by afew
Fri Mar 7th, 2014 at 05:44:34 AM EST
On Pieria, Frances Coppola posts a clear and cogent denunciation of the single currency and calls for its immediate demise.
After analysing money supply stats and concluding that the ECB is in no position to do anything useful to stave off the tendency to deflation and long-term depression, she lets rip on the euro.
The ECB is irrelevant and the Euro is a failure
The history of Europe is long and blood-spattered. It is nothing like the United States, which is a young country with a common language, clear boundaries and a single political structure. Yes, the USA fought a civil war to achieve its current degree of political unity, and there are no doubt still stresses and strains. But Europe - if you must regard it as one entity, which is problematic in itself - has fought HUNDREDS of civil wars. We do not have a single language, we still cannot agree where our boundaries should fall and national interests always trump "European" politics. You can't overturn tribal and cultural identities that go back thousands of years at the stroke of a few politicians' pens.
My objections to the single currency, therefore, are historical and cultural, rather than economic. I have read Mundell. I understand the benefits of a single currency, where there is economic convergence. I know that the founders of the Euro project expected that the discipline of a single currency would force European countries to implement reforms that would over time create the necessary economic convergence. I know that this is STILL what politicians and Eurocrats are trying to achieve with measures such as the fiscal compact. But call me Cassandra if you like: I do not think any of this will work.
Rather than economic convergence, the appalling management of the eurozone since 2008 is creating divergence:
The ECB is irrelevant and the Euro is a failure
Economic convergence is an impossible dream while there is no political or fiscal union. It cannot be achieved through wholesale economic destruction in weaker countries in the name of "structural reform" while stronger ones benefit in the form of lower borrowing costs, capital inflows and immigration of skilled workers. This creates economic DIVERGENCE, not convergence. The fact is that weaker countries in the Eurozone are diverging from stronger ones. Unemployment is at 5% in Germany, 12.8% in Italy and 25% in Spain. And as for Greece - if this report in The Lancet is to be believed, health outcomes there are heading for third world standards. Even France is now on the downwards path, helped by a shockingly inept government. How can any of this be considered progress?
I suppose it can be seen as progress by countries who share the self-congratulatory delusion that they are doing all right. But Coppola goes on:
The ECB is irrelevant and the Euro is a failure
The combination of a common currency with national politics is poisonous. Without closer political and fiscal union, including a proper banking union, pooling of debt and sharing of risk, the benefits of currency union are a chimera. The reality will be debt deflation and depression without end.
Well, not quite without end, actually - it is all too easy to see how this could end. The Euro is the biggest threat to peace in Western Europe that I have seen in my lifetime.
Certainly, at some point the French drowning man (Sarkozy or Hollande, same difference) will have to give up the straw of the Franco-German axis. Much better that should happen sooner rather than later.
