Euro break-up could be cure
The plight of Europe and its currency went under the spotlight at HKUST's finance forum. Reports by John Cremer
After a lengthy period of delay, confusion and behind-the-scenes bargaining, the 17 members of the euro zone appear no closer to resolving their most pressing issue: what to do with their currency.
It may turn out, as many seem to hope, that given enough time, the problems will simply go away, and short-term fixes will eventually right the ship.
But as Professor Bruno Solnik, of Hong Kong University of Science and Technology's (HKUST) Finance Department, spelled out in the latest HKUST/NYU Stern - Global Finance Seminar Series, inaction or limited measures would only prolong the pain.
In his view, more drastic surgery was needed. The sooner Europe's politicians and central bankers realised this, the easier it would be to restore growth, stability and economic sense.
Solnik, who teaches the MSc in global finance programme offered jointly by HKUST Business School and the NYU Stern School of Business, spoke under the topic "Financial Markets and the Eurozone Crisis: Some Provocative Views". He said he had little time for an approach that ignored root causes and, in doing so, pumped more money into propping up a crumbling structure.
He saw the euro-zone break-up as the way forward, with the economically weaker countries leaving and the rest better able to align their interests.
"A short-lived crisis in which you address the fundamentals is better than being 'on Prozac' while the problem gets worse," Solnik said. "At the moment, people are paying hundreds of billions of euros or dollars to buy time, which is only making things more difficult. I think, though, the euro will implode - and the sooner, the better."