Wednesday, October 08, 2008

Down the drain

...a conversation over email today:

(answering the question: "How can a country drop the Euro and go back
to a national currency?

Makes it harder to go back, yes, but the incentive to default on the
ECB obligations is there...its an external currency debt problem that
we have seen a bunch of times. The incentive (and the risk) is there
to repudiate the ECB, the Euro, etc. and walk away.

It is likey some EU countries will realize that agreeing
to centralize monetary policy in a pan european institution is not as
favorable as issuing local currency backed by local tax collections.

Those countries that benefited from the euro will blame it for their
current predicament...and those that did not benefit as much are going to
suffer political and economic fallout.

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