The Corner

The Euro

The EU’s single currency is perfectly nice to look at – in a bland, designed by a committee sort of way – but (despite the Euro’s current strength) it’s difficult to see these bills as anything other than brightly colored suicide notes. As becomes ever more apparent, one size does not fit all. Writing in the Spectator, Ambrose Evans-Pritchard discusses US diplomacy (not impressed), Neil Kinnock (not impressed), Chris Patten (not impressed) and the Euro (really not impressed):

“…One would have thought that the latest travails of the eurozone would vindicate a little caution on EMU [economic and monetary union]. The economists who actually deal with the euro inside the European institutions — as opposed to the politicians of the ‘College’ — are often as brutally Eurosceptic as the British public. ‘Do they think it is going to get any easier?’ laughed one senior Eurocrat, when I suggested that the government was hoping to have another go at the euro next year.

He, for one, fears that Germany is on the cusp of a deflationary spiral. It needs interest rates of zero and an emergency fiscal stimulus. What does it get? More or less the same mix of policies that shut down the American banking system in the Great Depression. And why? Because inflation in Ireland, Portugal, Greece and Spain is still too high, and because the Stability Pact forces Germany to raise taxes in a slump. Keynes must be weeping in his grave.

Like the US Federal Reserve in those crucial months of 1930, the European Central Bank — over-hawkish because unsure of itself — is still fretting about inflation as the economy risks tipping into a deflationary debt crisis. Knowing what we now know about the 1930s, it seems remarkable that any democratic country would again embark on such a destructive course. But the eurozone is not a country, or a democracy.”

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