Euro crisis

The euro remains a zombie currency which condemns half of Europe to prolonged misery while locking the other half into a liability union it never signed up for. And with the ECB actively joining the currency debasement race, the euro also becomes more dangerous for global monetary stability.

No, Germany’s highest court did not provide its unqualified seal of approval to the ESM, the Fiscal Compact let alone the ECB’s monetary activism. What it actually did was create enough loopholes for a future German government to pull Germany out of the eurozone.

The ECB now occupies a bizarre position in the pseudo-democracy of the EU. On the one hand, it has the power to compel struggling countries to implement austerity policies, cut their welfare states, reform their labour markets and change their tax systems. On the other, it effectively forces the stronger economies of Europe into a de facto liability union as all the ECB’s risky bond purchases are ultimately underwritten by the taxpayers of countries such as Germany, Luxembourg and Finland.

As much as one can understand why liberal economists would like to use the euro as a catalyst for economic reforms, it may result in the precise opposite. But if there is one place where a little liberal daydreaming is allowed, it is the general meeting of the Mont Pelerin Society.

As much as I understand the esteemed economists’ desire to end the euro crisis quickly, even with bizarre proposals such as euro devaluation, not every medicine is effective and not every cure is better than the disease.

Once it is finally realised that this economic crisis is not an ordinary recession, perhaps we will stop deploying Keynesian remedies and begin more fundamental reforms as advocated by Tanzi. But then again, it took several decades until communism’s apologists ran out of excuses – and some are still at it.

France, Germany, Italy and Greece may all be bound by a common currency but this economic linkage is not reflected in a similarly connected debate. In effect, each country has its own unique euro discussion that barely overlaps with its neighbours.

Europeans should be grateful to Signor Draghi as he has given them a glimpse into their future. It is a future in which the continent’s economic fate may be determined not by parliaments, governments, treaties or courts but by its central bank. It is a scenario in which every owner of money will be robbed a little each year to pay the debts of sovereigns and the financial sector.