A Weak Euro is the Way Forward
December 20, 2011
Op-ed by: Martin Feldstein, a former member of the White House Economic Recovery Advisory Board and the Belfer Center Board of Directors
Topic: Decline of the euro
“The large current account deficits of Italy, Spain and France can be reduced without lowering their incomes or requiring Germany to accept inflationary increases in its domestic demand. The key is to expand the net exports of those trade deficit countries to the world outside the eurozone.
Those current account imbalances are the result of imposing a single currency on 17 eurozone countries. If their exchange rates were free to vary, normal market pressures would cause the currencies of Italy, Spain and France to decline relative to Germany’s, stimulating exports and reducing their imports while also shrinking Germany’s trade surplus.”