Euro vs. Neuro
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  • Peter

    Parasites don’t leave their host willingly.

  • Luke Lea

    The neuro for the neurotic, the euro for the . . . erotic?

  • The problem with this plan is twofold:

    1. All current Eurozone debts are denominated in current-day Euros. Do these debts get redenominated? If so, into which currency: the old or the new? How would this be achieved?

    2. Since the stronger northern Eurozone countries are export driven, wouldn’t the stronger currency drive them into recession by making their exports expensive to the countries still on the “old” Euro? (Germany is already experiencing a flatlining of their GDP due to exports slowing down.)

    Greece must default at some point; that’s as close to a mathematical certainty as anything in this world at this point. Ireland and Portugal may very well follow. Spain and Italy might yet be saved, but time will tell.

    It’s time for the Eurocrats to realize that the “common currency” dream was stupid and abandon it. It was doomed from the start.

  • WigWag

    “Under the euro regime, low interest rates that suited northern economies like Germany just fine encouraged ruinous lending practices, real estate bubbles and excessive government borrowing in southern countries like Greece and Spain.” (Walter Russell Mead)

    I’m not an economist, but I find it very hard to understand how, in practice, two currencies can be created out of one without making things worse.

    Spain provides the perfect example. Perhaps Professor Mead or one of his readers can explain it, but I always thought that one of Spain’s major problems was a banking crisis sparked in large part by a major housing bubble similar to what we experienced in the United States.

    As recently as 2008, Spain’s government debt as a percentage of GDP was only about half as large as the public debt in Germany. While it’s true that low interest rates caused wages to explode while productivity did not, wasn’t the original sin of the current Spanish economic crisis irresponsible borrowing by consumers and irresponsible lending by banks rather than anything the Spanish Government did wrong?

    If talk about creating a new currency for Germany and its Northern European peers became serious, wouldn’t this spur a massive outflow of deposits from Spain’s banks into accounts denominated in the new currency?

    As depositors pulled their savings from Spanish banks to invest them elsewhere wouldn’t this dramatically escalate the Spanish banking crisis that lies at the heart of the problem that Spain is already facing?

    If Spanish depositors pull their accounts in mass, won’t the Spanish Government be on the hook to recapitalize the Spanish banking system to prevent it from collapsing completely? Won’t this require dramatic increases in expenditures by the Spanish Government which would drive up both the fiscal deficit and government debt even higher than they already are?

    Perhaps I’m missing something, but I don’t understand how cleaving the Euro in two makes things better; it seems to me, it would lead to an even worse banking crisis that would insure that things got worse not better. At least for Spain.

  • dearieme

    “saving Europe” != saving the EU.

  • Jacksonian Libertarian

    This looks like the desperate flailing around of someone about to fall off a cliff, looking for something anything to grab on to. When they should be looking for a soft place to land. The Euro is dead, bring back the national currencies.

  • higgins1990

    @Monty “It’s time for the Eurocrats to realize that the ‘common currency’ dream was stupid and abandon it. It was doomed from the start.”

    Liberals will never give up their religion. Never.

  • clau2002

    The name of this site say it all.Is the American interest for euro and EU to fail(DIVIDE ET IMPERA) and this is the reason for all this hysteria in the English language media.The real problem is simple:Trade means exchange of goods and currencies are used to measure it.EU is producing goods denominated in euro which are offered for exchange on the global market.The USA economy is 70%..”financial industry”(read speculative gambling and betting)hence the “goods”that are offered for exchange on the global market(products that back the $ bill)are fancy printed pieces of paper.We are told they have whatever value the sharks on Wall Street decided they have!The rest of the world seems not willing to accept that anymore and started to ask for real value”goods”from America in exchange for their goods.The euro has become the global alternative to the dollar and this triggered all the speculative attacks from the “markets”(read gamblers and speculators who delude themselves into thinking they are INVESTORS).This is your “debt crisis”.Compare the levels of debt of EU countries four years ago with those of today and ask yourselves where is the crisis!

    • Walter Russell Mead

      @clau2002: if you followed my work more closely you would know that I have long argued that the EU represents the greatest triumph of American foreign policy: it ensures that no European country can dominate the others and threaten the US global position, it is reasonably open to trade, and it more or less institutionalizes Wilson’s 14 points as the foundation of European life. It’s what we’ve wanted since 1776 — which may be why the US has consistently supported it from the time of the Marshall Plan.

  • Kris

    Quite right, clau2002; all we need to do is tune out Anglo-American hysteria and cynical fear-mongering. Tout va pour le mieux dans le meilleur des mondes, Madame la Marquise.

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