It is nice to see Krugman acknowledging the importance of monetary sovereignty, i.e. whether a government issues its own currency or not.<p>The trouble with the Eurozone seems to me that to any but the most hardboiled ideologues, it is obvious that significant stimulus is needed in the affected countries (perhaps combined with other measures, like strengthening the tax collection bureaucracy in some cases). The problem is how to get the stimulus there.<p>The countries themselves cannot do it because the financial markets won't let them, and the other countries hesitate to do it because of the collective outcry over taxpayers bailing out another country.<p>The ECB is filling the gap for now, but it doesn't really have the political mandate to make pseudo-fiscal decisions like buying a country's bonds.<p>To me, the solution seems obvious: Give the power of monetary sovereignty to the European Parliament. Since the MPs there are elected directly by the European people, they are the natural wielders of sovereign power when it comes to the Euro. Giving this power to the EP is even possible without taking any rights away from the individual countries, because right now, <i>no one</i> has monetary sovereign power in the Eurozone (unless you count the ECB, but again, they don't really have the political mandate).<p>Unfortunately, this possibility is not even being discussed yet, and there are significant political egos on the national level that need to be overcome before it can be implemented.
The ECB's reluctance to buy debt stems from Germany's (its strongest member) deep fear of inflation.<p>From <a href="http://www.npr.org/blogs/money/2011/09/09/140342690/the-friday-podcast-the-ghost-that-haunts-europes-debt-crisis" rel="nofollow">http://www.npr.org/blogs/money/2011/09/09/140342690/the-frid...</a> :<p><i>It goes back to the years after World War I, when Germany
experienced one of the most catastrophic bouts of
hyperinflation in the history of the world — an economic
disaster that helped lay the groundwork for the rise of the
Nazis.</i><p><i>So when Germany joined the euro, the Germans insisted
that the newly created European Central Bank be bound by
strict rules aimed at preventing inflation.</i>
In the past, I've complained about articles from mises and reason.org, so it'd only be fair to mention that this is basically politics as well, and likely off topic because of that.
Interesting - though I have to wonder, what is to keep spending in check, if the ECB just starts to buy whatever debt emerges? Could both sides be kind of right (the moralizers and the spenders)?