So was the Euro badly designed? It sure was. To make it work the currency banker needs a flexible corridor system. Instead they concocted stability rules which they all immediately violated.
The old theory was that Italy or Greece could devalue their currencies and avoid debt traps. But we can see they pay the price for the ability in bond spreads, everyone knew it was going to happen and charged a premium. With a corridor system, the currency banker maintains independent deposit and loan rates. Then the system works as it did before, if the loan portfolio grew, the deposit rate rises to match. That gives the market the ability to create the spread that should be there. There is no movable deposit floor in the chart above.
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