Business Spectator

The euro has been a moribund currency for years. The remaining options to buy it more time have been blocked by the German constitutional court. To end this farcical tragedy someone needs to put the final nail in the euro’s coffin. Who will it be?

The treaty to establish the new European Stability Mechanism is the best example of this fundamentally undemocratic approach. Even its name is misleading.

As it turns out, the euro is not only an unworkable currency. It actually started as a French insurance policy against German power. But even as an insurance policy it has failed. Against their will, it has turned the Germans into the new rulers of Europe. And it has consigned France to be the weaker partner in the Franco-German relationship.

Europe has arrived at the crossroads. It can either go down the path to full-blown fiscal union – and the ECB is clearly ready for it. Or, preferably, it must end the Euro experiment now before any further damage is done. The Germans should leave the fringe countries with the carcass of the Euro – and reintroduce the Deutschmark. It’s the only chance to avert an even greater European debt disaster further down the track.

After a decade of experience with European monetary union in practice, Sarrazin is sceptical about its future. “All attempts to legislate for fiscal stability, limited debts and no-bailout rules have not proved watertight. As it looks now, Europe is on a slippery slope towards becoming a full-blown transfer union,” he said. For someone who has first-hand experience in creating such a permanent transfer mechanism within a country, this must be a frightening prospect.

Amid the noise of the euro rescue summit last week, one important announcement received very little attention. This is surprising since it was a strategic message from Europe’s only real tiger economy, which grew by more than 8 per cent last year, and has a population of more than 73 million people. It was an announcement from the Turkish prime minister, Recep Tayyip Erdoğan.

Everything that’s wrong with Europe, it was on display in Canberra last week. Economic questions are treated as political ones; high hopes have to pass as strategies; utopias are considered realities. And if you harbour any doubts about whether all of this makes sense you better keep them to yourself. For otherwise you leave the sphere of what is officially sanctioned as respectable and politically correct politics.

Competition between political entities, whether they are countries, states or cities, has correctly been identified as one of the fundamental conditions for creating prosperity. But in Australia, we have abolished the possibility of such competition at both the federal and the local level. If we want to prepare Australia for future growth it is high time to reinstall the ‘killer app’ that once made the West – and Australia – rich.