The Great Debate

from The Great Debate UK:

How will the Eurozone crisis end?

-Laurence Copeland is a professor of finance at Cardiff University Business School and a co-author of “Verdict on the Crash” published by the Institute of Economic Affairs. The opinions expressed are his own. -

Back in 1997, when I wrote about the prospects for the forthcoming European Monetary Union, I said I expected something like the Greek crisis to end with a wave of bailouts of ClubMed countries, and I followed the situation through to what seemed its logical conclusion.

I guessed that Germany and the other surplus countries would realise they were caught in a can’t-beat-‘em-may-as-well-join-‘em trap. On balance, I think I stand by that forecast today.

The problem is of course that monetary union without fiscal union requires a willingness to leave member  countries to stew in their own juice when they become insolvent.

In the current situation, this not an option because right from the start of EMU, Brussels used both direct and indirect methods to ensure that no invidious distinctions were made between the debt issued by member country governments.

Betting on the unthinkable in the euro zone

James Saft Great Debate — James Saft is a Reuters columnist. The opinions expressed are his own –

Some crises bring partners closer together. Some, as investors in the euro zone are likely to discover this year, drive them further apart.

Look for rising tensions about fiscal and monetary policy among the bloc’s 16 member nations, and for a bigger penalty to be imposed on the euro and some euro zone assets against the possibility of a breakup or a secession from the currency group.