I think we are agreed on one thing: you cannot have a stable currency Union where some countries are in permanent surplus and others are in permanent deficit.  You either have to address the structural imbalances, or one or other have to leave. The argument for the deficit countries to leave is that devaluations are less painful than internal deflationary policies. Probably the simpler solution would be for them to kick Germany out by systematically voting against everything Germany wants on the ECB Council. The problem is that none of them have the gumption to do so.

We are also probably agreed that nothing major will happen until the next big financial crisis.  That is because simple arithmetic is beyond the capabilities of our dear leaders and their instincts are to stay put for as long as they possibly can - like the frog in the cauldron of water being gradually heated up to an unsustainable level.

So we will have a continuation of current beggar thy neighbour policies and anaemic growth.  Until the next big bang.

Index of Frank's Diaries