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Hollande's victory: The world ponders a major shift

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Paris buildings reflect in a shop window displaying the cover of a magazine with a picture of President-elect Francois Hollande in Paris on Monday, May 7.
Laurent Cipriani/AP
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Financial Post (Canada)

Few options for EU, Finn Poschmann

“The outcomes of loud, divisive and ostensibly important elections in Europe have rolled in....Yet none of it matters, because these national elections cannot address the toxic economic bonds that make fiscal policy a burning cross-border issue within the eurozone.

The toxic bonds are created by the euro itself, which formally came into being in 1998 and represented what was then to be the key step on the road to making the European Union a true federation.

...

The trouble arises because currency unions, like those among Canada’s provinces or the US states, normally include some centralized fiscal arrangement, like a federal tax authority, and which may include features that support and complement subnational fiscal authorities...

But in Europe the federal fiscal structure is weak to the point of nonexistence.

The alternatives are few. One is messy individual exits from the euro, wrenching and problematic because the governing treaty does not contemplate the possibility. Option two is to implement side-by-side euro-like currencies, one for the weak countries, another for the stronger; ugly but doable. The third is a euro implosion, or currency dissolution. On the strength of the election results, the odds of the last have gone up.”

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