So should Greece and Ireland:
Upon closer inspection, however, none of these benefits materialise. In Greece and Ireland, bailouts did not stabilise markets, did not encourage economic growth, and did not inspire a change of heart about credit. If anything, these cases suggest that, within the straitjacket of a monetary union, the bailout mix does not work.
Quite. Within a monetary union, with the exchange rate fixed, there\’s no real way to grow the economy sufficiently to get out of the debt trap.
In theory we could have a decade or two of grinding internal devaluation, sure. But that theory isn\’t going to last all that long against the Demos undergoing the devaluation.
I really do think that the federasts have this all wrong.
Yes, I know that they think that a sovereign default will damage, possibly even kill, their darling, the euro. And of course I\’m in favour of that myself, thinking as I do that the euro was a damn fool idea in the first place.
But I go on to think that not allowing a default is going to kill the EU itself. And again, I\’m all in favour of that, thinking as I do that the EU is a damn fool idea. But this is advice to the federasts, not the playing out of my own desires.
Can\’t you see that the people of, at minimum, Ireland, Greece and Portugal (with the possible addition of Spain and even Italy) just will not put up with decades of stagnation? They will leave if this is imposed upon them.
The get out clause, that of full economic union, just ain\’t gonna happen either. This requires huge shifts of fiscal resources from the rich to the poor countries. At least of the order of the SE of England\’s subsidies to the North, Scotland, or of West Germany\’s to East. No, not some rounding error of a percentage point of GDP or so, but 5%, 10% of GDP.
Given that the Swedish government take of the Swedish economy is already north of 50%, is there actually 10% of Swedish GDP available to send south?
It\’s just not going to work. Better to allow the defaults now and from that federast viewpoint, rebuild your desired system in the decades to come, not to blow it all right now.