April 25, 2006

The Euro is set for collapse, EU economic adviser

A article in The Business about the Euro, and how a senior economic adviser to the European Commission thinks the Euro is set for collapse
Paul De Grauwe, a leading economist whose work was used to make the case for European monetary union in the 1990s, says the signs point to a slow death for the euro project over as long as two decades.
It may take less time than that, it is already creaking under the strain.
De Grauwe’s research paper concludes the euro project will flounder on a key flaw: that national politicians bear full political responsibility for unemployment, but that the tools to deal with it have been transferred to European institutions.
Well yes, that is what happens when you give up control of a major part of the economy to a group of people that don't care about your specific country so long as it is correct for the entire Eurozone. As was said by the sceptics before the Euro started. Not that in actuality the Euro has been particually good for the Eurozone as a whole either.
In the long run, however, there can be little doubt: without further steps towards political union the euro zone has little chance of survival.
Which was also said by the sceptics even before the Euro was launched, I recall that there was even a Goldman Sachs issuing a paper at the time arguing exactly that. The Euro was never just about free trade, just as the EU or EEC was never just a free trade area, they have not actually yet managed to become a free trade area despite that being one of the stated goals for 50 years. Most of the institutions of the EU simply are not needed where this the goal, such as the commision and the parliament (with both it's two buildings).


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