Interest rate policy is behind the economic declines of recent years

The attempted harmonisation of European economies through monetary union cannot be described as an overwhelming success story.

The one size fits all interest rate policy can be considered a contributing factor to the economic declines we have seen over recent quarters. A regime more tailored to the demands of individual countries’ needs, such as the unsustainable growth witnessed in Spain and Ireland set against the stagnation of Portugal’s economy, would perhaps have been more successful in heading off the economic malaise. Ironically this structural inefficiency now looks to be one of the key attractions for investors in Europe. The global response to the economic crisis can now start to benefit those economie...