The Beginning of the End for the Euro?

gagahouse

Degenerate wrote: »

Theoretically, yes. The problem is that because they went a step further and actually merged their currencies, the immediate effect of breakup will be absolute economic carnage as cross-border balances must either be re-denominated (an effective default), or will be defaulted on anyway because the new, devalued, currencies just wont buy enough Euros to pay them back.

At least in the days of the Bretton Woods system, people knew that devaluation was a possibilty and hedged their bets appropriately in international trade.

It's a bloody mess brought about by the sheer hubris of the European political elite, when they thought they knew better than competent economists and went ahead to create this ghastly system.

"I am sure the euro will oblige us to introduce a new set of economic policy instruments. It is politically impossible to propose that now. But some day there will be a crisis and new instruments will be created."

Romano Prodi, EU Commission President. Financial Times, 4 December 2001. Amazing, the front on these guys. So a future crisis is not seen as an indictment of the current system but an opportunity to extend it.
"I know very well that the Stability Pact [which fines Euro-zone countries if they persistently run budget deficits over 3%] is stupid, like all decisions which are rigid."

Romano Prodi, EU Commission President. Interview with le Monde, 17 Oct 2002. The Stability Pact immediately became known as the Stupidity Pact.

"On 1 January 1999 with the introduction of the Euro ... an important part of national sovereignty, to wit monetary sovereignty, was passed over to a European institution ... The introduction of a common currency is not primarily an economic, but rather a sovereign and thus eminently political act...political union must be our lodestar from now on: it is the logical follow-on from Economic and Monetary Union."

Joschka Fischer, German Foreign Minister and Vice Chancellor since 1998. Former Communist firebrand and photographed beater-up of a policeman (ironically called Mr Marx). Speech to the European Parliament, January 1999.

http://www.liebreich.com/LDC/HTML/Europe/08-Euro.html