FLORENCE – It is too simplistic to explain the current wave of concern about the euro in terms of Greece’s problems. Greece has massive fiscal and competitiveness problems, but Greece (2.25% of the population of the European Union) is smaller than California (12% of the population of the United States). And California, too, is suffering massive fiscal difficulties and declining competitiveness in some of the industries in which Californians were once pioneers.
The euro’s current problems are, instead, a reflection of unresolved Europe-wide and global problems. The common currency is the canary in the mine of the global exchange-rate system.
Copyright: Project Syndicate 2010