Bloomberg catches up with Mises.org and Patrick Barron. Ashoka Mody writes today that the real solution to Europe’s ills is to have Germany leave the EU, possibly to form a separate economic bloc in the north. Moreover, the dispution, according to Mody, woudl be relatively minor:
The disruption from a German exit would be minor. Because a deutsche mark would buy more goods and services in Europe (and in the rest of the world) than does a euro today, the Germans would become richer in one stroke. Germany’s assets abroad would be worth less in terms of the pricier deutsche marks, but German debts would be easier to repay.
Mody adheres to the mistaken orthodoxy that devaluing currency makes a country more “competitive” but he is right that for a country in Germany’s situation, having a stronger currency is obviously not a source of serious problems for the country. Indeed, the Swiss have survived just fine with a strong currency in the past decade (excluding the period where they pegged the franc to the euro).
But, politically, one wonders how much France would strenuously resist a Greek exit. Many have long held that the euro project has long been a French project to keep the Germans on a short leash with the added bonus of removing the DM as a restraining influence on inflation in Europe.
