Let Spain, Greece (and maybe Italy) Exit the Eurozone Temporarily, Devalue and Grow
Episode Description
Wednesday's favorable German court ruling is a major step forward for European Central Bank head Mario Draghi's proposed unlimited sovereign-bond purchase program to rescue the eurozone. But even if implemented, it misses the most pressing problem -- a desperate need for short-term economic growth. The best way to achieve that: a temporary exit from the eurozone by Spain, Greece, and possibly Italy that would allow for major devaluations, says Wharton finance professor Franklin Allen. Once growth redresses regional imbalances, the countries could rejoin the currency union.
Brief Summary
Professor Franklin Allen argues for temporary Eurozone exits to allow devaluation and spur economic growth in struggling countries.
Key points
- Major Step Forward for ECB. The German Court ruling is a significant advancement for the European Central Bank's bond purchase program.
- Youth Unemployment Crisis. Youth unemployment rates in Greece and Spain are alarmingly high, surpassing 50% in some areas.
- The Case for Devaluation. Devaluation is proposed as a crucial short-term policy to stimulate economic growth.
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Episode highlights
- Major Step Forward for ECBThe German Court ruling is a significant advancement for the European Central Bank's bond purchase program.“Wednesday's favorable German Court ruling is a major step forward for the ECB.”0:19Sep 12, 2012
- Youth Unemployment CrisisYouth unemployment rates in Greece and Spain are alarmingly high, surpassing 50% in some areas.“In Greece, youth unemployment is over 50%.”2:19Sep 12, 2012
- The Case for DevaluationDevaluation is proposed as a crucial short-term policy to stimulate economic growth.“Devaluation is the best way to get growth quickly.”5:10Sep 12, 2012
Tension
60/ 100Some tension
