Wasn't that like that all the time?
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Hans-Werner Sinn has deliberately distorted and obfuscated my argument. I was arguing that the current state of integration within the eurozone is inadequate: the euro will work only if the bulk of the national debts are financed by eurobonds and the banking system is regulated by institutions that create a level playing field within the eurozone.
Allowing the bulk of outstanding national debts to be converted into eurobonds would work wonders. It would greatly facilitate the creation of an effective banking union, and it would allow member states to undertake their own structural reforms in a more benign environment. Countries that fail to implement the necessary reforms would become permanent pockets of poverty and dependency, much like Italy's Mezzogiorno region today.
If Germany and other creditor countries are unwilling to accept the contingent liabilities that eurobonds entail, as they are today, they should step aside, leave the euro by amicable agreement, and allow the rest of the eurozone to issue eurobonds. The bonds would compare favourably with the government bonds of countries like the United States, the United Kingdom, and Japan, because the euro would depreciate, the shrunken eurozone would become competitive even with Germany, and its debt burden would fall as its economy grew.
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