The Euro Trap

J. E. Weaver, Drake University, CHOICE This detailed, heavily footnoted book by prominent German economist Sinn (Univ. of Munich) assesses the euro and the ongoing concerns about the economies of the euro-zone countries. He provides considerable data, often on individual countries (e.g., Greece, Ireland, Spain, and Italy), and retains a clear point of view on what occurred and why.

Professor Sinn has again enlightened and provoked us, and offered strong policy medicine. In his view, the southern tier should temporarily exit the Eurozone, devalue, and establish fiscal order with clear financial and public balance sheets, hence regaining competitiveness. A new EUrestructured as a federal state with a US-type financial system, tight fiscal constraints on the states, a new target balance settlement system, and interregionally-neutral monetary policywould then welcome them back on new terms. This model is contrasted with Sinns view of existing policyforced huge north-to-south capital transfers (debt mutualization) and a printing-press central bankwhich he believes has resulted in recurrent bubbles, the acceptance of southern tier non-competitiveness, and a history of stumbling from crisis to crisis [continued below].

Robert Haveman, Professor Emeritus of Economics and Public Affairs, University of Wisconsin-Madison Sinn lays out all of the relevant issues, and in the process teaches us how Europe got into this pickle. Complex puzzles are solved, myths exposed, and the arcane explained in non-technical terms. While others will surely disagree with this analytical and historical perspective, they must now deal with Sinns clear delineation of the relevant issues and explain how they weight and interpret these issues differently. All readers will gain perspective and learn much from Sinns timely effort. The book is a must-read for all who are interested in thinking through the web of difficult questions now facing Europe; I highly recommend it.

Allan H. Meltzer, Professor of Political Economy, Carnegie Mellon University, and Distinguished Visiting Fellow, the Hoover Institution, Stanford University The Euro Trap merits a wide audience. The book has many strengths. It is detailed, but easily read. It recognizes and agrees that a driving force behind the euro is politicalto strengthen Europe and prevent future wars, so the euro must be strengthened, not abandoned. Most of all, it is honest in showing that the long euro crisis is not just a financial crisis, as many want us to believe. Differences in costs of production across Europe prevent recovery. Sinn concludes that to restore competitiveness in the indebted countries these countries should exit the euro temporarily and depreciate. The author recognizes that making that adjustment will not be costless or simple, but it is necessary and sufficient to restore growth.

Robert M. Solow, Professor Emeritus of Economics, Massachusetts Institute of Technology With his customary energ...

Hans-Werner Sinn is Professor of Economics and Public Finance at the University of Munich, President of the Ifo Institute - Leibniz-Institute for Economic Research, Director of the University of Munich's Center for Economic Studies, and President of CESifo. He is a member of the Council of Economic Advisors to the German Ministry of Economics as well as former president of the International Institute of Public Finance (IIPF) and of the Verein fur Socialpolitik, the association of German-speaking economists. He holds honorary doctorate degrees from the universities of Magdeburg, Helsinki, and the HHL Leipzig Graduate School of Management, and has been knighted with the Maximilian Order. He is the author of more than 20 monographs and 135 scientific articles. The British newspaper The Independent nominated him as one of the "ten people who changed the world" in 2011. The German Business weekly Wirtschaftswoche ranked Sinn 62 among the 100 most powerful people in Germany.

Introduction 1: Wish and Reality 2: Bubbles in the Periphery 3: The Other Side of the Coin 4: The Competitiveness Problem 5: The White Knight 6: The European Balance-of-Payments Crisis 7: Current Accounts, Capital Flight, and Target Balances 8: Stumbling Along 9: Rethinking the Eurosystem