The Euro, as a single currency, should be abolished
Another black and white motion statement leaving me no option but to choose No. While I agree to the first part I am not prepared to contemplate the idea that the Euro should get abolished. Abolished? Then what? All 17 countries now sharing the single currency would revert back to their old monies? Or a new version of yesteryear's currencies?
Simplistic as I made it out to be packed in a few odd questions, every single serious economic, financial and social consequence is inextricably wrapped up within each. That is where the stakes are high enough to ensure that the Euro is given a new lease on life. It calls for closer European integration. What form and shape this will take is for policymakers and far-sighted politicians to grasp and propose.
It would seem to me that the Euro has many underlying strengths but will not - contrary to the founder's beliefs - assure convergence between all the economies it services. How could it? The divide has been felt acutely lately (1-2 years) the logical consequence of relevant economic under-performance among member-countries.
There has obviously got to be a political solution rooted in realistic economic fundamentals. The road traveled so far proved artificially smooth during the first 10 years I dare say but unsurprisingly very bumpy in the last 1-2. It could not have been otherwise given the structural differences setting these countries apart. And excessive spending pursued mostly by a few Southern European States who could not see beyond the present. Adherence to the Maastricht criteria never again seemed to be taken seriously once countries landed themselves inside the Euro club. Not to mention Greece that never fulfilled the criteria in the first place or ever bothered to balance its books.
Very disappointing to admit but the Euro Zone is indeed right in the middle of a storm testing its main crews to the limit. The latest summit decisions seem to indicate that where there is a will there is a way. It may have just been one first small step in the right direction.
The specifics are very hard to work on. Yet it would seem to me that the 17-member Euro Zone and the larger EU can hardly afford shooting down the Euro. The broader picture needs to come into full view. An hypothetical demise of the single currency would deal another severe blow to Europe's economic fortunes. Its relative decline vis-a-vis the rest of the world would get a further boost.
I do not like misplaced calls for solidarity from Southerners but would rather see the stronger half of the dividing line realize where their medium-to-long interest lies. To that end many balances across the Euro Zone need to be restored at the earliest.
Europe agrees a "shock and awe" bailout for Greece
A rescue package of epic proportions, epic challenges for the Greek government and people, epic uncertainties and epic stakes for the single-currency.
It was the Euro's defence that ultimately forced politicians from Germany to Malta to perform a hard balancing act whose overall success is far from assured.Each finance minister has enough reasons to fret and grumble about.It being the Euro as a common currency, because of Greece despite Greece. Up to now every 'least damaging' approach failed miserably to cool down the financial markets that remained as unimpressed as ever throughout. For its part Greece is effectively the main winner in this high-finance gamble.The country bought time the markets were not willing to give it once confidence vanished.Precious time desperately needed to restore credibility and good governance at home. A daunting internal fix with daunting external implications. Three full years is what the government and Greek society top-down and bottom-up now have to set the record straight in so many ways. Literally and figuratively.
For the other 15 Eurozone countries - each facing own troubles to varying degrees - keeping fingers crossed would be mild to describe the monitoring of Greece's performance over the coming 36 months.Potentially they are all losers, starting out by losing simply to avoid bigger losses! There are so many relevant questions that might be asked to which full answers ought to be provided. They won't get asked or get answered. Tellingly, each and every single one of them would now seem rhetorical or at best an exercise for academia.
The spectre that haunts Europe
I am still hopeful that Greece will not require a bail-out in whatever form pinning my hopes on the PM's own words.
He did sound very bold and brave in the face of such overwhelming odds but until a deal is actually in place I would rather believe the Greeks can and will take care of themselves.
My stance is wholly based not on immediate needs triggered by the Western financial meltdown that led to the economic downturn.This in turn led to a collapse in tax revenues across countries caused by economies shrinking badly.
