The Euro has no chance of survival if countries like Germany are unwilling to make economic sacrifices to maintain the countries on the zone’s periphery, according to a UBS report cited by FT Alphaville.The report looks at monetary unions through history, particularly digging out the details of United States progress on the issue. UBS points to US success during the Great Depression in moving away from a more regional system to a federal system which supported the country’s less economically developed fringe.
The system will never be perfect, according to UBS, but it can be designed to mitigate the weight on its biggest members. This would include preparing the Euro zone for “asymmetric shocks” which affect some member states more than others.
A book brief as far back as 1998 points to this problem. It called for reduced demands on deficit rules and a reduction in state spending on things like pensions. Not much has changed.
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