Euro: Can It Survive?

No, it cannot survive in its present dysfunctional form. This flawed currency is now assailed on two fronts. The first is financial. Countries using it are completely out of step fiscally with each other, Germany has scooped up all the cash to become the China of Europe and several  countries and their banks are technically bust.

The second problem is actually worse than the first. It is political. The absences of a single finance ministry to run the economy of Europe as a single entity, a central bank empowered to manage the currency with all the tools, including the ability to print money, and the failure to establish  a democratic process by which this is all organised and approved by voters, now combine to doom the whole project.

Not only do we now have huge financial pressures building, but the people are now beginning not just to riot, but to vote. The Dutch government has fallen, the French have elected a President seeking the opposite of what his predecessor agreed to, Greece has become ungovernable, Ireland is soon to vote in a referendum to ratify the Fiscal Pact  and may well sink it by voting No. Markets now look askance at Spain, Portugal and Italy as the flames of disaster grow ever closer. Spain is so close to the heat it is beginning to smoke. So, do we find the leaders of this currency union acting with decision and effect? No! They dither and argue because they know they have no mandate to do what has do be done and if they sought one it would be denied.

Now or very soon the reality will have to be faced. Currency union, political union and fiscal union are not a la carte choices. They go together as a whole package; you cannot have one or two, it is all or nothing. The voters of Europe will never agree to this so it cannot happen. What must happen now is to work out a plan to exit Greece, Ireland, Spain and Portugal from the euro by an orderly means and write off much off their debt. None of them has prospered under the single currency; the good times were all an illusion. This leaves France and Germany, the Benelux countries and the rest. What happens here will depend on whether a kind of Franco-Germany is politically possible. If it is then the others can decide whether they wish to be part of it, or go it alone.

This is a tough message, but it is now time to get real. It is time to plan for the inevitable and to stop dreaming of the impossible. Failure to do so will lead to meltdown.