Paroling the Spanish Prisoner (Wonkish)
one of the issues that came up was the recovery in Europe, which is real and in some ways a bigger story for the world economy than the continuation of the Obama expansion here. An obvious question, which Anil raised, was whether this recovery calls for a reconsideration by Euroskeptics like myself.
.. we underestimated the political cohesion of the single currency, the willingness of political elites to suffer enormous economic pain in order to stay in the monetary union.
.. During the good years money poured into Spain, fueling a huge housing bubble. This fed inflation that made Spanish industry uncompetitive, leading to a huge trade deficit.
.. over the period 2008-2018 Spain suffered an enormous cumulative loss of output it could have produced: 33 percent of potential GDP. That’s as if the U.S. were forced to pay a price of more than $6 trillion to, say, remain on the gold standard.
.. the politics of the euro have been far more robust than us Anglo-Americans could have imagined.