Euro as Dodo Bird
We are on the verge of a complete break-down, one that is unavoidable no matter how much political gobbledegook is used to try to convince otherwise.
By Monty Pelerin
Don’t count on the survival of the Euro. It was a Frankenstein-type creation 
in the first place, forced by the political elites who wanted to expand their power base. That done, the fissures and cracks began almost immediately. Now, we are on the verge of a complete break-down, one that is unavoidable no matter how much political gobbledegook is used to try to convince otherwise.
An appropriate parallel to the Euro might be the dodo bird. Dodos couldn’t fly and became extinct in 1681. The creation of the Euro was a dodo from the start. It will soon endure the same fate. The efforts and protestations of its creators and vested interests will not enable this bird to fly. These dodos can be printed, a temporary way to postpone distinction, but one that will inflict higher costs on users and financial institutions. It will not survive.
Walter Russell Mead observes:
The headlines lately have focused on the big picture problems in Europe: a bank run in Spain, the prospect of costly bailouts, Greece’s inability to push through reforms, and so forth. But something much more fundamental is happening. At the grassroots level, the euro currency area is falling apart.
This condition is not reparable and will worsen. Mr. Mead provides the reason:
Interest rates should be low when there is no growth or a depression, and they should be high when economic activity is robust. Europe has now achieved exactly the reverse. Business and consumers in prosperous Germany have extremely low interest rates and can borrow freely. Companies in snake-bit countries like Italy and Greece face very high interest rates, even if their own business is sound and their prospects are good.
This is a destructive situation. If it lasts, Europe will be forced to dismantle the currency union, because no economies can survive under these conditions.
Contrary to Mr. Mead’s “if it lasts,” there is no way to remedy the problem. The welfare state mentality that has driven the debt and spending has doomed the Euro bird. A break-up is inevitable, only the time-frame is moot. The political class will do everything to preserve a bird that cannot survive. It will not be enough.
“Monty Pelerin” is a pseudonym derived from The Mont Pelerin Society. The writer has no connection with the Society (other than coincidence of philosophy). Nothing said by me should be considered to be representative of the views of the Mont Pelerin Society or any of its members. “Monty Pelerin” blogs at Monty Pelerin’s World
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