Jeremy Siegel wrote about currency unions on his last weekly column:
"Economists have long maintained that labor mobility and income transfers are a necessary condition to form a successful currency union. These conditions are certainly applicable in the United States, which enjoys unprecedented labor mobility and a dominant federal tax system.
Even if Greece is bailed out, the conditions that brought about the crisis in the peripheral countries are not alleviated. Certainly, the Greek fiscal authorities must enforce tax laws and reduce its burgeoning deficit. But in the short run these measures will just exacerbate the economic slowdown. The alternative, dropping out of the Euro zone and reintroducing a new national currency, is a worse nightmare.
To enter into a currency union is much like getting married without a prenuptial agreement. No one likes to think of the potential problems down the road. But without a pre-planned exit, the breakup will be that much more painful. Greece's problems could be a drag on Europe for years to come."
Jeremy Siegel is a Professor of Finance at the Wharton School of the University of Pennsylvania in Philadelphia. Siegel comments extensively on the economy and financial markets and he appears regularly on networks such CNN, CNBC and NPR, and writes regular columns for Kiplinger's Personal Finance and Yahoo! Finance.
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