A Short Note on Cyprus and its Aftermath: The “Euro A” and the “Euro B” – Giving the Eurocrats a “Time Out”
Europe needs a short term disaggregation plan—of the type suggested by myself and others over the past two years—pursuant to which the debtor nations beset with massive underemployment and failing economies—would withdraw from the Eurozone-proper and adopt a “Euro B” currency, administered by the ECB, with a pegged exchange into the existing “Euro A.” Such a plan would set that peg at “whatever it takes” to make those economies competitive again (starting, perhaps, around 70% of the Euro A), and then gradually adjusting the peg over time as imbalances were rectified by a relocation of production and jobs to the presently distressed nations. Debts of the distressed nations would become payable in Euro B, which would provide de facto debt relief, while creditors receiving the Euro B in payment would be rooting for growth in the periphery and the upgrading of the peg over time. And when the Euro B is back to parity with the Euro A, we can finally put the whole comedy of errors behind us and Europe can finally embrace as a monetary and fiscal transfer union without the threat of future imbalances.
[ADDENDUM: My book is almost finished and I should be back to blogging shortly!]
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