Better to leave the euro..

The euro (or European Monetary Union, EMU) has proven to be an unmitigated disaster. Rather than providing economic stability and prosperity, it has produced exactly the opposite. As the eurozone limps from one crisis to another, the bleeding in much of the periphery (and a fair part of the center as well, see the recessions in countries like France and the Netherlands) goes unmitigated and the proverbial recovery that was supposed to be just around the corner remains just that.

Really only Germany has greatly benefited from the euro. While capital inflows to the periphery whacked its competitiveness out of sync with Germany (rather than leading to an appreciation of its exchange rate), it also produced demand for German exports. While the boom times are definitely over in the periphery, much of the difference in competitiveness remains, and the way the eurozone authorities are dealing with that, through adjustment of the periphery only via a process called ‘internal devaluation’ is very arduous and painful.

Even Germany faces substantial risks. Germany is liable for potentially very large sums of money in guarantees of different rescue funds (EFSF, ESM) and ECB bond buying and Target 2 imbalances, when the whole thing will really go wrong, something which can’t at all be excluded. [Read on here]