Friday, December 5, 2008

The Future of the Euro (Part III)

Barry Eichengreen says I should stop worrying about the future of the Euro.

1 comment:

  1. Maybe because Eichengreen so badly wants a bigger Euro area, he fails to propose a simpler counterfactual.

    What if those East European banks had simply borrowed in their own currency, rather than the Euro (or Swiss Franc). Then, the full backing of the lender of last resort facility of their own central banks would have been available, and a crisis likely averted or at least mitigated.

    It was the foreign-currency borrowing that is the root of the problem. Yes, one solution is to join the Euro, but another solution is just stricter regulation on such risky behavior.