Martin Wolf: The eurozone’s next decade will be tough

Via FT.com, Martin Wolf explains that “The eurozone’s next decade will be tough”:

The crisis in the eurozone’s periphery is not an accident: it is inherent in the system. The weaker members have to find an escape from the trap they are in. They will receive little help: the zone has no willing spender of last resort; and the euro itself is also very strong. But they must succeed. When the eurozone was created, a huge literature emerged on whether it was an optimal currency union. We know now it was not. We are about to find out whether this matters.

Which puts me in mind of Hayek’s remarks on the first page of The Denationalisation of Money, under the heading Proposal more practicable than utopian European currency:

[Free trade in money] seems to me both preferable and more practicable than the utopian scheme of introducing a new European currency, which would ultimately only have the effect of more deeply entrenching the source and root of all monetary evil, the government monopoly of the issue and control of money…

…The advantage of an international authority should be mainly to protect a member state from the harmful measures of others, not to force it to join in their follies.

It appears Hayek was prescient in these remarks as in many of his others.

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