From the CESIfo group:
n January 2002 freshly minted euro notes were distributed, amidst high hopes, among the members of the newly created Eurozone. Today, just ten years later, the euro project is in the throes of a major crisis. What began as a European peace project has led to dispute and discontent that can only be held in check by heavy borrowing from the savings accounts of citizens of the Eurozone’s core countries.
Some euro countries that have lived beyond their means and accumulated high external debt since the introduction of the euro now find themselves on the verge of bankruptcy. Their central banks, in order to solve their economy's liquidity problems, are resorting to the printing press. With the European Central Bank's (ECB) approval, they are withdrawing savings from those countries with more solid economies using a virtual cash dispenser that they were allowed to set up upon joining the euro. The only way to prevent the crisis countries from continuing to do this is to supply them with ever more capital via official bail-out packages. And Germany is not the only country caught in this trap.
If there is to be any future for the euro project, tougher budget constraints will have to be re-introduced, and the countries that cannot handle them must be given the opportunity to restore their competitiveness by temporarily exiting the euro.
In his latest book, “Die Target Falle” (“The Target Trap”), Hans-Werner Sinn offers a comprehensive analysis of the issues outlined above.
Hans-Werner Sinn has been a Professor of Public Finance at the Faculty of Economics of the Ludwig-Maximilians-University of Munich since 1984. In 1999, and after being offered positions at several reputable institutes, including the Max Planck Institute, he was appointed President of the Ifo Institute in Munich and Head of the CESifo Research Network, which is one of the biggest networks of its kind in the world. He was president of the International Institute of Public Finance (IIPF) and Chairman of the Verein für Socialpolitik, the association of German-speaking economists. He has received numerous distinctions and prizes and is the author of several books and expert articles, as well as a sought-after interlocutor in the media and politics.