Euro Like The Ball and Chain

"The euro is a marriage in the old style, one of those entered into when divorce did not exist." said Joaquin Almunia, the European Commissioner responsible for monetary issues in a response to comments made by Italian Social Affairs Minister Roberto Maroni.

Maroni’s no-more-Euro song was out of tune with his coalition boss Berlusconi who told him to shut up. This was probably because the boss wants to keep this Ace up the sleeve in a bid to save his coalition from a fiasco at the next election. But by the time Berlusconi pulls the Euro card, this particular set of smokes and mirrors will be déjà vu. German SPD is already gearing up for the general elections under the same slogan. They tricked the voters the last time with the Iraq card and they are hopeful to trick them again.

We did point out earlier that the Euro doesn’t work well for the sluggish continental economies. However, the problems in Germany and Italy run much deeper so it’s hard to believe that a percent or two of interest rate cut or devaluation of the national currency (the old Italian trick) would deliver instant salvation. After all, Japan has had 0% interest rate for years and yet continued to drift in and out of recessions.

The proper cure for Germany and Italy would be a set of liberal economic reforms concieved and implemented by a competent government. Germany is more than ready to be relieved of the expensive and rigid social state, which delivered unemployment and stagnation instead of the promised leftist utopia - ‘the social justice’. Well, that’s what socialist systems do, in case you’ve just fallen from Mars and missed the last 50 years of economic history. The Italians are ready to be relieved of the Berlusconi’s government, which is most likely paralyzed with his own vested interest and corruption. Both German and Italian voters should deliver a fatal blow to the incumbents and remove them from the office. Germans are lucky to have an alternative in Angela Merkel, a business friendly iron lady from the East. Regretfully, I don’t see such an alternative in Italy.

To come back to the opening quote, the Italian marriage without a ‘get out of the jail free card’. Isn’t this another fine example of arrogance of EU officials lulled in their EU dream? And it is not a lone example. When a Charles Stanley analyst, Stuart Thomson, interviewed ECB officials they were dismayed at the prospect of anyone leaving the Eurozone. This will never happen. We are building a currency which will replace the Dollar. We will squeeze the Americans out and make them pay for the Euro in the same way we were paying through 60’s, 70’s and 80’s. Wow, that’s cool stuff. But the economic success can not be achieved by the force of political directives and party dogmas.

A democratic body such as the EU Commission should respond with a debate not dismissal. After all an elected official has voiced his genuine concern, for right or wrong reasons, about the way the common currency works or rather doesn’t work for his country. After all, for right or wrong reasons, some 64% of Germans seem to think Germany would be better off with the Deutsche Mark. Unless treated properly the bride will escape with or without a divorce.