Saturday, April 27, 2013

Euro Special

I promised a personal evaluation of the Positives and Negatives of the euro. They aren't in any particular priority order.

Positives
  • It has helped to avoid a third World War. [I don't actually give it credit for this but others do.]
  • It has eliminated exchange costs, so making cross-border travel easier between some member countries.
  • It has benefitted the German economy.
  • It has brought Eastern Europe closer to Western Europe.
  • It has forced the French to speak a bit more English. [OK, I'm scraping the barrel here.]

Negatives
  • Because of its (inexplicable) strength against the dollar, it has made worldwide trade more difficult for most eurozone members
  • It has heightened tensions between member states.
  • It has created a North-South divide.
  • It has engendered divergence rather than convergence.
  • It has encouraged phoney asset booms in Spain and other countries.
  • It has encouraged corruption on a massive scale.
  • It has strengthened, rather than weakened, nationalist sentiment.
  • It has delivered to Germany a leadership it doesn't want and probably can't exercise.
  • It has created very high levels of unemployment in Spain and other countries.
  • It has visited on populaces the sins of the corrupt and the incompetent, leading – for example – to thousands of evictions in Spain.
  • It has wrested political and economic control from democratically elected governments and given it to an undemocratic, unelected cabal of the EU, the ECB and the IMF.
  • It has prevented troubled governments from having recourse to devaluation to help their economies improve.
  • It has condemned Spain and other countries to at least 10 years of minimal growth.
  • It has caused an increase in the size of the black economy in Spain and almost certainly in Greece and Italy as well.
  • As someone has put it – “It has crippled half of Europe”.

So, I'd have to say the net balance is negative.

But what will happen next?

I don't know.

But I do know that every commentator believes that nothing will be solved until there's a fiscal union and a real central bank.

They also seem to agree that these are nowhere in sight. Which says all you need to know about the EU - An institution burdened with huge problems but incapable of solving them.

This week a senior German figure - the chairman of a scientific council that advises the finance ministry - said: “Europe is important to me. Not the euro. And I would only give the euro a limited chance of survival.” Asked whether he thought the single currency would last five years, he replied: “Five years sounds realistic.”

Who am I to argue?

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