Wednesday, August 31, 2011

The Next Europe: Left-over Euro & Deutschmark

 Dominique Faget/Agence France-Presse — Getty Images

Historian Hans-Joachim Voth gives the euro only another five years unless the euro zone is transformed into a full transfer union with massive redistribution. The continent is too culturally different to warrant a single currency, he says, adding that it would be best if Germany and other stronger economies left the euro zone.

SPIEGEL: Professor Voth, how much longer do you think the euro will survive?

Voth: Five years. The euro can't survive in its current form. We could, of course, make a full-fledged transfer union out of the euro-zone countries, complete with euro bonds and massive fiscal redistribution. In that case, we would have a different euro than the one that was originally conceived and promised to German voters. In the end, if the heads of state and government don't want that, it's likely that the euro will have to be dissolved.

SPIEGEL: You give the euro another five years -- what will Europe look like then, in your opinion?

Voth: I can imagine a world where there will a left-over euro: with France, Italy, the Mediterranean countries, perhaps Belgium as well. Apart from that the old Deutschmark zone will return, comprising Germany, Austria and the Netherlands, perhaps Denmark as well, perhaps Finland, which have no problems conducting the same monetary policy as Germany. We had a similar system during the European Exchange Rate Mechanism ERM. That was the optimal system, and then we gave it up for the euro.                                        Der Spiegel

See also Money Week

Der Spiegel:

  • The Ticking Euro Bomb: What Options Are Left for the Common Currency? - SPIEGEL ONLINE - 
  • Contagion!!! Dexia Rescue: Belgium Nationalizes Troubled Bank - SPIEGEL ONLINE - 
  • Berlin, Paris Deny Rift Rumors: EU Postpones Summit on Debt Crisis - SPIEGEL ONLINE - 
  • The Financial Crisis Returns: Europe's Attention Shifts to Its Ailing Banks - SPIEGEL ONLINE - 

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