And that is the case despite the fact the only consequence for Spain today of being in the euro is that its interest rates are going back to what they would have been without the euro...

In the long run, we're all dead. John Maynard Keynes

And I'd be curious to know how many of Florida's laid off workers are actually moving, given how many of them are unable to sell their houses, or underwater on their mortgages...


In the long run, we're all dead. John Maynard Keynes

Interview with German Government Economic Adviser: Euro Zone 'Could Cope with Greek Bankruptcy' - SPIEGEL ONLINE - News - International

Greece is currently facing the prospect of bankruptcy, which could threaten the euro. In an interview with SPIEGEL ONLINE, Peter Bofinger, a prominent economic adviser to the German government, explains why he believes Europe's common currency would survive a Greek collapse and calls for a new global monetary order.

...SPIEGEL ONLINE: ... The financial problems of the southern European members are putting pressure on the entire euro zone. Some of your fellow economists fear a crash would trigger a domino effect and cause a rapid plunge in the value of the euro.

Bofinger: Some of my fellow economists are going too far. Compared to other currency zones, the euro zone is doing a lot better than many claim. The national debts and new state borrowing is lower than in the United States. And in an emergency it could also cope with a Greek bankruptcy. The country produces just 2.6 percent of the euro zone's GDP.

SPIEGEL ONLINE: Still, the loss of faith in the euro would be massive. And regarding national debt, debt within the euro zone is currently about 88 percent of its GDP. You call that figure low?

Bofinger: It is not low, but it is lower than in the US. There, the national debt is 92 percent of GDP. In Japan, it is even 197 percent. And the United Kingdom's budget deficit is far worse than that of the euro zone. And as far as a possible loss of confidence is concerned, let me point out that the state of California has been on the verge of bankruptcy for months and its share of the US's GDP is about 13 percent. Viewed from that perspective, my fear of a domino effect is limited.

That's a bit disingenuous. The main benefit of the euro is that it eliminates foreign exchange risk which would otherwise exist if each EU member still had its own currency. Thus, without the euro, European economic integration would not have proceeded as quickly.

The financial industry may like foreign exchange risk, because it offers opportunities to profit from speculation and creates markets for financial derivatives, but other industries do not.

A bomb, H bomb, Minuteman / The names get more attractive / The decisions are made by NATO / The press call it British opinion -- The Three Johns

..financed by capital outflows from Germany.

This is BS, isn't it? Did german property speculators inflate spanish housing market??

..If Spain had its own currency, this would be a good time to devalue;
..what's happening to Spain reflects the inherent problems with the euro,

The problem is not the property bubble, it is euro??

... I thought it might be useful to lay out, in a handful of pictures, how Spain got into its current state. (All of the data come from the IMF World Economic Outlook Database). There's a kind of classic simplicity about the story -- it's almost like a textbook example. Unfortunately, millions of people are suffering the consequences.

...

So, whose fault is all this? Nobody's, in one sense. In another sense, Europe's policy elite bears the responsibility: it pushed hard for the single currency, brushing off warnings that exactly this sort of thing might happen (although, as I said, even euroskeptics never imagined it would be this bad).

Am I calling, then, for breakup of the euro. No: the costs of undoing the thing would be immense and hugely disruptive. I think Europe is now stuck with this creation, and needs to move as quickly as possible toward the kind of fiscal and labor market integration that would make it more workable.

But oh, what a mess.