There are two answers to the cruel questions posed to Greece by the single currency and the Euro wars. The simple and best one would be for Greece – and a few others – to leave the Euro, re-establish their own currencies, devalue and price themselves back into work. This remains unlikely, given the huge political capital invested in the Euro scheme.
The second is for the Euro zone to press on with the creation of a country called Europe – the UK and other non Euro members would opt out of all the necessary new powers and preferably some of the existing ones as well . The core members of the Eurozone would then have to subsidise and underwrite the weaker areas within the new country, as any other sovereign state does for its poorer areas. Areas with low incomes and high unemployment within the sterling currency union cannot devalue, so they receive sustantial cash transfers from the more prosperous and more fully employed areas. That is what has to happen to make the Euro work.
When I wrote two books to urge the UK not to join the Euro, I thought a Euro issued in too many EU countries would do a lot of economic damage. We had seen the dry run for the Euro in the form of the Exchange Rate Mechanism. It wasn’t just the UK that was forced out. The ERM was the single currency you could leave before the damage became permanent. The single currency is the ERM without an exit, which is why it was always going to be so damaging.
The UK should tell both the IMF and the EU that we are not putting a penny more into the failing Euro countries. They do not need more debt. They need a resolution of the fundamental flaws of the Euro scheme. It’s double or quits time. Either German and French taxpayers accept their obligation to subsidise Greece, or Greece has to leave. It also means the EU(euro section) needs to develop its rapidly emerging control over Euro member economies even faster. If rich areas in the zone have to subsidise poorer areas, they will expect control over the budgets and borrowings they have to subsidise.