Wednesday, 17 November 2010
Political Crisis of the Euro will end in revolution
So too, today, 20 years later and we see a very similar story being played out. the Peripheral Euro Countries have been smashed by the economic costs of being tied to the D-mark; now known as the Euro. Germany in turn has decided enough is enough and there are noises about not bailing out Periphery Countries without them ceding political and economic policy to Germany.
The Euro was a political project in 2000 and has sailed serenely on the back of a nice boom that lasted for 8 years nearly. Now in the first crisis it is in big danger of collapse. The Politicians of Europe are not ready for true economic unity and this is what a single currency area demands. German taxpayers are not ready to subsidise Irish and Spanish ones despite them having the interest rates and overall fiscal policy set to suit the Germans themselves. In short, the politics is too selfish.
Due to my study of the the ERM I have always been very sceptical of the potential for the Euro to succeed and perhaps now it is coming to pass; the choice is economic union with political union or not. I very much doubt we can have true economic Union when the EU institutions are so unpopular.
What is the great shame is that is the EU had not become a bureaucratic leviathan and instead had followed a US model of democracy we might be ready for closer Political integration.
There will be a fudge today to smooth the markets, but the real crisis in Greece and Ireland won't go away, just as it did not after May and the last bout of crisis. Something really has to give eventually, I am interested to see just how many time the can will be kicked down the road before the revolution (this may be one way or the other in terms of greater or lesser EUnity).