Regional currencies will prove the best route to reconciling the economic imperatives of increasing international capital mobility with the political realities of the nation-state.
France's economy is stagnant, statist, and uncompetitive and urgently needs reform.
Europe's budget plans are better designed: countries from France to Greece are raising retirement ages; others, from Britain to Germany, have created new organisations and rules to encourage fiscal probity. But Europe risks overkill.
Governments need to lay out a credible path to reducing their deficits in the medium term, but without excessively enfeebling an already weak recovery. That means raising retirement ages and overhauling pensions; putting in place the budget rules and institutions that will curb future profligacy; and favouring spending cuts over tax increases.
Developing countries have much to gain from capital mobility: the ability to tap external sources of finance, greater financial efficiency from deeper stock and bond markets, and technology transfer and know-how from foreign direct investment.
America should do more to fix the still-festering housing crisis and overhaul its training schemes so that high joblessness does not become entrenched. Hunkering down for austerity is not enough. The rich world needs a strategy for growth.
