The absence of political leadership in addressing the crisis of the euro is not surprising, given the fact that whatever is done – or not done – will lead to some redistribution of wealth and income.
Until four simple truths are explained to, and accepted by, Europe’s electorates, it will be impossible to move forward.
What cannot happen, in the short term, is for one or more countries leave the euro. Leaving a currency that will continue to exist elsewhere, within a single financial market, is highly problematic. Pressing the ejector button now could send the whole aircraft tumbling earthwards.
What leaders must explain is that, firstly, over the medium term there is no alternative to some form of federal fiscal arrangements. Second, that in the period before longer term fiscal transfer arrangements can be put in place, some euro area governments will need debt relief. And lastly, that the European Central Bank will need support, from governments and their taxpayers, to provide indefinite liquidity to maintain the machinery of day-to-day economic activity. This need not affect its operational independence.
Until the eurozone’s leaders have explained these four unavoidable facts we will all be going up blind alleys, when time is of the essence in averting potential economic and social disaster.
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