Towards A Good Samaritan World

Tuesday, June 07, 2005

SAVE THE EURO

The Economist is worried about the euro. I think that even if the unification tide is rolled back a bit in the coming months or years, the single currency is worth keeping. It will be helped by the abandonment of the Stability and Growth Pact: the SGP deprived states of discretionary fiscal policy, just when states' loss of control over monetary policy to the ECB made fiscal policy more necessary than ever. The ECB, like the Supreme Court in the early United States, will have to be cunning to maintain its authority in an unfavorable institutional environment. And much depends on the wisdom of its policymaking. Surely it is past time to lower interest rates and give Europe's economies more space to grow.

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