Greece, The Euro, and the sovereign debt crisis (2011)
By Matthew Lynn

The appearance of the book may look boring, but surprisedly, once you start reading the book, you can’t put it down until you finish it.

From this book, I got to know that Germans are very industrious people and the Greeks have a long history of financial defaults. In fact, the reason that they can enter into the Euro, is because the Greeks cook their books and present it fitting the requirements for entry into Euro. Based on the book, it is likely that the Greeks will still default and cause further distress to Euro.

The dismemberment of the euro will eventually be good for all the countries involved. The author finds that the dismemberment of the euro will be one of the great buying opportunities of the 21st century. The old European economics will get a bounce in growth and their companies will be expanding once again.


Lessons learned from the sovereign debt crisis and failure of euro

1. Don’t put politics before economics.

Economics don’t bend to ideological will, no matter how determined it might be. You have to get the economics right first, and then worry about the politics afterward.


2. Let the market decide

The author feels that the euro could have been saved even as late as May 2010 by letting Greece go bust. Once Greece was bailed out it created what in economics is known as a moral hazard. There will be no incentives for anyone to play by the rules. Why not just break them as the Greeks have done and then wait for a bailout?


3. Be intensely suspicious of grand schemes that don’t allow for error.

The architects of the euro assumed that all the nations signing up for the single currency would stick to the Growth and Stability Pact. The possibility that they might just ignore it was conveniently brushed under the carpet. The euro didn’t leave any room for error.


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