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Should the euro zone abandon everything that makes a currency area appealing in order to survive?

- "The sovereign debt crisis in the euro zone seems to have resulted in the following developments:
• strengthening of budgetary rules;
• pressure for countries to reduce their macroeconomic imbalances - or what is now perceived as macroeconomic imbalances: external deficit, growth in indebtedness, loss of competitiveness."
- "Some of these developments are quite desirable: replacement of the Stability Pact by
budgetary rules regarding fiscal deficits at the top of the cycle which countries are complying with; correction of overruns in the countries’ growth models: excess private indebtedness, excessive growth in construction, asset price bubbles."
- "However, it is important not to prevent the implementation of mechanisms that create
additional well-being linked to monetary unification:
• savings have to circulate freely and head to countries where they are most efficient; a currency area between countries that force each other to balance their trade balances has no appeal; countries must therefore accept that their savings finance investments in the other countries - provided that these are useful investments;
• monetary unification enables productive specialisation; all euro-zone countries cannot (should not) be industrial countries, and they should specialise according to their comparative advantages. This means that cost-competitiveness does not play the same role everywhere, that it is normal for euro-zone countries to have either external surpluses or deficits; and that they have different long-term growth rates."
Natixis Flash Economics 326 20100624

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