Should Greece leave the euro to pursue a currency devaluation that could aid its economic recovery, as Argentina did in 2002? Many people have looked to my country for guidance on what Greece should do next. But to assess the options for Greece and for the eurozone, we must first acknowledge the political nature of the euro project and the need for any policy to be sustainable.
The single currency is a political and not an economic project. As an economic venture, it is a flawed proposition: the eurozone is not an optimal currency area and its members, with differing preferences and characteristics, require different interest and exchange rates over long periods. But the euro exists, and it embodies European integration, which is the centrepiece of postwar European politics.
Therefore, as with any other political project that is economically unviable, preserving the euro carries potentially large costs that should be borne by the political beneficiaries, particularly those that can afford it. German reunification was one such project: its estimated cost of €2tn was paid largely by Germany, but also by the rest of Europe, because of lower activity and higher interest rates. There is a price to be paid for the euro and it should be paid by strong European economies, mainly Germany. One can pretend that the euro is viable if all countries follow certain arbitrary rules (remember Maastricht) but the truth is that to rule out a “transfer union” is to condemn the project itself.