The fate of the euro is waffling daily. Like two elephants wrestling in molasses, we’re seeing a painfully slow-motion dance where millions are being trampled upon with no hope of escape. Frequently, the pundits debate the future of the euro, of the European Union itself. I’ve slowly built my views and thought I would share.
The European Union was originally promoted as something more than just a trading block. The countries would share a common market, trading block, and currency. Certainly, we have the common currency. What we have not seen, is the camaraderie of sovereign nation states.
The EU is a concept only half-implemented, if that. To be successful, the individual nations needed to also give up most if not all of their sovereignty, going beyond merely being a trading block with common currency.
During the EU’s formation, France was the one that -insisted- on a clause requiring member nations to adhere to a strict sovereign debt ratio. The first clue to the long term health of the EU was when, not too many years later, France was the first to break that very clause, essentially saying, “Leave us be. We can take care of ourselves…”
Americans uniquely understand what the EU was to have become. We are Americans and then we frequently self-identify by our state.
Many Americans do not appreciate the polarization, strident self-identities, of the various nation states in Europe. It might be akin to Americans calling themselves “North Americaners” first, and Americans second. Won’t happen any time soon, nor would I expect that to be the case in Europe.
Looking at the EU, a story comes to mind. This fable we heard as children. The ant, works diligently all summer long growing and storing his food for winter. At the same time, the grasshopper frolicked all summer long, chiding the ant for working so hard. We all know what happened to the grasshopper.
We need to allow the markets to sort themselves out. Endless bail outs are achieving nothing. Fundamentally, because the underlying structural failures aren’t being fixed. In my own state, the only thing the ‘stimulus’ package did, was allow the state to continue along the same path for another 2 years. Only now the money’s gone (and with new round of politicians) are we seeing true structural change.
Governments can only forestall the correction and, the longer bailouts (or pick your mechanism) are attempted, the greater the magnitude of the correction will actually be. There ‘is’ no avoiding it.
That said, my expectation is Greece leaves the EU. The EU as a whole degenerates to a trading block the likes of NAFTA in North America. And, we see 5 years of crushing re/depression in Europe with strong global impact. The biggest concern, is that the magnitude of the problem will literally be life and death for some; a problem I recognize but have no answer for.
If you have a perspective to share, please do. Mine is an opinion like all the other pundits. There are plenty of different perspectives and valid thoughts—feel free to share.