But understand this: If Europe’s problems aren’t resolved in an orderly fashion, the stock market drops we saw last month will be small potatoes compared to the steep declines that lie ahead.
So here’s the solution: Let the Eurozone break up right now on its own terms. And let a new, stronger euro currency come as a result.
At this point, that is the only viable solution to the problems Europe faces.
So far, everything the European Union (EU) has done to try to subdue this outbreak has come up short. In spite of all the group’s efforts, the European sovereign debt crisis continues to snowball, drawing more and more countries into the fold as it gathers momentum.
The trendy solution is to simply expel the weaker members of the Eurozone. That would work if Greece was the only problem, but it’s not.
That’s why a better solution would actually be the opposite – for the stronger countries to abandon the euro and create their own currency.
European countries with strong economies – Germany, the Netherlands, Finland and Sweden – should simply walk out.
I’d like to take credit for breaking new ground with this idea, but I can’t. Former head of the Federation of German Industries, Hans-Olaf Henkel, writing in the Financial Times recently proposed this alternative solution as well.
Still, it’s worth subscribing to for a number of reasons.
To begin with, it would absolve the strong countries of their liability to prop up their weak Mediterranean sisters.
It was one thing when only small countries, such as Greece, Ireland and Portugal needed propping up. But now Spain, with a collapsed housing bubble and eight years of bad management, and Italy, with the most debt of any country in the EU, are at risk. Both of those countries’ economies are large enough to put a sizeable dent in even Germany’s vast wealth.
Even more ominous, storm clouds have started swirling around France, which is still rated AAA but does not deserve to be. The country has not balanced its budget since the early 1970s, and public spending has soared on the back of hopelessly uneconomic schemes such as the 35-hour workweek.
Now the French government has come up with a supposed solution – one that consists entirely of tax increases.
So it’s clear now that something must be done. And the solution I support has benefits for both strong and weak Eurozone countries.
The Benefits of Breaking Up
For the stronger countries, leaving the Eurozone voluntarily and forming a new, stronger euro currency would have three immediate advantages.