Hamish McRae: The eurozone will break up ... but not just yet
Published 09/11/2011 | 14:54
t is time to accept that the eurozone crisis may end with an extreme outcome. On the one hand, it is possible that European leaders will get a grip on the region's sovereign debts and that in a couple of years' time the crisis will be "under control, if not overcome". Those words come from Jürgen Stark, the German board member of the European Central Bank and, in effect, its chief economist. On the other hand, it is possible that the eurozone will have broken up by Easter.
Common sense suggests the outcome will be somewhere in between, and that is my own view. I have long felt that the eurozone would get through its first major crisis but not its second: the break-up of the eurozone will occur, though not for some years. But if the recent past has taught us anything it is that outcomes that seem to be at the outer limits of the conceivable can and do occur.
The views of Jürgen Stark are interesting for a number of reasons. One is that they represent what might be called the "cool head" judgement on the future of the euro. He acknowledges the scale of the problems but believes these can be contained. But they have to be contained by austerity. The ECB should not, so to speak, print the money and let the weak countries off the hook.