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Foreign Affairs

End the Euro

The Eurozone Crisis continues to threaten the entirety of the European community with fiscal disaster. While this is certainly an economic crisis as well as a political one, the philosophic ramifications of how the crisis is resolved will have a huge impact on the future of the European Union. The single currency project was and is the flagship of European integration, that which was marching the states of Europe "ever closer to union" over these past years, and is shaping up to become the European Union's greatest failure and liability.

Due to the importance of the Euro to the entire endeavor, the unionists are doing all they can to save it. This past year has seen supposed bailouts of Greece, Ireland, and Portugal-- but this is all clever deception. The bailouts were not for those countries; the bailouts were for the Euro. The resistant response of Ireland to the bailout, involving massive protests and the ouster of the ruling party, highlight that these nations did what they could to try avoid a financial takeover, as these nations are getting very bad deals-- European bankers are receiving the bailout money while the burden of repayment is being placed upon ordinary citizens. The bailouts are not helping these nations. Giving debtors high-interest loans is like helping a drug addict by pumping heroin into his swollen veins. The futures of these individual nations are being sold in order to save the existence of the Euro.

Some may say that the involvement of the International Monetary Fund is evidence that this is focused on the national economies, not the Euro-- after all, the IMF is an international institution, not a European one. Wrong. Dominique Strauss-Kahn was a Europhile who continued the process of turning the IMF into a puppet of the European Union. Under his leadership, the liabilities of the IMF are now 900% of what they were before he took over. Typically, when the IMF bails something out, they mandate a devaluation of the currency and enforce strict privatization and deregulation programs-- all forgone for the European bailouts. This policy will not be changing, as Strauss-Kahn's successor is another French proponent of integration--- Christine Lagarde has spent a large part of her recent career practicing EU Law at the European Law Centre. The IMF is an arm of the EU whose primary objective is to support the common currency project. (It is worth noting that the Europeans are demanding austerity measures for bailed-out and soon-to-be-bailed-out states, but they are resisting as they know, right now, they'll get the money anyways).

A single currency does not work. People point and say that the United States has a single currency, so Europe can pull it off too. They do not understand that the Euro is not like the Dollar. The American system allows for greater labor mobility of both individual and corporate members; has greater economic uniformity across its system; and allows easier fiscal transfers with the ability of the Federal government to move money around quickly. We also have more political will to move things around-- the British, who were touting the fact that they have saved over 6 billion pounds in domestic spending prior to obligations under the bailouts increased their expenditures by 12 billion pounds, are going to grow tired of helping maintain a currency they aren't attached to; and, as British MEP Roger Helms pointed out in a recent lecture, the "Germans, who retire at 66, aren't too keen to keep bailing out the Greeks, who retire at 50." Additionally, while the Dollar is doing far better than the Euro and will survive it, our growing regulations and Federal Reserve manipulations aren't exactly making us ideal to follow at the moment.

The European Union must end the Euro, and that may very well be on its way to happening. Soon, a German constitutional court is expected to rule on whether the bailouts violate German and European Union law (Note: IMF leader Christine Lagarde has admitted that the IMF bailouts were probably illegal, but worth saving the Euro for). While the court could rule the bailouts were illegal and thus place the Euro immediately on the path to a catastrophic crash, it is more likely they'll said with caution and begin to enforce tough restrictions on the ability of Germany to move money around. It should be the first step in Germany stepping away from the Eurozone and returning to the once-powerful Deutschmark, and allowing the other nations of Europe to regain their fiscal sovereignty. This will allow the European Union to take a step back and figure out what went wrong these past twenty years. Instead of progressing towards closer union, Europe should instead decentralize the process and remove the power of the European Central Bank from controlling so much. It can roll back the anti-democratic underpinnings of the project.

For those who say it is not anti-democratic, the European Parliament, which supposedly represents the people, had over 90% of its members vote for the Treaty of Lisbon; in referendums, 56% of the French people voted against it, 63% of the Dutch voted against it, and polls indicated that, if given the chance, a majority of Ireland would have voted against it. The leaders of the EU have time and time again proven that this is an elite-driven process with little popular support. It is time to step back, reevaluate, and allow the nations to regain control of their economies. The Euro has been a failed project, and its instability threatens the global economy. End the euro to save what little good is left in the European Union, and use it as an opportunity to improve.
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Discussions - 6 Comments

End the nanny state and socialism in Europe. That is the problem.

