Why Europe Needs an Agreed Blueprint for Exit from the Euro: The Eurozone Crisis Prompts Talk of Loan Defaults and Currency Withdrawal, but There Is a Third Way

Thomas, Rob, Financial Management (UK)

The events of the past four years have cruelly exposed the weaknesses in the design of the euro. But they have also revealed how difficult it is to construct a strategic response that balances the interests of growth and solidarity with the maintenance of appropriate incentives for nation states. Although viewed from Brussels or Frankfurt it may appear that there is no viable alternative to the current policy prescription for countries such as Greece, Portugal and Spain, the economic pain in these countries seems to be pushing them to breaking point and shows no sign of abating.

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The remedy of internal devaluation to restore competitiveness, austerity to restore sound public finances, and bank deleveraging to restore the financial system to health, constitutes the most complete deflationary economic policy seen in western Europe since the war. Although the euro has taken surprisingly little of the blame, it seems just a matter of time before the electorates of southern Europe demand expansionary polices that are at odds …

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Publication information: Article title: Why Europe Needs an Agreed Blueprint for Exit from the Euro: The Eurozone Crisis Prompts Talk of Loan Defaults and Currency Withdrawal, but There Is a Third Way . Contributors: Thomas, Rob - Author. Magazine title: Financial Management (UK). Publication date: February 2013. Page number: 54+. © 2009 Chartered Institute of Management Accountants (CIMA). COPYRIGHT 2013 Gale Group.

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