I called while discussing the financial crisis on the Westminster Hour for a return to national currencies. Italy and Spain are only going to be able to compete with Germany – and pay their own debts – if their exporters are priced back into world markets. Given the inflexibility of the Italian and Spanish economies and labour markets that will only happen in a reasonable time frame if they devalue relative to Germany.
It is surely better for Spain and Italy to compete and pay their own way than for German taxpayers to take on their debts and permanently subsidise countries that cannot compete with them in the Euro. Unless Germany is going to take on Spain and Italy’s debts it is difficult to see how the Euro will survive in the long term. The Euro is now causing such instability and economic stagnation that it would be better to break up sooner rather than later. The likely result, once that happened, would be a rapid return to growth in southern Europe and a strong stockmarket recovery.