Andrea Terzi — Eurozone desperately needs a “FISCAL WHATEVER-IT-TAKES”. But EU leaders ain’t bold enough to act.

Mike Norman Economics 2015-07-13

The problem with construction of the EZ is that following "the rules" results in an unresolvable balance of payments for successive countries until all the surpluses are in the hands of one country, or all the EZ countries can export themselves out of it, which foists the balance of payments problem on the rest of the world.

This is just a matter of balance sheets and accounting identities. No fancy math required. Just the ability to put figures in the correct accounts, do some arithmetic and compare balance sheets using simple algebra. Hardly rocket science.

Professor Terzi illustrates this through the game Monopoly.

Germany, controlling the ECB, is the banker. Therefore, Germany will be the last country standing. Of course, the EZ will implode before that, or the rules will be changed. As Italy and France are squeezed more, then the issue will surface with a vengeance.

Without concerted action to address the balance of payments issue the EZ is toast.

Ending the collapse is possible, and yet Europe clearly lacks political will. This week begins with a country in ruins. As it is, the Eurozone will not last long.

Money And The Real Economy Eurozone desperately needs a “FISCAL WHATEVER-IT-TAKES”. But EU leaders ain’t bold enough to act. Andrea Terzi, Professor of Economics, Franklin College, Switzerland