Euro

As it turns out, even countries smaller than Greece can still turn into major headaches for Europe’s policymakers. The country in question is the island nation of Cyprus.

In case you have not noticed it, the euro crisis is over. It must be because EU Commission President José Manuel Barroso, ECB President Mario Draghi and French President François Hollande all said so over the past six months.

One of the most oft-quoted sayings in economics is Herbert Stein’s famous dictum that if something cannot go on forever, it will stop. It is so often quoted because it is logically true. It certainly holds for the construction of the eurozone and the design of those policies to rescue it.

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 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.

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.

For a committed market liberal it was a strange experience. There I was hoping for an election victory of the radical Syriza party in Greece’s general election. Yes, the very party that rejects austerity and claims that unreformed socialism provides the answer to the country’s problems.