When situations seem destined to lead to bipolar outcomes, reality surprises us with balanced resolutions that are often unexpected. Experience usually shows us that solutions are rarely black and white, but rather shades of grey. They are probably less daring but perhaps also more widely accepted, more popular – for better or for worse. The same could happen in the resolution of the Eurozone crisis, where the peripheral economies can no longer coexist with those of the German-led bloc without causing each other real harm.
In fact, some commentators – whose links we’ve provided below – are already beginning to talk about what could well be the early stages of a “Limbo” in which struggling economies could be parked to infinity and beyond for as long as it takes. This “limbo” would simply be a newly created status for Eurozone membership, in which the respective euros of the states set aside there would fluctuate in value against the euro of the main Eurozone, but only to a limited extent. Obviously, their currencies could continue to be called ‘euros’ (or not), although their exchange rates against the ‘A’ euro would be significantly lower in order to revive their struggling economies. Some authors refer to a ‘Euro A’ at 1.80$ and a ‘Euro B’ at parity against $. Interest rates could also fluctuate to adapt to the needs of these struggling countries; in other words, the peripheral economies would be given the freedom to manage their own monetary policies without having to take the German economy and its allies into account.
At the same time, collective guarantee funds would be agreed upon to cover grace periods or arrears on their respective external debts, so that the rest of the Eurozone would in some way underpin that period, thereby avoiding the deadly spiral of rising risk premiums and the resulting defaults. All this is easy to say but difficult to put into practice, but after all, who said that preventing the collapse of the Eurozone was going to be easy?
On paper, such a status would be temporary, and therefore politically acceptable. This would avoid having to acknowledge terms that would betray the EU’s political failure, namely: the break-up, expulsion or exit from the euro of any country. In practice, however, the situation would be almost the same, but the solution would not appear to be as dire as the outright disintegration or fragmentation of the Eurozone, but rather a grey area, temporary and theoretically reversible. In short, we would be talking about something similar to the purpose attributed to the “bad bank”, which is due to be set up in Spain. In other words, a limbo in which to pile up the problems, with the hope – and the political rhetoric – that over the course of many years they will be resolved and everything will return to the status quo, however surreal that may be. In other words, faced with the inability to solve a problem, the EU, far from taking the bull by the horns, buries it under a radiation-proof sarcophagus. In true Chernobyl style, hoping that time and the reinforced concrete walls will achieve what the political class of Eurocrats and other economic illiterates and political cowards have failed to achieve.
For all these reasons, and because we are already hearing various voices Germanic According to those who advocate it, the ‘Limbo’ option (we’ll have to come up with a politically correct and grand-sounding name such as ‘Temporary Zone of Growth’, ‘Convergence’ or something similar) may gain more and more supporters and become the Eurozone’s way of pressing ahead regardless. There are also other authors such as Edward Hugh who even go so far as to suggest that Germany should temporarily leave the Eurozone (you really must read his essay from earlier this year: The Wolfson Question: A Reflective Essay by Edward Hugh)
Returning to the idea that it is the periphery that is left in limbo, of course, this “apartheid” will have a timetable for reintegration that is very, very electioneering Optimistic. So much so that it will inevitably be revised and delayed over the years, to suit the most hypocritical electioneering, just as is the case with the current deficit timetables. After all, which European politician is concerned about problems that will arise beyond their own term of office, or at most the next one? Let whoever comes next deal with their voters and their own broken promises and various treaties. In other words, the last one to switch off the light… That is the wretched essence of our politicians, who are the polar opposite of the statesmanship that is needed, as we have already said in this article.
The crisis in Greece is likely to be the catalyst that forces this path to be opened up, as without a truly critical situation, European politics has demonstrated its exasperatingly passive and nationalistic stance in recent years.
Be that as it may, and whatever they choose to call it, any solution that allows the periphery to regain control – even if only temporarily, to a limited extent and under supervision – of a monetary policy tailored to its own needs is to be welcomed.
Anything but a head-on collision with the harsh reality of the single monetary policy, to which we seem doomed.And given the ineptitude and cowardice of European leaders, the creation of a ‘limbo’ that prevents collapse and traumatic regression would already be a political feat worthy of the history books, and one of which we should feel proud. It’s a bit of a laugh.