Angie – I think I posted once before how I met a young trainee Swiss banker back in the early 90’s who said in his opinion he couldn’t see how the euro could work with such a diverse group of countries all with differing economies requiring different needs at different times. One currency, one interest rate, total control by the EU.
He said how thankful he was that Switzerland stayed out of it, I bet he’s even more thankful now.
The Euro project is a political one, economists – from all countries – have said for decades that it would not work without financial union as well. The failure of the Euro at its first test was predicted becuase of this and its why the UK and other countries have refused to join. The only way it could succeed is if the northern countries pay for the southern countries debt and corruption and I suspect this will never happen.
So the next best choice is for Germany, NL etc to leave the Euro. Their currency would rocket, the Euro plunge and the over valuation and non-competitiveness of the southern countries would be solved at a stroke. Germany could rejoin at a higher rate (now with even less nation debt as the DM would have appreciated against the Euro denominated debt) as its economy would probably still fit the Maastricht Treaty (Whereas none of the PIIGS could ever manage it against, now that the fiddles have been exposed).
The fundamental problem with the PIIGs economy would not be solved in the long term, but maybe they could have another 15 years to make another attempt.