Advancing a Free Society

Europe’s Debt Problems and the Greek Crisis

Friday, April 30, 2010

RFE/RL: Your warnings about future problems for the euro currency -- which you wrote about in the 1990s when the single European currency was still in the planning stages -- went largely unheeded by European policymakers. Now, with the severity and impact of Greece's debt crisis becoming apparent, you are in a position to say, "I told you so." Tell us about that perspective.

Josef Joffe: The problem is a monetary union without a fiscal union. That's like putting a number of train engines together in a train. Nobody leads and they all have to proceed at the same speed. If they don't, if somebody doesn't -- in this case Greece -- it threatens to derail the whole operation.

The only possibilities? You throw the offending engine out, which we can't under the [Lisbon] Treaty. There is no provision to throw somebody out of monetary union. They would have to do it on their own free will.

Or we [can] tell the engineer to stop throwing that much coal into the fire. In other words, "You're spending too much. You're uncompetitive. Do something." Or we can do what we're doing right now. Since he's kind of using up more coal than he has, we give him more -- and that's where we are.

We now have to finance the effects of Greek profligacy. And we will go on doing this for about three more months before they go into default.

Continue reading Josef Joffe on Radio Free Europe / Radio Liberty