Unity Makes Common Sense

25/06/2012

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A Loveless Marriage

Many voices are calling for an orderly break-up of the euro, says Prof. Alfredo Pastor, arguing that an amicable divorce would be better than a bad marriage. But Pastor says that dismantling the euro would have incalculable costs in both the short and long run and that re-establishing the exchange rate mechanism would require even more political commitment than that needed to move towards greater fiscal union.

If Spain left the euro, it would face insurmountable difficulties in rebuilding a national monetary system, says Alfredo Pastor, professor of economics at IESE Business School. "So my impression is that in the end, common sense will prevail" and Spain will remain in the euro zone, he said.
 
Greece differs from countries like Spain because it lacks the economic might to recapture competitiveness over the coming years. On the other hand, the other peripheral countries - Spain, Italy, Portugal and Ireland - should maintain the euro because they can survive and profit from it.

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