Release the labor market from the grip of inflexibility
It sound to me misleading to suggest, that the return to national currencies will solve the problems of Europe with relatively little pain. The reason for European sovereign debt crisis of the G.I.P.S. countries (Greece, Italy, Portugal, Spain. I am not including Ireland, where the problem is different) is their national income that exceeds their economic production capacity, creating gap that had to be covered by loans that came in the past from European financial institutions. With the beginning of economic crisis in US, that started because of entirely different and not connected reasons, suddenly the leaders of the financial institutions, that bridged for G.I.P.S. their financial gap, by purchasing their bonds, realized that they were fooled and they fooled themselves, believing that every sovereign debt of Euro Zone country has AAA rate, (as assumed by most of the credit rating agencies). Now that these respectable financial institutions have to write of most of these loans and it doesn’t matter if it will be by devaluation, write offs, or European Central Bank loans, that will have to be eventually transformed into equity in a process of diluting the previous owners, the result will be drying the money flow in Europe. Other consequence of sovereign debt crisis will be, that the financial institutions will have to fold their sleeves, and instead to continue to channel the financial resources to finance new sovereign debts, they will have to create effective system of investment financing in existing and new economic ventures, that have the potential to creating real economic ad-values (Not like sovereign debt that financed waste and overconsumption). If this change in credit availability will happen, eventually it may help to bring economic growth to Europe.
As to the economic misery of the G.I.P.S.I. country population, again the return to national currencies will not solve their problems with less pain than the alternative measure of income reduction. As a main problem in the G.I.P.S. countries i see the huge unemployment of the well educated youth, who to my understanding are better equipped to function in modern economy than their veteran predecessors, but are not recruited to work, due to the labor policy imposed by the political leadership of the unions and national leaders, who have no guts to oppose them. The G.I.P.S.I. countries have to learn how to create new economic ad-value and i am not expecting it will come from the old veteran employed, who were part of the system that created this economic unbalances, and who will not be reluctant to make any change in their current situation.
National currency or not, release of labor market from the grip of inflexibility has to happen and better earlier than later.