Euro-peein' ...

I touched on this about a month ago, the question about why the EU was created in the first place and on its longevity. Mr. Aravosis joined an interview of economist Joseph Stiglitz who echoes the sentiment:

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RYAN: Quick Question, since we're here in Europe, the euro, a lot of people are stressed - the French are stressed, the Italians, the Spaniards, people are really worried about the future of the euro. What's your take on where things are going?

STIGLITZ: Well, I think they should be worried about the future of the euro. When the euro was created there was a general recognition that it was not, what we call, an optimal currency area. It was going to be difficult. If one part of Europe faced, you might say, a greater shock than other parts, it wouldn't be any problem if everything is going well. But it was in a period of economic downturn -- we are now facing that, and the problems that were anticipated have now come to the fore.

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Indeed. Europe is a conglomeration of nation states, each with a different culture and government with relatively weak central control from Brussels/Strasbourg. Stiglitz continues:

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ARAVOSIS: A three-front war instead of a one-front war.

STIGLITZ: Exactly. And the hope was, I think on the part of some, that when the further actions that were needed to make the euro work, that they would be taken, and that would require the creation of a European solidarity fund for stabilization. Those actions, the framework has now been taken, but the concern is the magnitude of what is required may not be up to what they are willing to do, and the political process in Europe is very slow. It has to be ratified by each of the parliaments. So, the question is, given the speed with which the economic events are unfolding, whether Europe will be able to respond fast enough. And, I think there is a resolve among the political leaders of most of the countries to make it work. But that may not be enough, given the turbulence in financial markets.... [my em]

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The Euro, and the Eurozone, will always be at the mercy of the weaker economies and legislative sloth. Until revenue control and financial regulation become the sole purview of the central government, the future of the Euro will always be up for debate. As long as the client states are able to control their monetary policy as if they still used a national currency, there will be undue stress on the Union in hard times. As I said a month ago, the individual European states have to go all in or there was no point in creating the EU in the first place.

Why am I concerned over the future of the Euro, aside from the fact I have family and friends in Europe who would be hurt by the breakup of the Eurozone? Stiglitz again:

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ARAVOSIS: And why should we care as Americans what happens, so the euro doesn't do so well?

STIGLITZ: The breakup in the euro, or even turbulence in the euro, is going to mean that the European economies, one of our major trading partners, will be doing badly.

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And if the Europeans do badly, so will we.