In all cases supply side reforms,
such as reducing labor and product market protectionism, while
simplifying tax systems, need to be implemented simultaneously.
Other large nations, such as France, must follow similarly.
At the same time, each troubled nation will need to end
its budget deficit quickly. The most direct route, as discussed
above, is to embark on significant public sector wage and benefit
cuts that bring the primary balances into substantial surpluses.
These steps will be hugely unpopular, but the reality is unfortunate
and simple—to stay in the euro area each nation must
quickly get its house in order.
From a fascinating paper giving the options of how to get out of the eurocrisis.
Essentially, either inflation or get rid of the \”European Model\” as above.