Collective Conscious

Paul Krug­man has an excel­lent col­umn today which serves as a good intro­duc­tory his­tory of the Euro and a sum­mary of its cur­rent woes. Worth read­ing in full. I’m also pointed to this inter­ac­tive graph of Euro­pean debt and inter-​​Europe lend­ing (via). For what it’s worth, I’ll quote Krug­man here for empha­sis on what I have been push­ing as the best pos­si­ble out­come for Europe:

In early Decem­ber, Jean-​​Claude Juncker, the prime min­is­ter of Lux­em­bourg, and Giulio Tremonti, Italy’s finance min­is­ter, cre­ated a storm with a pro­posal to cre­ate “E-​​bonds,” which would be issued by a Euro­pean debt agency at the behest of indi­vid­ual Euro­pean coun­tries. Since these bonds would be guar­an­teed by the Euro­pean Union as a whole, they would offer a way for trou­bled economies to avoid vicious cir­cles of falling con­fi­dence and ris­ing bor­row­ing costs. On the other hand, they would poten­tially put gov­ern­ments on the hook for one another’s debts — a point that furi­ous Ger­man offi­cials were quick to make. The Ger­mans are adamant that Europe must not become a “trans­fer union,” in which stronger gov­ern­ments and nations rou­tinely pro­vide aid to weaker.

Yet as the ear­lier Ireland-​​Nevada com­par­i­son shows, the United States works as a cur­rency union in large part pre­cisely because it is also a trans­fer union, in which states that haven’t gone bust sup­port those that have. And it’s hard to see how the euro can work unless Europe finds a way to accom­plish some­thing similar.