Posted by: CS | June 26, 2012

Havoc in the Eurozone: Was that the whole point?

Greg Pallast, writing in the Guardian says:

The idea that the euro has “failed” is dangerously naive. The euro is doing exactly what its progenitor – and the wealthy 1%-ers who adopted it – predicted and planned for it to do.

Specifically, he says it was the intention of the Canadian Nobel-prize-winning economist, Robert Mundel, who urged the creation of the Eurozone, to hobble European governments by denying them the freedom to print money thereby devaluing their currencies to cover the cost of welfare programs and union-exacted pay raises by means of the inflation tax.

If so, the thing seems to have misfired. Instead of restraining government spending it has led to government spending financed by debts that cannot be repaid, which in turn threaten the stability of the entire financial system.

But a final judgment must depend on the end game. If the Eurozone breaks up, it will have proved a costly and destructive failure. If, instead, those seeking to exploit the crisis as a trigger to force full European integration and the formation of a common tax system and treasury, the result will also be a failure as a means to straight-jacket European governments, since the pan-European government thus formed will have the same freedom to print money as had its predecessor nations.

Thus, the only possibility of success, from what Pallast claims to be Mundel’s point of view, is if the Eurozone can be stabilized and the indebted countries forced to cut wages and government services and pay back the gigantic debt load they have accumulated.

So, whichever way you look at it, the Eurozone, appears to have been a bad deal for nearly everyone in Europe, with the exception of Germany and one or two other North European states, which have benefited in trade from the weakness of the Euro resulting from the lack of competitiveness of most of their Eurozone partners.

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Responses

  1. Interesting!- aangirfan


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