Re: Future of the European Union
Post 3
The EU has a rigid fiscal and monetary policies e..g. The common currency (Euro) that prevents countries from taking fiscal and monetary measures to aid their financial recovery (as Argentina did in the early 2000s) and will lead to further impoverishment of those who are innocent and rewarding those guilty of the financial crisis in Greece for example. An end to the Euro and the EU might be a good thing for millions in Europe whose concern is their daily bread and not "being heard in the world".
Why Greece Should Reject the Euro
By MARK WESBROT http://counterpunch.org/weisbrot05112011.html
"The experience of Argentina at the end of 2001 is instructive. For more than three and a half years Argentina had suffered through one of the deepest recessions of the 20th century. Its peso was pegged to the dollar, which is similar to Greece having the euro as its national currency. The Argentines took loans from the International Monetary Fund, and cut spending as poverty and unemployment soared. It was all in vain as the recession deepened.
Then Argentina defaulted on its foreign debt and cut loose from the dollar. Most economists and the business press predicted that years of disaster would ensue. But the economy shrank for just one more quarter after the devaluation and default; it then grew 63 percent over the next six years. More than 11 million people, in a nation of 39 million, were pulled out of poverty.
Within three years Argentina was back to its pre-recession level of output, despite losing more than twice as much of its gross domestic product as Greece has lost in its current recession. By contrast, in Greece, even if things go well, the IMF projects that the economy will take eight years to reach its pre-crisis GDP. But this is likely optimistic — the IMF has repeatedly lowered its near-term growth projections for Greece since the crisis began.
The main reason for Argentina's rapid recovery was that it was finally freed from adhering to fiscal and monetary policies that stifled growth. The same would be true for Greece if it were to drop the euro. Greece would also get a boost from the devaluation's effect on the trade balance (as Argentina did for the first six months of recovery), since its exports would be more competitive, and imports would be more expensive.