Countries that are highly uncompetitive are normally able to slash interest rates and devalue their currencies to prop up their economies.
But this is not possible within the euro, given its one-size-fits-all economic governance.
The implication is that weak, peripheral eurozone members will have to suffer years of painful deflation and tumbling living standards, as well as draconian budget cuts, in order to adjust.
Harvard University Professor Martin Feldstein, a long-standing sceptic on the euro, yesterday said the single currency 'isn't working' because member governments have no incentive to keep their public debts under control.
'There's too much incentive for countries to run up big deficits as there's no feedback until a crisis,' he said.
http://www.dailymail.co.uk/news/worldnews/article-1250433/Greece-debt-bailout-EU-leaders-split-euro-crisis.html
But this is not possible within the euro, given its one-size-fits-all economic governance.
The implication is that weak, peripheral eurozone members will have to suffer years of painful deflation and tumbling living standards, as well as draconian budget cuts, in order to adjust.
Harvard University Professor Martin Feldstein, a long-standing sceptic on the euro, yesterday said the single currency 'isn't working' because member governments have no incentive to keep their public debts under control.
'There's too much incentive for countries to run up big deficits as there's no feedback until a crisis,' he said.
http://www.dailymail.co.uk/news/worldnews/article-1250433/Greece-debt-bailout-EU-leaders-split-euro-crisis.html
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