> (hurting importers)
Of course a fiscal crisis is a crisis but that might not be so bad in the long run? If we, as EZ, can't balance a budget and balance a current account, lowering the value of the currency will surely help with that, if it's possible at all.
> (hurting importers)... (hurting exporters)
But that's also called a diverse economy and you have to balance that in any big economy anyway.
> However, pegging Gambia's currency to USD only works in short terms.
How short? Ecuador is not even pegged to USD, it completely abolished its own currency back in 2000, while both Kosovo and Montenegro have done the same with euro. There are other economies whose currencies are far from freely floated. Of course this does not apply to big EZ economies. But it doesn't have to, because they can actually influence the monetary policy.
> Having checked it's Germany.
It's Slovakia.
> I don't quite see the convergence this is supposed to show.
Well you should see it now.
> This is nutshell what France was doing (on a less apparent scale). It was pegging its weaker currency to EUR (because it's a large importer).
And as was the case with Greece and in a lesser way with the rest of PIGS, there will come a painful payback time for France too (or it's already here). They are still a subject of the bond market.
But a broader point can I think be clearly seen here: if France (and others) can't run huge deficits and then simply devalue their own currency anymore, then that is surely convergence too?
Of course a fiscal crisis is a crisis but that might not be so bad in the long run? If we, as EZ, can't balance a budget and balance a current account, lowering the value of the currency will surely help with that, if it's possible at all.
> (hurting importers)... (hurting exporters)
But that's also called a diverse economy and you have to balance that in any big economy anyway.
> However, pegging Gambia's currency to USD only works in short terms.
How short? Ecuador is not even pegged to USD, it completely abolished its own currency back in 2000, while both Kosovo and Montenegro have done the same with euro. There are other economies whose currencies are far from freely floated. Of course this does not apply to big EZ economies. But it doesn't have to, because they can actually influence the monetary policy.
> Having checked it's Germany.
It's Slovakia.
> I don't quite see the convergence this is supposed to show.
Well you should see it now.
> This is nutshell what France was doing (on a less apparent scale). It was pegging its weaker currency to EUR (because it's a large importer).
And as was the case with Greece and in a lesser way with the rest of PIGS, there will come a painful payback time for France too (or it's already here). They are still a subject of the bond market.
But a broader point can I think be clearly seen here: if France (and others) can't run huge deficits and then simply devalue their own currency anymore, then that is surely convergence too?