The €uro. A Dead Duck Walking?

TheBigShort

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I don't proclaim to be expert in these affairs, but from my armchair it is becoming clearer and clearer as time progresses.
News from Italy, on the back of political uncertainty is unsettling, at the very least.
The €uro is failed experiment. It is a one-currency-fits-all-economies.
In its relatively short history, it has done more to destabilize the economies of the eurozone than it has to bring any form of alignment.
Euphoria, exuberance, easy credit, overheating, debt spiral, bankruptcy, bailouts, money printing, political instability, crisis...are all adjectives and words that you can associate with the €uro.
Stability is not a word that you could plausibly associate with the €uro.

The question what to do? Wind it up in as orderly fashion as possible over the next decade or continue with the pretence that as a currency it commands the loyalty of Eurozone citizens and that politically "whatever it takes" - Draghi, will support its continued existence?

Personally, I think it is a dead duck as it stands.
Italy's woes are continued evidence of that.

I say that as someone who voted for Treaties to facilitate the €uro and supports the concept of the single currency.

With the exception that world central banks are moving closer to a one world currency (including a universal basic income) then I don't see how it can limp from one crisis to another without political instability driven btyy economic forces eventually breaking it up.
 
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To be fair, Italy was a basket case when it had it's own currency and will be a basket case again with it's own currency. The Italian Lira is not Sterling or the Swiss Franc. Unfortunately, it is easier for people to blame the Euro for every economic problem in places like Italy than facing up to the reality. And I say that as someone spent a significant number of years working for an Italian bank and who has a love for the Country and people but God, they are stuck in the 1950's when it comes to economic and social reform and the impact of globalisation.
 
The Euro and it's associated rules and oversight may be the only thing saving the Italians from themselves!
 
Italy was a basket case when it had it's own currency and will be a basket case again with it's own currency. The Italian Lira is not Sterling or the Swiss Franc. Unfortunately, it is easier for people to blame the Euro for every economic problem in places like Italy than facing up to the reality.

Thats a fair point. The economic woes of the Italian economy are not necessarily of the euro's doing. But it only goes to underline how unsuited the euro is to the Italian economy.
The aim of the euro was to create one economic and financial unit operating under the same rules. This does not suit all of the economies within it and is creating political instability. The greater the instability, the less likely the euro will be to survive.
 
The Euro and it's associated rules and oversight may be the only thing saving the Italians from themselves!

Thats somewhat an oxymoron in itself. It is the associated oversight and rules that appear to moving voters to poitical parties prepared to abandon those rules.
 
I've always considered it only a matter of time before the Euro, and with it the EU, collapses in flames and I consider the UK to have been wise to opt to abandon the latter before such a disaster materialises.

I'm not saying I'm right but it is my gut feeling and heaven knows what timeframe is likely to be involved.
 
Thats a fair point. The economic woes of the Italian economy are not necessarily of the euro's doing. But it only goes to underline how unsuited the euro is to the Italian economy.
The aim of the euro was to create one economic and financial unit operating under the same rules. This does not suit all of the economies within it and is creating political instability. The greater the instability, the less likely the euro will be to survive.

Yep. They are paying the price for fudging the issue when the Euro was introduced. I don't think they want to leave the Euro. I think like the UK, it is coming from a deep dissatisfaction with the EU as a whole and the EU need to wake up to this very quickly. I like the EU. I believe in the idea of it but there is no doubt that it is becoming as dysfunctional as the United Nations.
 
Just nonsense. The dollar is in exactly the same state, given the mixed type of economies in each state. It is not the currency that is the problem it is the economies themselves. They could use monopoly money for all the difference it would make.

I dont think its 'nonsense' but granted there is a circular arguement at play here.
As my list of adjectives to describe the euro implies, there are times when being in the euro appears to be highly beneficial. But clearly it has a politically and economically destabilizing effect also.
If its not the fault of the euro, but rather the economies themselves, then that only confirms that the euro is an inappropriate construct. It cannot suit all economies all of the time. This leads to economic instability, and in turn, political instability.
Perhaps, one solution would be to cede fiscal sovereignty to a centralised Federal United States of Europe?
Unlike individual states in the US, eurozone states are constrained to the Fiscal Stability and Growth pact which, in my opinion, is a crude, and ultimately unsustainable way of appropriately managing a countries economy.
 
