The real problem with the euro

No, the real story behind the euromess lies not in the profligacy of politicians but in the arrogance of elites — specifically, the policy elites who pushed Europe into adopting a single currency well before the continent was ready for such an experiment.

Paul Krugman.

Do recall, the man has actually won a Nobel for Economics.

Update: about the idea that Europe wasn\’t ready but might be in the future: there are well respected economists who think that the US only became an optimal currency area in the 1980s….about a century after it started having one currency.

7 comments on “The real problem with the euro

  1. But the dim bugger assumes that there will be a magic moment when the continent will be ready for such an experiment. This is a sort of Whig Interpretation of History, before the fact.

  2. “well before the continent was ready for such an experiment.”

    It may be, in the dim distant future, that the rotten, venal and corrupt Brussels kleptocracy may be found capable of running a hot bath.

    I’d personally bet on the sun going nova first, but the possibility nevertheless exists.

  3. “…Europe needs to move much further toward political union…”

    Not sure I’d be invoking Krugman too much

  4. Eurosceptics who argued that a single currency would lead to a single economic policy were correct. Eventually countries like Greece will need a bailout and that will come with a price. Krugman may well be right that Europe needs to move further towards political union to save the Euro. That is always where the logic of the Euro was going to lead. It was intended to be a transformative part of the EU project. It is a design feature, not a flaw.

  5. the USA is interesting becasue of the way that things happen at different levels – federal, state, district. A federal interest rate can be compensated for to an extent at a local level. With the Euro, this cannot happen. It all comes down to governance…

  6. Optimal is a funny word, Tim: at what point did the US single currency area become on balance a worthwhile thing? Day 1, is my guess, but just a guess.

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