Many thanks to the commenter who drew my attention to this excellent post by Paul Krugman. The professor was (in my view) wrong about Latvia and Estonia (primarily due to the very specific characteristics of those economies), but here he’s got the big things pretty much right.
Reasonable people could debate his comments on Polish austerity, but not, I think, this:
[A] lot of [Poland’s] relative success clearly had to do with the fact that Poland not only kept its own currency, but allowed the zloty to float. As a result, during the years of big capital flows to the European periphery, Poland saw a currency appreciation rather than differential inflation, and it was able to correct that real exchange rate quickly when crisis struck.
The point, of course, about the preservation of separate currencies is that they are an excellent market mechanism for adjusting for the differences between economies, a market mechanism that european monetary union has suppressed – with predictably disastrous consequences. How ironic that a lefty professor should understand what Poland’s supposedly free market government does not.
Krugman continues:
So what does Poland’s leadership want to do? Why, join the euro, of course.
It really does make you want to bang your head against a wall. Think of Spain, Ireland, now Cyprus. How much more evidence do we need that the euro is a trap, which can all too easily leave countries with no good options in the face of crisis? Even if you’ve bought into the legend of Latvia, which you shouldn’t, you should be willing to acknowledge that euro membership is at best a gamble, with a potentially terrible downside.
Indeed it is. And yet the oligarchs of Brussels, architects and operators of one of the most poisonous financial schemes in history, have the nerve to complain about “Anglo-Saxon casino capitalism.”