The Eurocracy is Only Postponing the Day of Reckoning

… writes Irwin Stelzer in the Wall Street Journal Europe today.

"To politicians steeped in the ethos of the euro zone, it is a matter of war and peace, of preventing the European project from collapsing and leaving mighty Germany free to pursue its own rather than European interests. To them, if the euro collapses, or if the euro zone shrinks rather than continuing to attract new members, the European "project" will be at an end, with consequences foretold in Europe's bloody history.

Less apocalyptically, the French fear that if there is a default—the polite term is "restructuring"— they will have wasted a crisis, and failed to take the next step to replace a Europe of sovereign states with a United States of Europe by centralizing control over individual nations' fiscal policies. The only questions are what form the formal central review will take, and what penalties will be imposed on nations that overspend—fines, loss of votes, or expulsion of serial miscreants are all being discussed.
...

Economists see things somewhat differently …
… there isn't enough money available from the north to prevent restructuring Greece and others for very long. Soon the burden of solving the problem will pass to Greece's creditors, who undoubtedly are already figuring they will have to write off a portion of their loans—30% is the number being bruited about.

Unless, of course, the European Central Bank begins printing money to pay for the sovereign debt it is buying.”

In that case the value of the euro will fall towards parity with the dollar (and maybe lower, I would suggest). But that will not be enough:

“ … clouds that won't be dispelled until writedowns and fundamental economic reforms replace attacks on "speculators" as part of the solution. Meanwhile, austerity and slow or no growth will be the order of the day …”

The whole article is well worth reading.