Ambrose EP on the euro

Ambrose has always been very sceptical about the long term viability of the euro (for very much the same reasons that I have been similarly so) but this does ring true:

Mr Fischer now thinks monetary union is beyond saving. A massive rescue will be needed. It will not be forthcoming. German-French relations are the worst since the war, he said. The European insitutions have lost virtually all authority in this crisis. The half-century Project is collapsing. .. or words to that effect, from what I hear.

As regards Prof’s Pohl’s comments, they are revealing. Why should the currencies fall 60pc unless they are massively overvalued? If they are massively overvalued by anything like this amount  - or even half - how can they possibly rectify this within the eurozone? Is Germany going to inflate at 10pc to let them claw back competitiveness? Of course not. This is pure madness.

Prof Pohl shrinks from the implications of his own logic, as almost everybody does in Euroland when they near the high-voltage line. EMU is inherently unworkable. It was launched before there had been real convergence of productivity growth rates, wage bargaining systems, legal practices, mortgage markets, etc, and without the fiscal transfers and debt union that makes monetary union work (badly, but on balance positively) in, say, the US, Canada, and Britain. The destructive effect has now brought the EU project to this unhappy pass, where even Joschka Fischer is giving up on it.

In short, either there is an economic government for the entire euro area or the currency will fall apart. And as no one is willing to have such an economic government, or thinks it is possible, therefore…..

It’s not going to be pretty and it’s most certainly not going to be enjoyable. But then the fallout from deeply stupid economic plans never are.