Is Euro currency just like the proposed Eurobonds?

This is a terrific article from John Cochrane of U Chicago.

The article criticises Europe’s approach of not allowing Greece to default and making the crisis worse for the whole union. He says the new idea of Eurobonds is not going to happen. Infact, Euros are just like Eurobonds – currency guaranteed by 17 EMU economies:

“Eurobonds” that would be issued to buy sovereign debt, backed by EU-wide taxes, have been suggested but aren’t going anywhere in the face of taxpayer resistance. In reality, Eurobonds have already been issued—they are called euros. The countries of the European Union are already pledged to make up any capital loss of the European Central Bank, and this must eventually come from tax revenues. That’s the same as paying off Eurobonds.

Hmmm. This did not strike me…

He says Europe’s problem is bad ideas:

Europe’s deepest problem is bad ideas. Unpleasant price movements represent “illiquidity,” “speculators,” “market manipulation,” “lack of confidence” and “contagion,” not the hard reality of looming default. The point of policy is to “calm markets” and “provide confidence”—not to solve financial problems.

When the price of bread rose in their revolution, the French took bakers to the guillotine. They got more inflation, and less bread. When their descendants saw bond prices falling, they passed restrictions on short sales. They got lower prices, and less liquidity.

This is not a temporary market dislocation. This debt will not be paid back. Greece and the others might well rather default. Cleared of past debt, like Argentina, they are likely to be able to borrow again soon. These countries surely don’t want austerity. And least of all do their political classes want to reform their great-scam states—there is pervasive rot in an economy where every occupational license is a political favor—though reform is the one thing that could actually return them to strong growth and let them pay back debt.

There is so many different perspectives on Europe…It looks like a real bad idea which managed to survive first 10 years since inception..

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