Nov. 11, 2011
Eurozone's Formation Flawed From the Start, Emory Expert Says
The Eurozone’s financial problems are spreading, and it’s forcing the leaders of Greece and Italy to resign. Emory University political science professor and Europe expert Thomas D. Lancaster says this all started with the formation of the European Union (EU).
“The further Europe goes into this crisis, the more obvious it is that the European Union simple got it wrong regarding monetary integration,” Lancaster explains. “The key mistake was obviously the attempt to push monetary integration without simultaneously integrating fiscal policy. Many economists and political analysts warned the EU at the time, but the emotional push of this ‘grand experiment’ in European monetary union unquestionably trumped sound economic theory.”
Don’t Expect Italian Bailout
With Italian Prime Minister Silvio Berlusconi stepping aside and new elections likely to happen soon, it still may not be enough to provide confidence in Italy’s ability to see itself through this financial crisis. But, Lancaster say there won’t be a bailout from the European Union.
“The problem with Italy is that its economy is so large the EU simply can’t bail it out the way it has done Greece, Ireland, and Portugal,” he says. “These countries are still not ‘out-of-the-woods’ and Spain also has major problems.”
Future of the Eurozone
Lancaster says that once Greek Prime Minister George Papandreou resigns, the country will form an interim government to approve the bailout package and hold new elections in February. The future of Greece, though, is most likely going to be outside of the Eurozone
“I believe it is almost inevitable that Greece will eventually have to leave the Eurozone,” Lancaster explains. “This exit will test the EU because no plan or exit strategy has ever been discussed. Once done so and executed, it would like be applied to other countries.”
Is the Eurozone Falling Apart? (August 19, 2011)