The European disaster is the result of two very bad ideas: (1) partial political integration (rather than none) and (2) partial monetary integration (rather than none). Now that this experiment has blown up, the “cures” are supposedly these: more political integration (budgets) and more monetary integration for the non-PIIGS nations.
A few people are saying it’s either/or. Here is an example of either/or reasoning.
Eurozone solutions: With the late October “deal” now in tatters, and with subsequent developments in Italy, in Greece, and in the market pricing of French risk, the future for the eurozone now seems to be all about the ECB and outright monetisation. It seems amazing that the same folks who insisted that Greece would not default, that the eurozone was solvent and was just going through a CDS [credit default swaps]-trader-driven liquidity squeeze, that kicking the can down the road was a viable plan, and who trumpeted the late-October deal, now think ECB monetisation is the solution. I would urge extreme caution, again. In my view, the eurozone can either go down the path of full political and fiscal integration, which clearly means a smaller neue-eurozone and default by the nations that don’t fit in with this hard-money Germanic ideal or it can take the soft-money Latin/UK/US-style soft-money route, where the ECB agrees to unlimited monetisation. It is clearly a case of “either, or”, but not both. These are two divergent policy paths.
The correct solution is neither: no ECB inflation and no fiscal unification.
What should be done? This: Step one: dissolve the European Union. Step two: dissolve the European Monetary Union. Step three: dissolve the European Central Bank.
What should the newly independent nations do then? Anything that their constitutions allow. Preferably, this: Step one: reduce all tariffs to zero. Step two: establish gold coins as the only currency legal for paying taxes. Step three: abolish the national central bank.
Simple. Likelihood: zero.