Feature

The euro is not so secure

When will southern Europeans dump the euro?

Thomas Catan and Marcus WalkerThe Wall Street Journal

When will southern Europeans dump the euro? asked Thomas Catan and Marcus Walker. German-engineered austerity has saddled Greece, Italy, Portugal, and Spain with “Depression-era conditions,” and jobs may not return for more than a decade. Yet the Europe Union “has no crash plan to get people back to work.” The confidence of bureaucrats in Brussels and Berlin that no one will leave the euro could easily prove false. “Europeans’ reserves of patience are deep, but surely finite.” Look what happened in Argentina, which suffered years of recession in the 1990s after pegging its peso to the U.S. dollar. The economy contracted by 8 percent in three years, but Argentines patiently supported that peg—“right up until the moment they exploded” in riots across the country in 2001. The government resigned, Argentina defaulted, and the dollar peg was abandoned. Europe’s situation is strikingly similar. “By the end of this year, Italy’s and Portugal’s economies will have shrunk by around 8 percent from their peak, Spain’s by around 6 percent, and Greece’s by more than 23 percent.” Anyone who thinks the euro is safe should remember what happened the last time people seemed resigned to living under a painful currency regime—then suddenly “swept it away.”

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