Second, it implies that macroeconomic policies be made more symmetric. The asymmetric nature of the macroeconomic adjustments that puts most of the adjustment burden on the deficit countries has created a deflationary bias in the Eurozone. ...

Thus while the ECB’s decision to act as a lender of last resort has reduced the risk of a financial implosion, this risk has been substituted by a new risk, i.e. the risk if implosion due to uncontrollable social and political disturbances in the South of Europe.
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Finally, in the long run the monetary union will have to be embedded in a significant fiscal union. This is probably the hardest part of the process to make the Eurozone sustainable in the long run, as the willingness to transfer significant spending and taxing powers to European institutions is very limited. It remains a necessary part, though. Without significant steps towards fiscal union there is no future for the euro."

 

This program will not be accomplished in my lifetime, that's for sure !