FT.com / Columnists / Martin Wolf - The eurozone’s next decade will be tough

FT.com / Columnists / Martin Wolf - The eurozone’s next decade will be tough: "The eurozone’s next decade will be tough
By Martin Wolf"

The crisis in the eurozone’s periphery is not an accident: it is inherent in the system. The weaker members have to find an escape from the trap they are in. They will receive little help: the zone has no willing spender of last resort; and theeuro itself is also very strong. But they must succeed. When the eurozone was created, a huge literature emerged on whether it was an optimal currency union. We know now it was not. We are about to find out whether this matters.

There is an obvious incompatibility problem: it is hard to have an independent fiscal policy and open capital flows, when there is no monetary policy independence.