If the euro survives and subsequently achieves a status equivalent to that of the dollar as a reserve currency, it will provide an impetus toward currency consolidation elsewhere, said Kenneth Rogoff, an economics professor at Harvard University.
Writing in the Financial Times, Rogoff said that if, on the other hand, the eurozone is pulled apart, many decades could elapse before any other region adopts a similar program.
At present it looks as though the euro, which was meant to give greater resilience in the face of financial crisis, amplifies shocks rather than otherwise, for Europe’s peripheral countries are in weak competitive positions and no currency depreciation mechanism is available to them, Rogoff wrote.
European leaders’ plans to achieve effective devaluation through wage adjustment seem fanciful; the only clean rescue would be if European growth far exceeded expectations, which is unlikely, he said.
The question now is whether the common currency is sustainable politically; if the global economy doesn’t soon resume rapid growth, an answer won’t be long delayed, Rogoff concluded.
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