Right now, Europe is in complete financial chaos because several economically small states are in a debt crisis.
But what both France and Germany know in the end is that if they don’t backstop Greece, Portugal, and Spain the Euro will change dramatically, if not be erased from history.
The Euro is not just a note passed around to exchange goods and services. It is a statement of unity between its member countries, an aspiration for countries on its periphery, and a further sign to the world that the European Union speaks with one voice on economics.
This opportunity should be taken to tighten, rather than undermine the Euro and Paul Krugman has outlined on his blog the extent to which countries like Spain and Greece remain behind Germany.
Greece and Spain received huge cash influxes from richer neighbours prior to the financial crisis, but kept none of the cash and all of the high wages afterward. With huge unemployment numbers and a high cost of living, these countries have found their way into a debt crisis, Krugman explains.
To deal with these problems, Krugman argues that the economic union must be tightened and the labour market further integrated. That would be the only way the Euro, and the E.U. could survive this crisis unscathed. If they don’t take these moves, the union is kaput.
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