Europe is at the abyss ”” again. Its turmoil is rattling global stock markets and stoking fear and bewilderment. The obvious question is, what’s the solution? The answer is, there is no solution. Europe faces choices, some bad and others worse. Unfortunately, it’s unclear which are which. The best that can be imagined is that Europe lurches from crisis to crisis and that its slumping economy weakens the already fragile global recovery. The worst is a massive flight from the euro and an economic free fall that resurrects the dark days of 2008 and 2009.
Can anyone doubt that the euro’s creation in 1999 was a huge blunder? It aimed to promote European prosperity and unity, but it’s doing just the opposite. The very belief in its early success reduced interest rates in Europe’s periphery (Greece, Portugal, Spain, Ireland, Italy). Low rates fed credit booms and housing bubbles that, once burst, caused recessions and swollen budget deficits.
I do not understand the comment that Germany would be the big loser if the euro collapsed. It is unlikely that the euro would collapse completely; more likely, it will return to a core of six nations (France, Germany, Benelux plus possibly Italy). Despite the upheaval many people in Britain would simply feel relief. As for the EU, its democratic deficit becomes daily more evident. The politicians we elect for it are remote and unknown and they, as much as we, are governed by an unelected salariat of officials who are unaccountable to the electorate.