Wednesday, May 26, 2010

If we didn't have Greece, we would have to invent one.

Was just thinking about the blessing that the Greek crisis is turning out to be for the euro zone, Polish and the whole European Union economy.

Two arguments. First, with stagnating private demand and prospective fiscal tightening (now likely to be much faster and deeper than previously expected) a weak euro is the only chance for the euro zone to entrench economic recovery and strengthen debt sustainability. American, Asian and Latin American consumers will pay the bill. The whole European Union will benefit, including Poland and other EU-10 countries who heavily rely on the strenght of the German recovery, which is mostly based on exports. At the current exchange rate Poland is "the China of Europe" - there is no other EU country that would be so competitive, given that the zloty has depreciated the most among all EU currencies (ULC based, increased productivity included).

Second, the Greek crisis has given rise to euro zone institutional reforms which were needed in the first place, but were not likely to be implemented without the Greek shock. So, thanks to the Greeks we are moving closer to fiscal, supervisory and labor market federalism. As the Polish saying goes: "what does not kill you, where strenghten you". seems to fit the current euro zone crisis perfectly well. Americans would just say that "every cloud has a silver lining".

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