http://business.time.com/2012/04/12/why-germany-should-leave-the-eurozone/
We have all been hearing about the Euro crisis for a while now. Several people have suggested that the weaker countries like Greece need to leave the Euro Zone as their domestic problems like their budget deficit are affecting the entire zone. However leaving the Euro Zone will leave them in a very harsh state from which recovery would be quite lengthy. The reason being their new local currencies will be devalued dramatically against the Euro making it even harder for them to repay their debts. This article proposes a different solution by saying that Germany should leave the Euro Zone. As the strongest economy in the Euro Zone, its new local currency will be higher in value to the Euro. This relatively lower value of the Euro will make it less difficult for the weaker countries to pay their debts.
We have all been hearing about the Euro crisis for a while now. Several people have suggested that the weaker countries like Greece need to leave the Euro Zone as their domestic problems like their budget deficit are affecting the entire zone. However leaving the Euro Zone will leave them in a very harsh state from which recovery would be quite lengthy. The reason being their new local currencies will be devalued dramatically against the Euro making it even harder for them to repay their debts. This article proposes a different solution by saying that Germany should leave the Euro Zone. As the strongest economy in the Euro Zone, its new local currency will be higher in value to the Euro. This relatively lower value of the Euro will make it less difficult for the weaker countries to pay their debts.
1 comment:
While it is true that this would lower the effective debts of many of the failing Eurozone countries, it would severely destabilize the financial system. Many banks with Euro-denominated debt would be faced with a significant devaluation of the money owed to them, which could very likely lead to either severe bank failure or another round of financial bailouts.
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