Thursday, August 28, 2014

The Euro

FLG has long said that the euro is fundamentally a political, not an economic or financial issue. Megan McArdle:

It’s hard to see how anyone gets out of the euro without at least a deep local crisis, and quite possibly another round of global crises, as the chain reaction melts down markets around the world.

[...]

That doesn’t mean that it won’t eventually happen; I still think this remains a real risk. But if it does, public officials will probably be denying the possibility right up to the bitter, unpleasant end.
What makes McArdle's post interesting is that even though the creation, continuation, and dissolution of the euro is fundamentally political issue, it doesn't mean there won't be economic and financial pressures on and consequences of those political decisions.  FLG brings this up because it's easy to be confused, and many people are, that the euro is an economic issue because of this interaction.

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