The bad news is that it has become increasingly clear that, at least for large countries, currency areas will be highly unstable unless they follow national borders.
"A Centerless Euro Cannot Hold" by Kenneth Rogoff | Project Syndicate - 0 views
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With youth unemployment touching 50% in eurozone countries such as Spain and Greece, is a generation being sacrificed for the sake of a single currency that encompasses too diverse a group of countries to be sustainable?
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What of Nobel Prize winner Robert Mundell’s famous 1961 conjecture that national and currency borders need not significantly overlap? In his provocative American Economic Review paper “A Theory of Optimum Currency Areas,” Mundell argued that as long as workers could move within a currency region to where the jobs were, the region could afford to forgo the equilibrating mechanism of exchange-rate adjustment.
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What Is Plan B for Greece? by Kenneth Rogoff - Project Syndicate - 0 views
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even if all of its past debts are forgiven.
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But even if Greece’s debt had been completely wiped out, going from a primary deficit of 10% of GDP to a balanced budget requires massive belt tightening – and, inevitably, recession.
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Nonetheless, Europe needs to be much more generous in permanently writing down debt and, even more urgently, in reducing short-term repayment flows.
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Hot Money Blues - NYTimes.com - 0 views
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for the time being, and probably for years to come, the island nation will have to maintain fairly draconian controls on the movement of capital in and out of the country.
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It will mark the end of an era for Cyprus, which has in effect spent the past decade advertising itself as a place where wealthy individuals who want to avoid taxes and scrutiny can safely park their money, no questions asked.
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To some extent this reflected the fact that capital controls have potential costs: they impose extra burdens of paperwork, they make business operations more difficult, and conventional economic analysis says that they should have a negative impact on growth (although this effect is hard to find in the numbers). But it also reflected the rise of free-market ideology,
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Crippled eurozone to face fresh debt crisis this year, warns ex-ECB strongman Axel Webe... - 0 views
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Crippled eurozone to face fresh debt crisis this year, warns ex-ECB strongman Axel Weber
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Harvard professor Kenneth Rogoff said the launch of the euro had been a "giant historic mistake, done to soon" that now requires a degree of fiscal union and a common bank resolution fund to make it work, but EMU leaders are still refusing to take these steps.
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"People are no longer talking about the euro falling apart but youth unemployment is really horrific. They can't leave this twisting in wind for another five years," he said.
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