The Greek crisis is only the first of what could be several tremors resulting from the euro’s original sin. While few are willing to say it yet, the solution is clear: the only way to avoid further harm to the global economy is for Germany to lead its fellow stable states out of the euro and into a new and stronger currency bloc.
The notion of a single euro zone economy is false. Unlike their northern neighbors, the countries in the zone’s southern half have difficulty placing bonds — issued to finance their national deficits — with international capital investors. Nor are these countries competitive in the global economy, as shown by their high trade deficits.
These problems are only worsened by euro membership. If Greece were outside the euro zone, for example, it could devalue its currency to make it more competitive, and its foreign debts could be renegotiated in an international conference.
Instead, the fiscal strictures of the euro zone are forcing the country to curtail public expenditures, raise taxes and cut government employees’ salaries, actions that may push Greece into a deep depression and further undermine its already weak international credit standing. The alternative to this collapse, having other members of the euro zone assume its debt payments, is no better. Doing so would be a signal to other debtor countries that they could abandon their own remedial efforts and instead count on foreign assistance. The creditor countries would be brought to their knees.
In short, the euro is headed toward collapse.