Thats somewhat an oxymoron in itself. It is the associated oversight and rules that appear to moving voters to poitical parties prepared to abandon those rules.

The parties getting the votes now are just pushing populist policies that would bankrupt the country if followed through on. The prudent response to an aging population and plummeting birth rates (to the point where they introduces a 'Fertility Day') isn't to promise universal incomes, slash income taxes while increasing the state pension along with lowering the retirement age.
 
The parties getting the votes now are just pushing populist policies that would bankrupt the country if followed through on. The prudent response to an aging population and plummeting birth rates (to the point where they introduces a 'Fertility Day') isn't to promise universal incomes, slash income taxes while increasing the state pension along with lowering the retirement age.
Exactly, we'd never do that, no our populist left wingers want to do all that but pay for it by taxing "the rich".

If that doesn't work then blame the Euro.
 
The parties getting the votes now are just pushing populist policies that would bankrupt the country if followed through on

Perhaps so, perhaps not. The markets are responding to proposed policies that will increase Italian debt in excess of productivity growth. As such, Italian bonds yields are rising, threatening bankruptcy of the Italian state, threatening Italys participation in the euro, threatening the very existence of the euro (mine and your currency), threatening economic instability in the wider European economies.

Who, on that basis alone, can plausibly say that the Euro is a stable, suitable currency for Europe?
 
Exactly, we'd never do that, no our populist left wingers want to do all that but pay for it by taxing "the rich".

If that doesn't work then blame the Euro.

Its not about 'blaming the euro'! It is about acknowledging how the euro, as a currency, is a failed construct. It is not a suitable currency for all eurozone economies. In its short existence it has been associated with crisis more than stability.
I support the concept of a single currency, but the euro does not, in my opinion, work to provide economic stability and growth.
 
Exactly, we'd never do that, no our populist left wingers want to do all that but pay for it by taxing "the rich".

Isnt the attempted coalition government in Italy a partnership between right and left wing parties?

The way im reading matters is, that it is not so much the prospect of a populist coalition that sparked the sell-off of Italian debt, but rather the failure to establish the coalition itself. It is the prospect of returning to the polls with heightened euro scepticism coming out further on top that is prompting the sell-off.
Notably, the parties concerned are in negotiation to find a finance minister than will receive seal of approval from the President - this appears to have stalled the sell-off for now.
 
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Being in the euro requires sacrifices - it's a lot easier to devalue your currency than to cut wages and benefits.
I don't think there is buy in to this from some eurozone countries (e.g. Italy, Greece), and they should have been asked in a referendum to join.
And I don't think there is buy in from other eurozone countries (e.g. Germany) that being in a shared currency will required shared financing.

Given that, the euro will stagger from one crisis to the next until either (a) both sets of countries buy into it OR (b) the countries that don't want to be in are cut loose.
The euro, as presently constructed, was a terrible idea.
 
Its not about 'blaming the euro'! It is about acknowledging how the euro, as a currency, is a failed construct. It is not a suitable currency for all eurozone economies.

I see it a bit differently. I think Italy has shown itself to be not only not suitable to its own currency but also to the Euro. Ditto for Greece. It's not that the euro is not suitable to some countries, rather, some countries are not suitable to the euro. The euro has brought the cost of borrowing down to practically nil. Some countries like Italy and Greece and us have used this to borrow far far too much and when it comes to paying it back it causes them problems. Just because DFS have 0% on sofas doesn't mean I have to buy one...
 
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I think Italy has shown itself to be not only not suitable to its own currency but also to the Euro. Ditto for Greece. It's not that the euro is not suitable to some countries, rather, some countries are not suitable to the euro.

So the countries that are 'not suitable' should leave? Or be cut loose?
 
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