Reading Gerard Baker’s speculations on Germany leaving the euro I got somewhat bored halfway through. The solution was as obvious as the fact that Mr. Baker, and perhaps most of Europe’s luminaries, are blind to it.
Europe is a hodge-podge of buried irredentist sentiment and maximalist territorial dreams. Do you want Greek discipline in paying its debts? No problem, force it to put up the islands that Turkey has wanted for a very long time and suggest that insufficient fiscal discipline will lead to an auction sale of the territory collateral complete with loss of sovereignty. Not only will this instill fiscal discipline in countries that have to put up parts of their own territory, it will induce their neighbors to save up “wishful thinking” funds to bid the real estate up high enough.
Is the UK spendthrift? Have them put up Gibraltar as collateral and watch the Spanish suddenly start saving like mad in hopes of an auction. No doubt Moroccan finances would tilt towards fiscal surpluses as well.
The utter national humiliation of dismembering your own country to finance social spending should set things right. And if not, well, other hands would take over their country’s ultimate assets, national sovereignty.