For some 15 years now, long before the invention of this blogging thing (harking back to the Good Old Days of Usenet), I\’ve been saying to all and sundry that the problem with the euro is that it simply isn\’t an optimal currency area. Therefore it shouldn\’t try to have a single currency.
Finally we\’re beginning to see serious people saying the same thing:
The Greek financial crisis has put the very survival of the euro at stake. At the euro\’s creation, many worried about its long-term viability. When everything went well, these worries were forgotten. But the question of how adjustments would be made if part of the eurozone were hit by a strong adverse shock lingered. Fixing the exchange rate and delegating monetary policy to the European Central Bank eliminated two primary means by which national governments stimulate their economies to avoid recession. What could replace them?
The Nobel laureate Robert Mundell laid out the conditions under which a single currency could work. Europe didn\’t meet those conditions at the time; it still doesn\’t. The removal of legal barriers to the movement of workers created a single labour market, but linguistic and cultural differences make US-style labour mobility unachievable.
That\’s Joe Stiglitz, a Nobel Laureate. Paul Krugman, another such Nobel Laureate has also been pointing out recently that Spain\’s entire problem is the euro and that Brown\’s one decent economic policy was to stay out of said euro. And of course we\’ve got Robert Mundell there, the Nobel Laureate who was/is the expert on optimal currency areas pointing out that the euro just doesn\’t fit the real world.
Shadenfreude is of course the most delicious of emotions.
But this shows the major thing that is wrong with the entire European Union project. Those running it really do seem to think that if you ignore economics then economics will ignore you. But it ain\’t so. It doesn\’t matter how many communal flags you deploy, how stiffly you stand to attention when \”Ode to Joy\” blasts out of the speakers.
If your basic economic policy is fucked then your economy is fucked.
Which is of course why you should all go out and do something about it today by voting UKIP. We\’ve got to leave this nonsensical system entirely based upon a delusion.