How to write the euro’s obituary
By Edmund Conway
The euro is not yet dead, but already I can envisage two quite different obituaries for the single European currency.
The first will go something along the following lines:
The euro was doomed from its very beginnings. Its progenitors failed to realise that it is impossible to have full monetary union and a completely free market without instituting some kind of centralised treasury. It was this, in the end, that contributed to the fatal imbalances that eventually destroyed the euro: one half of euroland (Germany) was allowed to live frugally; the other recklessly (Portugal, Greece, Ireland, Italy, Spain). Such imbalances are fine in a loosely-connected group of countries, but not when you are yoked to a single currency and interest rate. Sad as the euro’s collapse was, it was inevitable from the start.
The other might read like this:
The tragedy of the eurozone’s collapse was that it represented a combination of misfortune and ham-fisted crisis management. The project was flawed and incomplete, yes. No-one denies it needed more political and fiscal union to work. But to have expected it to have implemented a central Treasury from the very start was politically unfeasible. In its later years it was gradually moving towards more fiscal co-ordination. The problem was that at this very stage along came a financial tsunami too powerful to resist and overwhelmed the entire enterprise.
In other words, the big debate which will follow the eurozone’s collapse (or the departure of one or more of its members) will concern whether its demise was inevitable, or was a consequence of an exogenous issue – the financial crisis.