Sunday, May 27, 2012
Tyler Cowen on the Euro Zone
Tyler Cowen has an interesting column in today's business section of the NY Times. He describes the euro zone's instititutional failure in dealing with the crisis. While the euro creates a "monetary nation", it does not create a true nation. The governments of Greece and Spain are sovereign so all the agreements that brought about the euro are international agreements. The nation that should be the leader of the group is Germany, but Germany's past makes it difficult for Germany to exert such leadership. (Another leader could be Britain where there is a great deal of human capital in international financial arrangements, but they aren't in the euro zone). Cowen's piece is pretty negative regarding the prospects for a solution that is not very costly. I am visiting Germany to teach a course for the third consecutive May and the Greek crisis has been in the news each time. The first time I thought it was interesting but not terribly important, last year I thought it was important and would probably lead to further integration in the EU. This year, I am much more pessimistic about prospects for a successful solution. Something I began to think about being in Germany is that the unification of Germany over two decades ago now offers insight into what is happening in the euro-zone today. After a little research, I'll write more on it in a future post.