Things are getting ugly everywhere.
I agree that the stronger countries really need to get the PIIGS out of the EU. In principle, the EU isn’t so bad of an idea, but with the caveat that the economies are essentially equal in most respects. And there’s the problem.
Many (here on FR, economists, heck even some DU’ers) have proposed a two-tier EMU.....one for the countries that can make currency work, and one for those who can’t. While there may be some merit to that notion, for me it’s easier just to throw out those who shouldn’t be in the club. Of course, there’s no mechanism to do this, another problem.
Instead of turning the PIIGS into zombie economies, perhaps the EU should try focusing their attention on creating a means to exclude them.
Or barring that, then they should dissolve the EMU and go back to their previous currencies.
If they kick the PIIGS out of the EU, the PIIGS default on the bonds which are in French and German banks, and those banks go down, possibly dragging down the French and German economy.
This is the sensible way to go.
If the PIIGS stay in, then they will have to print Euro’s to cover all of PIIGS debt payments.
I’m betting on the latter.