The Euro: This Marriage Can't Be Saved

At the time of the euro's launch in January 1999, Milton Friedman declared that the euro would not survive the first major European economic recession. He believed that the member nations would pursue their own fiscal policies, which would be inconsistent with a common monetary standard. The debt crisis in Greece shows just how right he was. If the Southern European governments comply with "Le Tarpe's" requirement that they move their bloated government budgets toward balance in order to get loans, then their fall in government spending and increased taxes will move their economies into recession. If they don't comply with those conditions, then the effect will be even more pronounced. They will immediately have to balance their budgets, because few lenders will lend money to a government that is about to default. Beyond causing a deep recession that will push down wages, Le Tarpe does little to address the underlying sources of Southern European debt -- the low savings...(Read Full Article)