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Article
Why the Euro Will Survive: Completing the Continent's Half-Built House
C. Fred Bergsten
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After Europe adopted a common currency, it took almost ten years for the first serious economic and political crisis to hit. Now that it has arrived, Europe must use the opportunity it presents to get the continent's basic economic institutions right and complete the euro's half-built house. Going forward, the euro area's agenda must combine the financial engineering that is necessary to overcome the immediate crisis and a growth strategy to restore the area to economic vitality. Fortunately, both the history of European integration and the way the euro area's leaders have responded to the current turmoil suggest that both the historical imperatives and economic self-interest of all the key countries, creditor as well as debtor, will coalesce successfully. As the drama continues to unfold, watch what the parties involved do rather than what they say. This process will require more treaty revisions and fixes to the euro area's institutions. An increasing number of commentators and economists question whether the common currency can survive, but if the history of the continent's integration is any guide, Europe will emerge from its current turmoil not only with the euro intact but with far stronger institutions and far better economic prospects for the future.
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Op-ed
Why a Collapse of the Euro Area Must Be Avoided
Anders Åslund
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In the last century Europe has seen the collapse of three multi-nation currency zones: the Habsburg Empire, the Soviet Union, and Yugoslavia—and each ended with disastrous hyperinflation. The lesson is clear. The euro area should be maintained at almost any cost. The only reasons for a breakup of the euro area would be if euro area governance fails completely, or if one nation decides to leave. Greece or any other financially weak country is unlikely to depart from the euro area. In the three hyperinflationary currency union collapses, it was small, wealthy counties that left first. In the current crisis, large imbalances have accumulated between southern debtor countries and northern creditor countries. Any capping of these balances would disrupt the payments mechanism between the euro area countries and impede all economic activity. Many articles on a possible breakup of euro area either see it as a mere devaluation or reckon that its collapse would amount to a major economic disaster. It seems the latter is more likely.
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See also: Why a Breakup of the Euro Area Must Be Avoided: Lessons from Previous Breakups
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