A universal European currency is a mistake, but it's hard to know what to do next. I'd be interested to see the Dutch experimenting with leaving if they think they're so burdened with the 'dumb' and 'lazy' south. Lord knows, the "PIGS" (they sure love being called that) are tired of hearing the sound of you guys crying. A warning: an independent currency would include a bunch of externalities that would make their tax haven a little harder to maintain.
As for places like Italy and Spain....the euro was sold to Southern Europe as an uplift to prosperity, after lagging behind more successful northern economies for decades. The conventional wisdom was that by eliminating the exchange rate risk + lowering interest rates, a more competitive Southern Europe would emerge. And when the Euro was introduced, there was an immediate but very short lived boost for these economies. Countries like Spain/Italy/Portugal, which had historically high inflation did actually benefit from lower interest rates, but the cheaper financing also had the unintended consequence of taking away pressure, a sense of urgency, and mandate on governments to enact economic policy reforms and they stagnated as a result of that. In Germany, and the small surrounding countries that integrated into its industrial economy, the reverse was true. Don't underestimate the effect of having the sovereign ability to make sweeping economic reforms at notice: Germany was called "the sick man of Europe" in the early 2000s, then their economy took off following huge labor market reforms. They were once stymied by the strength of the deutsche mark, but now Germany benefits from the euro’s lower exchange rate, which made its goods more competitive abroad. And that's really particularly true of the eurozone itself, which accounts for something like 40 percent of Germany’s exports. So for decades, exporters from Southern Europe could undercut their German competitors on price -- no, not anymore. That wouldn’t be such a problem if Germans reciprocated by buying their neighbors’ exports, but they don't. Germans prefer to save, both in the public and private sectors, so the country has large trade surpluses with almost every country in the eurozone. Instead of acting as the great equalizer, as the progenitors of the euro promised, the euro exacerbated Europe’s economic divisions and left some countries worse off. In Italy, per/capita capita GDP in 1999, the year the euro was introduced, was about €1,000 above the eurozone average...by the end of last year, it had fallen to about €4,000 below the average. The economy has been stalled for 20+ years.
And you know, contrary to the perception you guys have of Italy today - they actually have run a small budgetary surplus, before interest payments, year after year. But without economic growth, the country's debt (from a legacy of overspending in the 80s and 90s when their GDP overtook the UK ("
il sorpasso") has remained high. Relinquishing their financial sovereignty has given them very little to show for themselves. At €2.5 trillion, Italy has the greatest debt burden of any country in the euro area except for Greece -- something like 140% of GDP. Germany’s debt is less than 60 percent of its GDP. Rome can continue to finance itself for now because the ECB is buying its debt in the markets, keeping quiet on the interest it pays...that's not going to last forever.
So yeah, Rome wants the EU to issue common debt, but there's the question: "what difference will it really make?" Germans wonder, 'what's the point?' Bailing out a country like Italy would just bring them back to the pre-crisis point and it wouldn't solve the underlying issues that the Euro has been implicated in less successful economies. A single currency would still have all the same problems and be just as exposed as it always was. On the other hand, Italy isn't Greece - German industry is heavily engaged in the country, as are German banks. Germans actually have an interest in uplifting the economy there, and can't fuck them over as badly as they did with austerity for the Greeks. And in regards to Italy's massive debt: if it were to leave the Euro and bring back the lira, it'll just be servicing its euro debt with a weaker currency -- a much weaker currency. That debt mountain is not something to gloss over for a Euro exit, no matter what il capitano Salvini says to his idiot followers.
This is hard. Much harder than "My country is just so much better at policy and managing money than these dumb southerners".
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PS: Van Goghe had no artistic talent and wouldn't even be noticed on Deviant Art today. Starry Ass.
