Jeremy Warner on the Telegraph puts things in the right perspective in his latest article on the Telegraph.
Yet there is one region which seems, perversely, to be drawing comfort from the latest turn of events – the eurozone. For the high priests of the single currency, the renewed travails of Argentina and Turkey seem to vindicate all they have been trying to do. Countries that fail to engage in adequate supply-side reform, and instead constantly attempt to devalue and inflate their way out of trouble, only doom themselves to repeated economic failure. Contrast this with the eurozone, they say, where the single currency forces member states to address the underlying causes of their afflictions. The easy option of devaluation is denied
Europe offers nothing in the way of solutions, just grinding, destructive austerity, which has inflicted seemingly permanent economic damage on once proud nations. Only growing labour migration prevents a more serious form of what economists call hysteresis – the loss of skills, and therefore economic potential, associated with prolonged periods of high unemployment.
One thing the crisis has succeeded in doing, however, is dramatically cutting wages in affected economies. If clobbering people’s standard of living counts as policy success, then Europe is setting new standards, never mind that reduced nominal wages only further increase the size of the debt overhang, making countries even more prone to future financial trouble. Unable any longer to afford its own goods and services, Europe instead dumps its excess production on the rest of the world and calls it progress.
The full article is here.