“With the northernmost euro member now set to become the bloc’s weakest economy, the question of currency regime continues to resurface as Finland looks for explanations for its lost competitiveness. Timo Soini, who is also the leader of one of three members of the ruling coalition, the anti-immigration The Finns party, says the country could have resorted to devaluations had it not been for its euro membership.”
“What about austerity? Spain did a lot of tightening in the first few years of the euro crisis, but not much since then: [CHART] […]
The question then is, does this constitute any kind of vindication of either the euro or the austerity regime? As you might guess, I’d say that the answer is a clear no. Yes, adjustment can take place even with a single currency; but it’s a very slow and painful process. Yes, growth can resume once you stop imposing ever-harsher austerity; also, if you repeatedly hit yourself on the head with a baseball bat, you will feel better when you stop.
What is true is that the single currency isn’t totally unworkable. It’s just extremely costly.”