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2011-11-06

Eurozone sovereign debt crisis: creative thinking badly needed

Comments on Christopher Findlay "European debt crisis: European fragmentation?" 6/11/2011, http://www.eastasiaforum.org/2011/11/06/european-debt-crisis-european-fragmentation/
Most mainstream economists and politicians tend to think in a flexible exchange rate regime as the best and that can sometimes become a barrier to creative thinking.
In the current situation, for example, Greece could exit the euro and start using a new national currency withou destined to dwonward currency spiral if it pegs to the euro with a certain and appropriate own currency real depreciation.
I don’t see it would be inevitable for what occurred in the Asian financial crisis in 1997 to repeat if Greece, or any small number of existing eurozone countries exit the euro.
A dual and pegged currency in the current eurozone would present a sensible adjustment from the current effectively fixed exchange rate equivalent from 1 to 1 to a x to 1. Essentially it would create a much more flexible adjustment mechanism without necessarily introducing increased risks.
Even from the mainstream economics point of view, it is not a retreat from its current state of euro to a worse regime!
Why don’t economists think in this way?

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