THE DAILY TELEGRAPH: I've hardly been alone, but that's no excuse. For more than a year now, I've been regularly predicting the euro crisis's final denouement, yet still it hasn't arrived.
So I've been forced to reach a different conclusion; perhaps it never will. Instead, the eurozone has entered a seeming state of permanent crisis. In desperation, European policymakers have adopted a very British characteristic – the hope that they can somehow just muddle through.
But though no one can know the exact timing of the endgame – that's ultimately for the politicians to decide, so no time soon might be a reasonable bet – it's now fairly clear what that endgame must be.
What's presently being played out among the GIPS (Greece, Ireland, Portugal and Spain) is final proof that you cannot have a monetary union of such size among sovereign nations without compensating fiscal union. That simple underlying truth leaves the euro facing a choice between two equally unappetising outcomes.
Either the richer countries carry on bailing out the poorer ones more or less indefinitely, rather in the manner that Germany subsidises its formerly communist East, or membership of the euro has to be reconstituted on a smaller and more sustainable basis. There's really nothing in between. The longer European policymakers remain in denial about this choice, the worse the situation will become.
So it's with a sense of weary familiarity we approach the latest impasse. The European Central Bank is implacably opposed to debt restructuring, but the eurozone's solvent Northern states have reached the limit of their appetite for further bail-outs. This leaves Greece in an impossible position; it can neither reduce its debt burden through restructuring, nor will anyone lend it more money. » | Jeremy Warner, Assistant Editor | Wednesday, May 25, 2011
My comment:
The euro project has been mishandled from day one. It was clear to me from the very beginning that countries should have unified their currencies one by one, and slowly, allowing ample time for consolidation. To give you an example: Germany and Austria and France could have come together in the first stage. At least five years should then have been allowed for observation and tweaking. That would also have given these countries time to consolidate the colossal changes they had embarked upon.
When they were sure of their ground, the next economically strong country could have joined in, but after that move, another five or so years should have been allowed for consolidation. And so on and so forth.
But there is one very important point that the Europeans seem to have forgotten in all this: to have a unified currency, there should be one, unified government. To bring in weaker countries such as Portugal and Greece, there would have had to be regional economic policies to try and iron out the large differences in their economic circumstances. But one very big question remains: Can we truly expect the Greeks ever to compete with the Germans? The Germans are a particularly industrious people. They are also northern Europeans. The climate in northern Europe is far, far more conducive to hard work than is the climate of countries in the hot Med. – © Mark
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