The Euro's Future

31/05/2011

http://assets.fundacionfaes.org/Home+FAES/2011/05/XXV_OBSERVATORIO_D1.jpg Juan Velarde: "Remaining in the euro is compulsory. Getting out would be a disaster because it would create a huge exodus of capital and, domestically, a huge inflation. But this demands reorganizing, downwardly, wages and social benefits, which will bring significant social tensions"

"It is quite a shock to see the division of the Spanish market as a result of the interventionist decisions made by the various regions with their logical consequences on the reduction of competitiveness"

"The Spanish economic reality should be a matter of concern as it already bears clear signs of stagflation: high unemployment - indeed growing -, a minute GDP increase, and all of this linked to inflation, which is increasingly plundering the pockets of the Spanish people, simultaneously hit by the crisis"

Juergen Donges: "The euro is not the problem, it is a highly respected currency in the international markets and overvalued in the foreign exchange markets"

"The problem is that there are some economies, some countries, in the Euro zone which are unable to manage their budget and have a structural weakness in their economic growth. If my diagnosis is correct, the problems come from some specific economies, we know where we must act and how to take action. Not in Brussels, but in Athens, Lisbon, Dublin and Madrid"

"The key is credibility, the greatest asset that a government has when managing its economic policy. When we are talking about the future, we are talking about something that is uncertain, that is why we have entrepreneurs willing to take risks. The government has the possibility to reduce 'some' uncertainty. Implementing policies, not announcing them, is what creates credibility. This way, private agents know that there are some parameters"

Pedro Reis: "We must earn the euro every day"

"Austerity is the only way to restore a healthy growth in Portugal. We must cut down the state and reboost economic growth"

"We are at a critical moment for Portugal. We must change our model, and we, the Portuguese, are the ones who should do it"

Antonio Torrero: "The euro has been a great economic engineering project inspired by the noble aim of consolidating the European Union. It has been guided by the idea that very different economies will accelerate their convergence on a common currency"

"With the euro, countries with lower income have benefited from low interest rates and access to external financial markets, which has led to a long period of economic growth. The downside has been a high level of indebtedness in households, firms, banking system and public sector"

"In Spain, crisis management has been a disaster; we have got into debt, we have lived beyond our means and the Government has refused to accept reality. The result is plain to see. If a serious stabilization plan had been made, led by someone with credibility and prestige, it would have been possible to undertake an adjustment operation with a reasonable chance of success"

Peter Schwartz: "The euro was devised as a political currency to make the European Union"

"For economists, the euro has a structural problem that will have to be taken into account"

"Government, families and businesses have debts. A restructuring of the debt, in a similar way as it was done in Argentina and Russia with the Brady Bonds, should be studied"