To a large extent Greece is indeed a one-off case-study for the worst reasons, its latest fiscal deficit the sum total of profligate spending, widespread cultural-rooted tax evasion, underbudgeting, creative accounting, weak notion of public service and duty, etc - all conspiring over decades to bring the country to the brink of bankruptcy.
I am sure many Greeks will have seen it coming and warned their governments in years past.To no avail as even the present government was elected as recently as late 2009 on a platform to increase spending.
According to EMU rules public finances were clearly to remain national responsibilities.A considerable chunk of sovereignty for States to manage through their democratically-elected governments of the day.
Would the Greeks have liked their Finance Ministry to be ruled or dictated to from Brussels or Frankfurt just so the Maastricht-agreed criteria could not have been so despondently ignored?
Current turmoil is the Euro's hardest test ever but one that will also represent a defining moment in the single-currency's future.
It is a fact that Southern European countries are faced with similar issues though not on the same scale and urgency.Others in Northern Europe, the US and Japan also recorded their biggest fiscal deficits and added up noticeably to their debts in 2009. Each one has its own track-record, however. This is exactly what sets Greece apart from the rest. Each country is unique in its own way, there being obviously overlapping between them.
International rating agencies must make the effort to closely monitor and register those differences and then advise financial markets.
After all it is sovereign countries and sovereign debt one is dealing with.
There is much more at stake than strictly soulless bundling of nations.
A showdown between France and Germany over the EU is inevitable at some point in time. It was always bound to be so in light of an unbalanced bilateral relationship that has only grown worse over recent years. 'The Economist' scoops a few items that make up the dividing line now setting the two EU core countries apart. Yet it fails to analyse beyond the problems of the day, the political leadership of the day, the issues of the day, Angela Merkel & François Hollande. The new public partnership(?) between AM & FH is much more reflective of the two countries' identity, domestic tensions and interests, overall performance and relative GDP weight than the previous duo ever projected.
France and Germany - Germany in particular for reasons of undisputed economic strength - have got to hammer out a new routemap for the Eurozone. One that finally addresses political issues as well. The very issues that were dismissed while market finance seemed permanently assured.
Not for me to foretell the future but it does look like contracting economies cannot indefinitely remain in limbo trying to figure out pathways to growth. Social costs have mounted everywhere with unemployment reaching levels spelling serious damage to societies and their fabric. The adjustment underway did prove the logical outcome to years of excessive spending. Cold-blooded soulless austerity, however, has removed all hope for an improved economic environment tomorrow. Even where and when it might eventually come about.
France and Germany, Germany and France have to quickly ensure the policies and means at EU-wide level that will reconnect many with the European ideal - whatever that is meant to be at present. Their existing gulf must be seen to be closing instead of widening if the EU is to survive into the future.
The political speech across the Eurozone has witnessed a change from
austerity into something as yet undefined.
There is no doubt Mr. Hollande's rise to power a year ago has put additional
weight into the anti-austerity argument. This is as much about France's own
predicament as it is about austerity fatigue starkly felt in bailed-out
countries whose desired outcomes are far from clear.
It is of course an uphill struggle to right public accounts when
economies contract sharply over consecutive years. Vague promises of economic
growth resuming into the future hardly find believers amongst a discredited lot
having to make do with ever higher levels of multiple uncertainty.
Europe, the European Union and the Eurozone are facing very challenging
Broadly, a multiple whammy has hit the old continent's economy, social set-up
and ways that most politicians look utterly dejected when not awkward simply
trying to cope. If at all they realize the underlying causes and trends.
Because more than a few structural issues are not being discussed out in the
open or perhaps even behind closed doors.
I do not see an upbeat path forward for every nation sharing the single
currency - that which is a precondition to any successful monetary union -
unless an emboldened deal is achieved at European level. Sooner rather than
The ultimate objective being to resume and sustain economic growth and
employment across every country from north to south, west to east of the
Eurozone, the European Union, Europe.
The time is now to find a workable replacement to austerity without
upsetting public accounts.