The Map and the Territory by Alan Greenspan — TEN | CULTURE

1. 1. The euro was seen by European central bankers as a stepping stone toward political integration of Europe, aimed at preventing future wars.
2. 2. Financial markets assumed that southern Eurozone members like Italy, Spain, Portugal, and Greece would adopt German-like fiscal discipline under the euro.
3. 3. The convergence of borrowing rates toward German levels rather than an average indicated the deutschmark served as the shadow anchor for the euro.
4. 4. The euro's initial decade of stability was fueled by a global boom that allowed southern Eurozone countries to borrow cheaply from the north, masking growing competitiveness gaps.
5. 5. Despite the Maastricht Treaty, the Eurozone has not prevented less prudent members from disproportionately benefiting from the currency pool, as Greece exploited.
6. 6. Southern Eurozone unit labor costs rose persistently from the euro's onset, as devaluation was no longer available to restore competitiveness.
7. 7. Southern Europe's sovereign bond spreads widened back to pre-euro levels after the 2008 crisis, and central banks of Italy and Spain became major net debtors in the TARGET2 system.
8. 8. There is scant evidence that southern Eurozone members significantly altered their behavior after adopting the euro; their unit labor costs continued to rise faster than Germany's.
9. 9. The financial crisis stopped the uptrend in southern unit labor costs, but German unit labor costs have risen since 2008 due to stagnant productivity and rising wages.
10. 10. Northern Eurozone countries are characterized by high savings rates, low inflation, and adherence to the rule of law, while Greece and Portugal have had negative savings rates since 2003.
11. 11. A breakup of the Eurozone could leave a northern core of countries with similar economic cultures, but the process may be too economically wrenching to undertake.
12. 12. The ECB's Outright Monetary Transactions facility, offering unlimited central bank credit, dramatically lowered southern bond yields without any actual lending.