October 7, 2011
The euro zone is likely to need political unification to bridge the differences between the profligate south and the prudent north in order to save the euro, Alan Greenspan, former chairman of the US Federal Reserve, wrote in an opinion piece in the Financial Times.
“It seems inevitable that for the euro to prevail, something more formidable than the failed stability and growth pact is needed to constrain aberrant behavior,” Greenspan wrote. “It may be that nothing short of a politically united euro zone, or Europe, will, in the end, be seen as the only way to embrace the valued single currency.”
The crisis in the euro zone is not just one of debt but one of culture, as the burden is mainly on southern Europe, while northern countries’ spreads against Germany are tight, he argued.
“If the euro is to remain a viable currency across the euro zone, members must behave in the responsible manner contemplated in the Maastricht treaty. But it is not clear that culture, so integral to a nation’s personality, can be easily altered,” Greenspan wrote.