The problem is France, which hasn’t got a current-account surplus and does have a “competitiveness problem”. Economically, it can’t live with the German block, but it is unlikely to end up leading a “rival Latin block” either. That’s why France is “so desperate to keep all the others in” and hang on to the myth that it holds some power within the union as it stands.
So it is really France that is working to hold the union together? “Yes,” says Connolly. But it can’t. “Who knows how long it takes”, but in the end the weaker members “have to go”. Would it help for the European Central Bank (ECB) to loosen monetary policy? “They have already done so to a considerable degree.” You can’t get Spain, Portugal, Greece, and “even France” into balance without “destroying their economies”, so in the end you have two choices: “you can recreate the bubble, or you have the transfer union”.