| A pessimistic view of the euro Oct 8th 2012, 15:31 http://www.guardian.co.uk/business/2...monetary-union Quote:
When he was leader of the Conservative party, William Hague once likened membership of the euro to being trapped in a burning building with no fire exit. It was an apt description, as young people in Greece would testify: in a country that has already contracted by more than Germany did during the Great Depression, the jobless rate for Greeks under 25 is 55%...
...Activity is collapsing in Italy, is weakening fast in France, and has started to falter in Germany. Unemployment in the eurozone is at record levels as the recession starts to feed on itself. Collapsing demand leads to company failures, adding to the bad debt problems of already weak banks. These, in turn, call in loans and make credit harder to find. Government finances suffer, increasing pressure on finance ministries to find additional savings. Another chunk is taken out of demand, making it more difficult to cut budget deficits and the national debt.
Europe's malaise is affecting the entire global economy. It is hampering an already tentative US economy and may result in Mitt Romney becoming US president. It is leading to slower growth in China, which in turn is leading to heightened trade tensions.
The eurozone has experienced weaker growth in the past decade than Japan did in its lost decade of the 1990s. The gap between the rich and poor countries has widened rather than narrowed. Before long, one in eight working age people will be on the dole. Flows of inward investment to what is increasingly seen as an economic backwater are starting to dry up. The failure of monetary union has been complete and abject...
...The single currency does not operate by empirical principles. If it did the plug would already have been pulled on it. It is a top-down project, with a lineage stretching back to the Enlightenment, in which technocrats come up with what they see as a blueprint for happiness: clear, rational and beautiful. When the blueprint does not deliver the expected results, that is not the fault of the plan.
As made clear this year by the ECB president, Mario Draghi, the future of the euro is not open to negotiation: Europe could have a second or even a third lost decade and it would make no difference to those who think it the last word in modernity...
...The best thing for Europe would be if the euro were smashed to smithereens, allowing countries to devalue and impose capital controls. It would still be painful but at least they have the ability to boost their economies and pay down debts more slowly. The alternative is to sit and watch the flames lick higher.
| I am seriously beginning to wonder about the survival of the EU, never mind the euro. | |
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