IMO the biggest story in the world today is the slow motion financial catastrophe in the countries that use the euro. The European elite has proven themselves the world’s heavyweight champions at kicking the can down the road. Now tiny Slovakia has blocked the creation of the euro’s bailout fund on the grounds that the people with the lowest wages in the EU shouldn’t be subsidizing the pensions of people who make a lot more than they do. What does it all mean?
But as outgoing European Central Bank President Jean-Claude Trichet said Tuesday, events are moving too fast for Europe’s decision-makers. “The crisis is systemic and must be tackled decisively,” he told a European Parliament committee. “The high interconnectedness in the E.U. financial system has led to a rapidly rising risk of significant contagion. It threatens financial stability in the E.U. as a whole and adversely impacts the real economy in Europe and beyond.”
I’ll resume my decorous silence on the subject. It’s really outside my comfort zone for commentary. However, since reviving his blog a few months ago my blogfriend Marc Schulman has devoted his blog, American Future, to aggregating news about the eurozone’s financial problems. One-stop shopping for news of the euro’s problems.
My last word is that I don’t believe that there’s much we can do about the inherent, structural problems in the euro. Those have been there all along and it’s up to the Europeans either to resolve those problems largely by creating a common banking and fiscal structure for the participants or ending the euro. The most we can do is to try to mitigate the risk for us in a collapse in the euro and, of course, we aren’t doing that.
Anyone who’s really, really interested in the eurozone crisis — in particular, the design flaws leading to it — should read:
David Marsh, “The Euro: The Battle for the New Global Currency”
http://www.amazon.com/Euro-Battle-New-Global-Currency/dp/0300176740/ref=sr_1_2?s=books&ie=UTF8&qid=1318437728&sr=1-2
As I think I’ve mentioned before I was living and working in Germany when the euro was first being debated. I sincerely believe that for the Germans much of the motivation in adopting the euro was their desire for the deutschmark to become a reserve currency.
Germany is just not large enough on its own for that to happen. However, in federation with France, the Netherlands, and so on it created a large enough bloc to become feasible.
There was never a need for the euro. There was already a common currency, a reserve currency: the dollar. German nationalism made that intolerable.
Probably because that would send a pretty strong signal that the U.S., as a matter of policy, considers the Euro to be in such a precarious state. When you are trying not to go over the edge, not having your friend give you a shove in the wrong direction isn’t a bad thing. At least that is the thinking in Washington I’m guessing.
True. Issuing storm warnings is a signal that you think that a storm is coming and filling your tank with gas is a signal that you think that you may be running low. Not issuing storm warnings won’t stop the storm from coming, driving right on by the service station won’t prevent you from running out of gas, and there’s very little that we can do one way or another that will shore up the euro.
Well…I never said it made sense. :p