If the euro goes, so does the elite's hope of United States of Europe. There is no point of an imposed European Constitution without monetary union. That was the point of the euro. Anyway, rock, hard place, between.

I'm not so sure. If I'm around in 50 years, I don't think that Europe will be a collection of small to mid-sized nation states. We are probably witnessing the failure of the first attempt at Union of some kind. But I don't expect it to be the last.
If the people of the countries of Europe were asked if they would like to break up the EU, I suspect that a good-sized majority would say no.
The trick is to figure out a way to move away from the social democratic model which is killing the Union. Hard to do. How does one convince a generation of people who went to the best schools that what they learned was fundamentally mistaken?

Agree. Also by no means is the Euro a failure, that currency could drop quite a ways against the dollar, and still be up historically. What you are seeing is crazy talk that occurs when a market as big as the DAX loses 2000 points and over a quarter of its value in less than a month.

There is absolutely nothing that went wrong with the Euro over the past 20 years. It has been a strong currency, and an alternate safe haven to the US dollar. As we see the plumetting value of the Euro has caused the dollar to rally. In case you happened to like the swiss franc, this decided somewhat predicatably to devalue against the dollar, and the dollar rose about 9% against the swiss franc.

I actually think the US dollar might be undervalued against the Euro, but by no means is the Euro a failed currency.

In fact any tenth grader could get on Yahoo and chart the Euro against the Dow Jones since its inception on January 1, 1999. What you would find is that a person who turned his dollars into Euro's and hid them under a mattress managed to outperform the the Dow Jones over that period. It was not a spectacular performance, but if you are going to use fiat currency as a store of value, it ain't bad.

In fact the DAX itself is up about 200 points (about what it is up today!) since January 1, 1999. So if you had converted to Euro's and bought the DAX even if you hadn't dodged the 30% meltdown, you would still be up against both the dollar and the Dow Jones.

It is just a really hard case to make that the Euro is a failled currency.

I do not think that common currency is entirely impossible. However, with its current implementation, it is highly problematic. There are certainly benefits to it as well--it definitely makes doing business in Europe much, much easier. I personally love the fact that when I'm bouncing around between countries there I don't need to constantly be exchanging money. But it allows for inflexibility when it comes to addressing economic crises, and it makes it much more difficult for countries to get out of a crisis. Ireland would recover far sooner if its currency was not tied to Germany. One interest rate is not good for everyone. Additionally, there is the issue that problems in some outlier countries--Greece, Ireland, Portugal--can hurt otherwise-healthy economies like Germany.

Another big issue right now is job mobility. If someone can't get a job in Oregon, they can move easily to Texas-- we share a culture, a language, a way of life. And it is really easy to move around. It is much harder for an unemployed person in Ireland to up and move to Germany. Now, the EU has been slowly working to make it easier to move around, but it is not close to being there yet, and the Schnegen Agreement (a central part of this) may be in trouble as various EU member states grow annoyed with the easier movements of Gypsies and Muslims around Europe.

There needs to be more harmonization of political and cultural identities, more flexibility, closer economic systems, and less distortion of the economies of Europe by certain subsidies and other protectionist measures. Europe should have focused more on creating a true free trade zone and figuring out how to address crises before jumping headfirst into a common currency. I think the non-Euro members of the EU (provided they don't go bankrupt helping to bail out the Eurozone) are going to be on much sounder economic footing five years from now than their counterparts.

Just thought of this before posting, but perhaps creating some transnational currency could have been a better idea. I haven't really thought of it before and thus haven't though of ramifications, but if the Euro existed side-by-side individual currencies, it might have been a way to allow for this flexibility while allowing the benefit of easy transnational business.

"How does one convince a generation of people who went to the best schools that what they learned was fundamentally mistaken?"

Send them to you, or Michelle Bachmann, or Ashbrook, or put them through an evangelical homeschooling program?

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