In the years following the crisis, southern Europe made some efforts to become more competitive. Although there have been some successes, in Spain for example, the general public has spoken out against further reforms.
The reformers were either voted out of office or had to abandon their ideas. Under these circumstances, reform ideas that would promote economic convergence will not find political support in these countries in the years to come.
Ways of maintaining the euro in the south:
The financially weak euro countries can implement tough austerity measures, reforms, pension and wage reductions. They would have to raise a lot of money to recapitalise their banks, and investors would have to build up enough confidence to invest here.
This Option is politically unenforceable. People no longer want reforms and reject them, as can be seen from the current protest of the Yellow Vests movement in France. Wage cuts would increasingly lead to many private insolvencies and further burden the ailing banks. In view of the many problems, it is difficult to imagine how investor confidence could be restored.
The euro member states from the south need permanent large transfers from Germany and/or other countries.
Transfers from Germany and other countries are possible, but not in the required amount. Emmanuel Macron called for "several points of GDP" in 2017. This cannot be achieved politically. The German government may have offered a low double-digit billion amount, but in view of the problems in the south this should not make a decisive difference. Divergence, i.e. negative convergence, would also require ever greater resources.
The southern euro countries need an ECB that buys up and monetises their promissory notes, a politicised monetary policy, which will eventually lead to inflation.
This is the variant that has been implemented in recent years for a lack of political alternatives. The States have lived beyond their means and financed excessive consumption via the money press of the politicised ECB. Now the ECB wants to get out of this monetary policy and force the politicians to apply options 1 and 2. Whether this will succeed is questionable. The voters in southern Europe are not voting for spending discipline and those in northern Europe are not voting for endless transfers.
Germany and other northern European States leave the euro. The euro depreciates and southern Europe's competitiveness is restored.
This is the admission that the euro is not working: "Better an end with horror than a horror without end", as the popular saying goes.
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