The Failure of the Euro

The Failure of the Euro

The Little Currency That Couldn’t

By Martin Feldstein

Foreign Affairs

January/February 2012

The euro should now be recognized as an experiment that failed. This failure, which has come after just over a dozen years since the euro was introduced, in 1999, was not an accident or the result of bureaucratic mismanagement but rather the inevitable consequence of imposing a single currency on a very heterogeneous group of countries. The adverse economic consequences of the euro include the sovereign debt crises in several European countries, the fragile condition of major European banks, high levels of unemployment across the eurozone, and the large trade deficits that now plague most eurozone countries.

The political goal of creating a harmonious Europe has also failed. France and Germany have dictated painful austerity measures in Greece and Italy as a condition of their financial help, and Paris and Berlin have clashed over the role of the European Central Bank (ECB) and over how the burden of financial assistance will be shared.

The initial impetus that led to the European Monetary Union and the euro was political, not economic. European politicians reasoned that the use of a common currency would instill in their publics a greater sense of belonging to a European community and that the shift of responsibility for monetary policy from national capitals to a single central bank in Frankfurt would signal a shift of political power.

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(Partisan Ranger Note: This isn’t good..depending upon how you look at it. This is THE CFR publication of record. The Euro is dead, it is just a matter of time.)


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3 Responses to The Failure of the Euro

  1. John Stott says:

    When these articles are written I analyse them and look for the true agenda, the meaning. Given its source it should not be taken lightly. It convinces me of one thing, “they” will do anything to save the dollar. We oft here of NWO and one world currency, we already have it.
    Saddam payed the price, as did Ghadafi, the EU had the temerity to push itself as an alternative. China and Japan, Russia, all taken the same way,or being taken.
    When you look for the source of evil, it is never too far away.

    • I agree. A Euro collapse would breath a certain life into the dollar and solidify its position as the world’s reserve currency–I can’t see Western nations shifting to the Chinese yuan. I think most of them see the Chinese economy as something of a hollow shell (which it really is–most of their production is foreign owned). You are also correct, the world currency is the dollar. But hell, it is so strung out in debt I can’t see it holding water for too much longer regardless of what happens in Europe. These central planners can plan and scheme all they want, but as Adam Smith so aptly taught everyone 240 years ago, there is a natural law to economics. The free market will always find its way to the surface and undermine their plans. They can tinker and manage all they want. They can fight wars and overthrow governments. It doesn’t matter.

  2. John Stott says:

    Adam Smith was right and I agree. However their myopic scheme seems on course, it seems to me that a reordering of dollar debt via war is part of it. What price one US city destroyed by a Chinese nuke? Versailles was an example, West Germany and war reparations to Israel another. As you also rightly point out Chia is / has been a bubble. That entity can break out in civil strife at a blink of an eye.
    What an awful mess.

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