Euro not to blame for crisis, but made it much worse

No-one but a fool thinks the euro is the only cause of Europe's economic crisis. There's also the anti-business madness of Brussels and the member states to consider too. Abolish social democracy, abolish the EU and abolish the euro all at once

A currency breaking an already broken continent
the commentator
On 18 December 2013 14:05

It's always hard to pin-point anyone mired in denial when everyone around them suffers from the same condition. Today we have a marvellous piece of wrong-headed tripe in the Guardian (where else?) on how the euro is not to blame for Italy's long standing economic malaise.

This is a standard line across the eurozone where muddled finance ministers and "analysts" just don't get it.

The writer Francesco Grillo is billed as "an author and visiting scholar at the Oxford Internet Institute, University of Oxford. He is director of the Italian thinktank Vision and advises the European Commission on innovation." God help Oxford, God help his Italian think tank, and God help the European Commission. (Or is all that beyond the power even of the Almighty?)

His line, is that economic problems existed before the euro came into existence, like every other eurozone basket case, and therefore the euro is not to blame.

In a sense, he and all the others, have a point, but not the one they think they have. European policy -- buttressed by the parallel folly of the member states -- has so stifled business and innovation that European states would be in trouble if no-one had come up with the mad idea of a one-size-fits-all currency in the first place.

But now that these countries do have the euro, it was always bound to make things a whole lot worse. First, most (except Germany and maybe Austria and the Netherlands) have a currency that makes them vastly uncompetitive. They don't have German economic fundamentals and having a currency that reflects another state's fundamentals is going to cause big problems.

Italy desperately needs to devalue to boost export led growth, as does every other southern European euro member (plus quite a few others, including France).

Second, their interest rates will only ever be appropriate by accident. Greece, Ireland and Spain were crucified in the last decade because their booming economies had interest rates that were far too low. This made credit too cheap and too attractive (though low interest rates were fine for Germany!).

People and businesses borrowed like there was no tomorrow. But when "tomorrow" came they couldn't pay their debts back, the housing markets collapsed, and countries went bust. All hail the euro!

Nonetheless, it remains the case that highly statist economies were always going to run into trouble anyway. EU red tape exacerbated all that, especially the ridiculous labour and social regulations that have decimated small businesses across the continent.

What Europe needs is a three-strike demolition job: abolish social democracy, abolish the EU, and abolish the euro.

Do all that, and all of us, including Italy, will be in far, far better shape than they are today.

NB If you missed it, see here John Redwood MP's piece yesterday on how Britain narrowly avoided the disaster of joining the euro, due to the disaster of joining the ERM. At least Britain learned its lesson, even if it cost us dear at the time

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