Cruel To Be Kind?: A Smaller Eurozone

Months of austerity cuts and protests have dragged on into years, and despite regular meetings among the European elite on the issue it still appears no closer to being resolved. Whilst half of the Eurozone is enduring radical spending cuts, so drastic that they have encouraged frequent riots, the other half is relatively stable, though increasingly bitter that their responsibly-saved Euros are being spent on countries that are less fiscally-responsible. Moreover, the crisis has had more far-reaching impact, as other developed and developing economies worldwide rely on European custom and investments to prosper, which prolongs global economic turmoil. There is infrequently speculation on the breakup of the Eurozone- and even less frequently on the end of the Eurozone altogether. Whilst I don’t believe the Euro will be eradicated altogether, at present a dramatic change in membership seems to be the best solution to bringing this crisis towards a conclusion. All sides in the Eurozone are currently hampered by shared exchange rates and substantial economic integration and interdependence; a problem which, with hindsight, clearly should have been avoided by greater enforcement of budgetary spending and borrowing in Eurozone member states from the offset. By exceeding the borrowing limits agreed for the Eurozone, member states jeopardise the economic stability of other member states as well as their own. Consequently, it would seem fair if, once a state exceeds those limits for a certain period of time, all Eurozone member states were entitled to a vote on whether that state should be expelled from the Eurozone as a result, with a super-majority passing the decision. Expulsion of fiscally-irresponsible states means that, whilst those states will suffer dramatically in the short-term, in the longer-term, by restoring their own currencies, supply and demand will rebalance their economy quicker than if they try to do so with a shared currency. Currently, Greece is trying to encourage investors' confidence in their weak economy, which uses the strong and expensive currency, the Euro. If Greece had a restored Drachma, it would be cheaper than a Euro, and investors may wish to seize goods in this cheaper currency, and ultimately rebalance the economy. Exclusion of irresponsible states also reduces the burden on those that abide by the rules. A smaller, more efficient Eurozone would benefit those within it by restoring its collective reputation as a reliable investment hub, whilst those economically-weaker states will be able to recover at their own pace, and the prospect of stability and growth should give the world economy a boost. It would also provide Eurozone states with an incentive to abide by the borrowing guidelines, and deter states from joining if they feel they are unable to meet these requirements.