Can the European project survive?
On Wednesday at AEI, a group of monetary and fiscal experts discussed the future of the EU and the euro. Fred Bergsten of the Peterson Institute for International Economics portrayed an optimistic forecast for the EU, arguing that its survival is key to Germany’s economic and geopolitical interests. In particular, the euro allows Germany to enjoy both a trade surplus and a relatively weak currency, which would not have been possible if it still used Deutsche Mark.
AEI’s Vincent R. Reinhart then used an engineering framework to analyze how the European project could fail. The International Monetary Fund’s Carlo Cottarelli pointed out the role of EU policies in its economic stagnation and argued that the EU can easily contain future risks from Italy, Spain, and Greece.
AEI’s Desmond Lachman discussed the risk Italy poses to not only the EU but also the global economy. With its high levels of public debt and nonperforming loan but low levels of unemployment and economic growth, Italy’s economic forecast is not positive. If Italian banks fail, this will pose great contagion risks to the rest of the EU.
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