Analysis of the potential disaster facing the eurozone
Richard Conquest
The euro is coming under severe pressure. Now even the Prime Minister of Luxembourg and President of the Euro Group, Jean-Claude Juncker, and Karl Otto Pohl, former Chief of the Bundesbank, fear that the euro may be in danger.
The Bruges Group’s detailed examination of the severe strains facing the Single Currency in Is the euro Sustainable? finds that the entirely ‘man made’ problems that confront the eurozone today have their origins in the fatally flawed notion that one exchange rate and one interest rate are appropriate for economies with very different and disparate histories, structures, performances and sovereign governments.
The euro was meant to bring convergence to the economies of the European Union. Yet it has caused even greater divergence. These economic imbalances and distortions which have been analysed in this paper will continue to worsen. There are too many vested interests in Brussels; the EU elite is more concerned with their own privileges than in undertaking any meaningful structural economic reforms that could help to rectify the situation.
The euro as a hybrid fixed exchange rate regime is unsustainable, and the issue of its failure must be addressed. In the case of the European Union this can only ultimately result in the rejection of government by the venal and corrupt institutions of the EU and a subsequent return to democratic rule by accountable national governments that uphold the rule of law.